Executive Summary
Nestle Refrigerated Food Company, in 1990, had to decide about the launch of Contadina Pizza (a refrigerated pizza), and so that it could continue the building of the refrigerated food category started by it a few years ago. It had entered this category through the launch of Contadina Pasta and Sauces, and had achieved results that exceeded its expectations. Nestle Refrigerated Food Company would cut out serious and major competition, Kraft general food, who was to make a similar launch in about 6 months; by being the first mover in this competition. Marketer studies that consists of the forecast of estimated demand show that the launch is recommended and pizza with topping are preferred as compared to only pizza. Market studies also show that the basic business requirement of $45 million, factory dollar sales, can be met by a minimum of 7% market penetration.
As per studies and since the Italian ethnic food market is fast developing, the opportunity looks great, but Nestle Refrigerated Food Company should be very careful as bad results could seriously hurt the Contadina Brand Name. The price of the offering should be adjusted to be at lower levels and heavy support from advertising should be carried.
NESTLE REFRIDGERATED FOODS: CONTADINA PASTA & PIZZA (A) – GROUP 2
Q1) Using the BASES model described in Exhibit 9, forecast the estimated demand (trial and repeat) for the two Pizza options under consideration:
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Analysis of external environment: Pizza consumption is strongest in the northern and eastern parts of the U. S. The target market areas will include large cities such as New York and Baltimore. Analysis of the competition: Nestle's Contadina Pizza will be competing for a share of the $18. 4 billion pizza market. The pizza market can be categorized into restaurant (takeout / delivery ) pizza, ...
Pizza and Topping and Pizza Only. Using the BASES Model, we forecast trial and repeat purchases. The BASES Model assumes that the sample size used and the analysis of in-house product usage represents the entire target market. It also assumes that the estimated market plan is similar to the actual launch plan. If there is any inconsistency in these assumptions, it can result in incorrect forecasting of the success of the product.
The estimated advertising awareness and purchase intent figures are subjected to certain limitations and these involve risks with respect to the following:
The product does not live up to the promised benefits
Respondents like a concept but overstate preferences or do not buy the product due to the social desirability factor
High trial cannot predict product success
Limited diagnostic information cannot provide insight into complex structure or interests and attitudes
Q2) What can one learn from Exhibits 13, 14, and 15?
We can analyse from exhibit 13,14 & 15 , that kit has huge potential of attracting customer segment consuming frozen pizza and fresh pizza from supermarket , but Nestlé should ensure use
NESTLE REFRIDGERATED FOODS: CONTADINA PASTA & PIZZA (A) – GROUP 2
of high quality ingredients and avoidance of artificial ingredients or preservatives, as this is one of the most important reason that will catalyse the switch. Therefore, branding and advertising campaign should be built around awareness of masses about two main factors:
High quality ingredients
Zero preservatives and additives
Significant switch in heavy pizza consumers wouldn’t be seen initially since: 1. They get a huge variety through take away and deliveries T 2. The brand loyalty to already existing chains like Pizza Hut, Dominos. In the long run, Nestlé can gain momentum in this segment if they are able to diversify the kind of pizza they will serve in the kit both in terms of crust and toppings. Q3) How does the pizza concept test data (Exhibits 19, 20, and 21) compare to the pasta concept test data (Exhibit 6)?
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Exhibit 6 talks about the Pasta concept. Pasta in this case was an already existent product, which acquired by Nestlé sought to reposition itself in the market and highlight its USP. The pasta market already had many competitors of its kind and in this case, Nestlé had a “building” ready with them which had to be “knocked down”, its “foundation” used to create a completely new brand. The concept test data clearly even in terms of its parameters like creating uniqueness in the product, negligence of the pricing and more focus on improvement or change rather than formation, establishes this fact.
Looking at Exhibits 19, 20 and 21 – the predominant focus on the pricing of the product, the features / characteristics of the pizza kit itself in terms of taste and delight propositions to the customer, comparison with alternatives (emphasis on ALTERNATIVES and not competitors, because none existed) clearly proves that Nestlé was focusing on starting from scratch, creating a market by offering something that till then did not exist.
Q4) What is your reading of Exhibits 23 and 24? (include Exhibit 18 if you wish) Exhibit 23
This exhibit talks about market research analysis conducted by Nestlé, with regard to its pizza and toppings, with the sample size of 186 people out of which 130 had a favourable intent to purchase the product and 56 were against. In percentage the exhibit tells us about the number of people who had particular likes (“Favourable”) about particular features/ characteristics of the product. Talking about the “Suggested Improvements” section- these were the recommendations of the people in general (both favourable and non-favourable about areas of the product which the company might work on, comprising of every characteristic of importance to a customer – price ,taste, ingredients et al. The “Unfavourable” section talks about, again in percentage, of people criticizing a certain characteristic of the product, as being bad or demanding improvements/change.
This analysis, in numbers, gives an insight into the features of the product that Nestlé had got right and where the market demanded more. A favourable value of 130 out of 186 was encouraging but still much remained and this analysis gave precise areas into which Nestlé could look for further customer satisfaction.
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NESTLE REFRIDGERATED FOODS: CONTADINA PASTA & PIZZA (A) – GROUP 2
This exhibit talks about the price that Nestlé wanted to put forward in the market with the “consent” of the customers. Again a sample of 186 people who were chosen for the in home use test was taken and they were asked – what price they would pay for the product. If we take the sum of any one column of this exhibit, we achieve the total of 100, which tells that each customer could recommend one price and this data collected along with the recommendations from the exhibit 23 and primarily the cost involved in producing the product and the target profits were the deciding factors for the price of the product.
