Nestlй Refrigerated Foods Company Marketing Research

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Nestlé Refrigerated Foods CompanyMarketing
Research

• Begum Abad
• Hanuman
• Nicole Erard-Coupé
• Naveen

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Background

• 1987- Nestle enters the refrigerated food market
  by acquiring Contadina Pasta and Sauces.
• Noncommodity refrigerated foods was a relatively
  undeveloped category in U.S in 1987
• Refrigerated foods were responsible for 7 of
  Nestlé's global sales despite little contribution
  from the potentially large U.S. Market

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Market SummaryRefrigerated Foods

• Based on market research, Nestlé's decided to
  launch Contadina
• Contadina Fresh Past Sauces rolled out
  nationally in 2nd half of 1988
• Product launch was very successful
• 75 mil. Retail sales in 1988
• 150 mil. Retail sales by 1990
• Pasta line accounted for nearly 80 of sales
  volume

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Market SummaryRefrigerated Foods

• Given Contadinas success, the NRFC began a
  product development process for a refrigerated
  pizza concept
• The pizza market was an 18.4 billion market
• By 1989 NRFC developed 2 new pizza concepts
• Pizza Kit
• Preassembled, heat and eat Pizza

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Market SummaryPizza

• Pizza market Statistics
• 88 of all pizzas sold by restaurants
• 60 of pizzas eaten at home
• 76 of all U.S. families had eaten restaurant
  pizza w.in past 6 months
• Pizza consumption strongest in northern and
  eastern parts of U.S.
• 10,000() franchised pizza restaurants
• 25,000 pizza outlets
• frozen pizza market more fragmented w/o clear
  market leader

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Product DevelopmentPizza Kit

• Kit included
• 12 crust
• Sauce
• Cheese
• Sauce Tomato or Pesto
• Additional Toppings Pepperoni, Sausage,
  3-Cheese, Mushrooms Bell Peppers (Sold
  Separately)
• Serve 2-3 people

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Market ResearchConcept Test

• Preliminary Concept test (200 Interviews)
• Positive purchase intent was 58 (49 among
  males, 66 among females)
• Results
• 128 Heavy Take-out users(once every 2-3 weeks())
• 115 favorable to concept (out of which, 60 said
  they would buy Contadina instead of another
  product)

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Market ResearchBases II Line Extension Study

• Involved both Concept in-home product use test
• Pizza Kit w/ Toppings Sold Separately
• Pizza Kit only (No Toppings Sold Separately)
• Determine the impact on trial kit by availability
  of separate toppings
• Analyze Strengths and Weaknesses of both concepts
  

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Pizza Kit

• Product
• Support either Pizza Kit with or without toppings
• Pricing (NRFC expected factory pricing to be 2/3
  of retail prices)
• 6.39 for Kit
• 1.29 for each additional Topping
• Place
• National distribution possible, could install a
  pizza line _at_ the Danville factory
• Promotion (Total 18 mil.)
• 9 mil. Advertising
• 5 mil. Consumer Promotions
• 4 mil. Trade Promotions

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Target Market

• 95.5 Mil. Households
• Contadina Pasta Users would Represent approx. 24
• MRD felt Parent Brand Penetration could range
  btw. 5-25 (recommended volume projections be
  sensitive to this range)
• Based on Promotion Plan, NRFC projected 37
  overall awareness
• Parent Brand Users likely to be more aware of
  Contadina name

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NRFC Data on Consumer Awareness Purchase
Assumptions
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Pizza Kit

• Favorable to Pizza Toppings
• 50 would purchase toppings every time purchased
  kit
• 25 would purchase toppings ½ the time
• Business Requirements for Pizza
• 45 mil factory dollar sales
• 12 mil project Investment costs
• .3 share retail pizza market
• Should NRFC launch a pizza product
• Which option
• How large market would they find
• What market share could be achieved

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AnalysisVolume Estimation
8,434,789
5,891,590
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AnalysisRepeat Purchases
11,527,545
8,248,227
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AnalysisPizza Toppings
9,840,587
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AnalysisRevenue Estimation
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AnalysisSensitivity Analysis

• 5 Penetration
• 15 Penetration

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Summary

• Should launch Pizza Kit with Toppings
• Require _at_ least 7 Market Penetration to meet
  Basic Business Requirement of 45 million factory
  dollar sales (45,423,334)
• Market Size
• Market Share

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Recommendations

• Nestle should first work a lot to refine the
  taste of its pizza.
• It should also lower the prices of its offerings.
• Company should fine tune its manufacturing
  facilities before the product launch.
• Post launch, company should use the same
  distribution network as it did for Pasta.
• The product should also be supported heavily with
  huge advertising outlays.

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What Happened?

• 1991-Nestle launches Contadina Pizza.
• Positioned as a quick, convenient, yet fresh
  alternative to frozen pizza.
• Pizza introduced in a kit format composing of a
  12 inch refrigerated pizza shell, packed together
  with separate pouches of cheese and sauce.

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What happened?

• Toppings also were merchandized adjacent to the
  kit.
• Toppings included pepperoni, three cheese blend
  and Italian Sausage.
• Pizza kit was sold for 6.19
• Toppings were priced at 1.49

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What happened?

• Product launched in selected cities.
• Marketing support amounted to 11 million in 1991
  and 10.5 in 1992.
• Company faced disappointing results by not
  meeting any targets
• Sold 4 million units in Year 1 that amounted to
  13 millions in sales.

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What happened?

• Tried to improve the advertising themes by
  testing three more ads.
• All these ads also failed in terms of recall.
• Company maneuvered with price promotions but
  failed in this aspect.
• Company had 60 spoilage on the toppings

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What happened?

• Abandoned the toppings
• Sold pepperoni and cheese kit and a cheese kit at
  5.99 and 5.49 respectively.
• Company paid the price for relying on the pasta
  data that was in the initial stage.
• Pizza wars also hampered the profits

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What Happened?Marketscan Americans Hunger for a
More Homey Pizza, WSJ, June 29, 1993

• 1993
• Kit sold for 5
• Held 15 of the 170 mil-a-year market for
  refrigerated pizzas pizza kits
• Kraft introduced Boboli Shells
• 1997 Nestlé sold Contadina to Del Monte
• Excluded from sale was line of refrigerated pasta
  sauces
• Nestlé's changed name of refrigerated pasta and
  sauces to Buitoni

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Volume Estimation