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Nestlé Refrigerated Foods Company Marketing Research

Nestlé Refrigerated Foods Company Marketing Research. Begum Abad Hanuman Nicole Erard-Coupé Naveen. Background. 1987- Nestle’ enters the refrigerated food market by acquiring Contadina Pasta and Sauces. Non—commodity refrigerated foods was a relatively undeveloped category in U.S in 1987

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Nestlé Refrigerated Foods Company Marketing Research

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  1. Nestlé Refrigerated Foods CompanyMarketing Research Begum Abad Hanuman Nicole Erard-Coupé Naveen

  2. Background • 1987- Nestle’ enters the refrigerated food market by acquiring Contadina Pasta and Sauces. • Non—commodity 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

  3. Market Summary:Refrigerated 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

  4. Market Summary:Refrigerated Foods • Given Contadina’s 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

  5. Market Summary:Pizza • 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

  6. Product Development:Pizza 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

  7. Market Research:Concept 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)

  8. Market Research:Bases 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

  9. 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 @ the Danville factory Promotion (Total $18 mil.) • $9 mil. Advertising • $5 mil. Consumer Promotions • $4 mil. Trade Promotions

  10. 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

  11. NRFC Data on Consumer Awareness & Purchase Assumptions

  12. 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

  13. Analysis:Volume Estimation 8,434,789 5,891,590

  14. Analysis:Repeat Purchases 11,527,545 8,248,227

  15. Analysis:Pizza Toppings 9,840,587

  16. Analysis:Revenue Estimation

  17. Analysis:Sensitivity Analysis • 5% Penetration • 15% Penetration

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

  19. Recommendations • Nestle should first work a lot to refine the taste of it’s 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.

  20. 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.

  21. 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

  22. 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.

  23. 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

  24. 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

  25. 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

  26. Volume Estimation

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