Exhibit 18
Once again the sum of each column gives a value of 100, each individual value in terms of percentage. Respondents were asked whether they tried a particular product from an array of eight choices (frozen pizza, home delivered pizza etc.) and then whether they retry the product. The two different columns tell us how customers shifted from one product to another, some products gaining a percentage at the expense of other product.
Q5) In general, how would you compare the pizza opportunity to the pasta opportunity? What are the similarities? Differences?
Extensive market research by Nestlé inferred that the market for refrigerated pizza and toppings was very limited as compared to pasta. The success of renovation of an already established pasta brand in the market could not be taken as an example or a demonstration or anticipatory results for the pizza product in the market. As is preached by the most preliminary principles of marketing, the USP of both the pizza and the pasta products were the primary and decisive factors in their popularity and sales. Both with respect to the pasta and the pizza range, Nestlé had the chance to create a market, establish new brands, position themselves as they wanted and a major first mover advantage.
However, with the pizza range, they had virtually no foundation or base to work on and they were competing with alternatives for the products, not competitors. Market survey indicated that only 15% and 4% of people consumed frozen and homemade pizzas in contradiction to the 17% and 90% users of frozen and home-made pasta. Pastas did not have any issues with the pricing while 21% and 44% of respondents who were in favour of and not in favour of refrigerated pizzas respectively felt that pizzas were quite expensive. Nestlé plan to give to the customers, not only a pizza of good quality, taste and a reasonable price but also the freedom to customize their pizza, something not offered by the restaurants and delis.
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Q6) Why was the pasta product so successful?
With first year sales of $ 50 million going up to $ 100 million in 3 years, NRFC’s Contadina Pasta was a great success. The factors that contributed to the same are as follows: 1. Realizing the potential of the Italian Food Segment in the US market, Nestlé decided to launch Contadina Fresh in the refrigerated foods category. Analysis brought forward the view that competitors would be following the same cycle and all the products would reach the market at the same place, due to which Nestlé would not be able to gain a significant first mover advantage. It therefore acquired an established regional player in the market- Lambert’s Pasta and Cheese, to help surpass its competitors and be the first to bring refrigerated pasta to the national market. 2. Having acquired a regional player that had developed a process to extend the shelf life of the product, Nestlé was able to establish a highly efficient distribution system. Alongside this, the decision to establish a new manufacturing facility helped Nestlé to achieve considerable efficiencies in costs.
3. Using brokers as sales agents instead of the traditional sales force was another factor attributing to the success of NRFC. A “larger share of sales time” was achieved due to these brokers who had
NESTLE REFRIDGERATED FOODS: CONTADINA PASTA & PIZZA (A) – GROUP 2
significant experience in the sales of perishable/refrigerated products. It also helped in further cost reductions.
4. Establishing a brand name that communicated an image of traditional authentic Italian food which could be distinguished from the convenience products category was another advantage. This, combined with the packaging technology of Lambert helped Nestlé in positioning itself in a particular market segment via the PASS technique.
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5. A well marketed “component approach” allowed Nestlé to achieve high quality over the product’s shelf life as flavour did not migrate between the components. It also helped in reducing the sticker shock among customers.
Q7) How do you like Nestlé’s new product development process? For pasta? For pizza? The 7 steps of Nestlé’s new product development process starting from the concept creation to the final launch of the product are very comprehensive and look over almost every matter / issue concerning the development and launch of a new product. I would definitely say this is a very good process, not only in its capacity to cover each and every aspect of a new product but also in its versatility of application to products in virtually any industry with small tweaks here and there, and also because of its practicality and the sheer common sense of involving the right people from the right departments at different stages of the process, whilst giving them the freedom to take a different path, if deemed appropriate, for any specific product.
For Pasta, because of the already established Lambert’s Pasta and Cheeses, Nestlé skipped out on the first 2 phases of Idea Generation and Refinement. The product development stage focused on R&D and changes required to increase the shelf life to 40 days and devise various innovative ways of testing the product. Further moving on, they carried out tests in the market, extensive market research, surveys, and in-home use tests to further work out how to improve their pasta line – effectively repositioning the pasta brand itself christened as Contadina Foods. For pizza, Nestlé had to start from the scratch. There didn’t exist any such product in the market.
The Idea generation phase resulted in the refrigerated pizza as a product extension to the preexisting Contadina product-line. The Idea refinement phase went ahead with two ideas about the refrigerated pizzas that can be introduced in the market. The product development phase resulted in elimination of one of the ideas due to feasibility issues. Though Market Research was conducted for both the ideas, Nestlé had no option right now to move ahead with only one of the idea. Q8) Would you launch the pizza?
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Yes, launching of the pizza will be favourable for Nestlé as they were already successful in the refrigerated Pasta market by acquiring the Contadina refrigerated foods, reducing the time to do Market research and thereby gaining the first mover advantage. This created a positive image of the refrigerated products of Nestlé in the market. Moreover, this was a new offering in the market. Also as per Exhibit 13, out of 200 people 128 were heavy takeout users, 115 were favourable to the concept of Top two box and 129 had purchased frozen pizza in the past 12 months; moreover making frozen product is difficult as it has to be first thawed from its frozen state before it could be cooked, as against the refrigerated product which had to be just microwaved in most of the cases.
