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TruEarth Healthy Foods: Market Research for a New

Product Introduction

Group 3, Section C
AMIT JAT IPM2011012
ANKIT GOHIL 2014PGP041
KIRAN KUMAR MS 2014PGP162
P ABHISHEK 2014PGP238
PRANEET SINGH 2014PGP262
GUPTA TARU IPM2011032
DILIP
VATSAL KUMAR 2014PGP416
Group 3 | Section C

Problem Statement
Whether to go ahead with TruEarth whole grain pizza concept or not?
What will the sales be given various scenarios?

TrueEarth the Company


Formed in the year 1993 by DeRosa
Maker of gourmet pastas, sauces and meals
One of the first companies to focus on whole grain products, offering both 60% and 100%
wholegrain pastas
Change in consumer trends in 1990s
o Increase in disposable income coupled with time poverty led to HMR
o Growth of refrigerated fresh pasta over the dry-shelf stable pasta
o Growing awareness of the importance of whole grains

Case Facts: Cucina Fresca (Fresh Pasta and Sauce)


Enjoyed first mover advantage in the category
Fresh refrigerated whole grain pasta line with full range of choices along with sauces
Designed to be consumed in a single meal for two compared to dry pasta and shelf-stables
sauces that came in larger sizes
Benefits: shorter cooking time, option of filled pastas and perception of being healthier and
of better quality
Frescas potential sales volume was estimated using Nielsens BASES model
Results indicated a 76% positive purchase intent(who would definitely/probably buy)
Marketing plan involved $8 million in advertising and $2 million in promotional coupons
By 2007 sales had reached $23 million but started slowing down in 2008 because of entry of
competitors (Rigazzi being the main competitor)

Case Facts: Whole-grain refrigerated pizza


Growing health concerns and popularity of less carbohydrates in diets presented an
opportunity for TruEarth to introduce this product
Pizzas formed core component of Italian-American food category, with annual sales of $53
billion in 2007; 77% of consumers ate pizza at least once a month
Restaurants already served whole grain pizza but there was a potential first mover
advantage in the refrigerated pizza segment
Store-brought refrigerated pizza market was 11% of total sales and amounted to $5.8 billion
TruEarth decided to price the pizza kit at $8 (additional toppings sold separately). Each kit
would feed 2-3 people
Group 3 | Section C

Porters Five Forces Analysis of the Whole Grain Fresh Refrigerated


Pizza Market
Threat of Competitors: HIGH
TruEarth faced a formidable competitor in Rigazzi Brands, which was not only of a similar scale, but
also sold all the same products as TruEarth. It competed with TruEarth for the limited shelf space &
had previously targeted TruEarths high priority cities with its own line of whole grain fresh pasta. It
had also offered high trade discounts to retailers and high-value coupons to consumers in the
process.

It had also tested its own pizza concept and was likely not far from an introduction.

Threat of New Entrants: HIGH


Like in the case of whole grain pastas (pp 5-6), it would not be long before other companies figured
out how to make whole grain fresh refrigerated pizza that also tasted good, just like Rigazzi. The
entry barrier was low. Therefore, in the whole grain fresh refrigerated pizza market, TruEarth could
face a high level of threat from new potential entrants.

Threat of Substitutes: HIGH


Whole grain fresh refrigerated pizza faced a whole array of substitute products. For those customers
who were inclined to consume whole grain pizza out of health concerns, restaurants such as Papa
Johns and Pizza Hut, as well as local pizzerias had offerings.

In general, pizzas were available as takeout/delivery, restaurant pizzas refrigerated pizzas, frozen
pizzas (from Kraft and Nestle) and homemade pizzas.

Threat of Buyers Growing Bargaining Power: MODERATE


As more players enter the whole grain fresh pizza market, the bargaining power of the buyers would
increase. However, TruEarth had the reputation of supplying high quality and tasty products and
hence, the threat would be moderate.

Threat of Suppliers Growing Bargaining Power: ?


TruEarth used only high quality ingredients, and hence was susceptible to some extent to suppliers
bargaining power. However, the case does not provide much data regarding this aspect.

From Porters model, the market does seem to face a high level of threats, and does not seem very
attractive.

Quantitative Market Analysis


Assumptions
Some of the assumptions considered in the quantitative analysis are given below:

1. The awareness level of Cucina Fresca customers with regard to the pizza offering would be
higher (50%) as compared to a 12% awareness level for non-customers
2. The penetration level of Cucina Fresca among the target market for the pizza product varied
from 5% to 15% and was reported to be 11% by the BASES survey
3. The pattern of 80% of definitely would buy and 30% of probably would buy respondents
actually making a purchase would hold in case of the pizza market as well.
Group 3 | Section C

4. An ACV level of 40% would be achieved.


5. Each purchase would involve 1.25 units being sold
6. Average spend per purchase would be $12.38
7. Each purchaser would have 2 repurchase occasions in a year
8. 49% of purchasers would go for a repurchase
9. Wholesale sales would need to exceed $12 million to meet the companys return
requirements

Analysis
Refer Excel Sheet

Findings from quantitative analysis


There were 3 scenarios to be anticipated with varying penetration of the pasta product in the target
market. The results of the analysis from each of the three scenarios shows that the company will be
able to meet its target of $12 million in wholesale volumes and therefore, should go ahead with the
new product launch.

Critique of Analysis
The analysis & underlying assumptions can be critiqued on the following fronts:

1. A 50% awareness of the pizza product from existing Cucina Fresca customers seems overly
optimistic
2. A 40% ACV value is relatively a low target and may lead to a missed opportunity. For Cucina
Fresca, the company had targeted a 50% ACV value.
3. Only 2 repurchase occasions in a year seem to be on the lower side, while 49% repurchase
seems to be on the higher side

Other aspects
1. As pointed out in the case, pizza is essentially an indulgence food. Positioning pizza as a
healthy food choice and basing our whole marketing strategy on this position would be a
risky option.
2. There is the risk of not being able to match the quality of takeout/delivery, restaurant and
homemade pizza.
3. The varieties of topping offered are severely limited compared with the vast choice normally
available to a buyer when purchasing a pizza. For instance, in exhibit 6, surveyed users gave
lower ratings to the TruEarth pizza on taste and variety attributes compared to takeout
pizza.
4. Given the limited life of the product, any drop or adverse fluctuation in demand, even in the
short term, would lead to heavy costs in terms of unsaleable inventory, especially given the
practice of retailers seeking markdowns and high guaranteed sell-through performance.