PRODUCT MARKETING

Nestle Refrigerated
Foods: Contadina Pasta &
Pizza (A)
CASE ANALYSIS

NIKHIL SARAF
CASE BRIEF

After the great success of Nestle Refrigerated Food Company (NRFC) product Contadina pasta and sauces,
NRFC was thinking to grab the growth opportunity through brand extension of Contadina. To continue their
rapid growth, they needed other new product opportunities.

NRFC had established certain guideline steps that might help them a lot in developing new successful product
throughout their business life. Those steps are as follow :

 Idea Generation
 Concept Screening
 Product development
 Quantification of Volume
 Test Market
 Commercial Evaluation
 Introductory Tracking

By following these steps NRFC come up with the idea of Contadina brand extension by inducing “refrigerated
pizza” in a line.

PROBLEM STATEMENT

NRFC was unsure of the option to select from Pizza & Toppings and Pizza only.

Nestle must address several issues prior to product launch:

 Unproven concept – crust packaged together with separate packets of cheese and sauce ready
for home use was a new concept
 Product positioning—the Pizza Kit must be positioned to attract most of its customers from the
takeout/delivered (75% of total market) segment
 Brand awareness & extension—the product is in the same ethnic food group as its pasta &
sauce product, and could damage to the brand if it is a product perceived as a low quality one

Another major challenge facing NRFC was the competition from Kraft who had already test- marketed a
refrigerated pizza product during the pasta market-testing. With NRFC expecting Kraft to launch the pizza
product in the next 6 months, it was imperative for them to launch the pizza product without delays so as
not to lose their first mover advantage.
ANALYSIS

THE SUCCESS OF PASTA

 They could capitalize on the First Mover Advantage and on the strong research methodology adopted
prior to launch.
 Further, majority of the population was in favor of the concept.
 Main characteristic of the pasta, which it is refrigerated and not frozen to target a market niche in the
US, which is completed with a large variety of the ingredients products.
 It has a good quality and freshness, and quick and convenient to make, which characteristics are
perceived by the consumers as well, making a high intent and perceived value of the product, which
could distinguish the product and the brand and can use as a USP for premium or superior positioning
strategy.
 Moreover due to the acquisition of Lambert Inc, two plants, a package technological innovation, a
longer shelf life and an efficient supply chain is a benefit of the product as well.

SIMILARITIES AND DIFFERENCES IN THE OPPORTUNITIES OF PASTA AND PIZZA

 A significant market niche, which should be explored and capitalized on.

 The umbrella brand name of Nestlé is also a strong supported force for both products, which can use
a sufficient supply chain management and network nationwide in the US, and has serious
advertisement budget.
 The strong and effective research methodology is also a huge benefit and opportunity for the
company and for both pasta and pizza concept. With the refrigerated pasta and the pizza kit,
Contadina achieved first mover advantages in the market of refrigerated products.
 With these high quality and premium positioned products there is the opportunity also to reach high-
rollers and build up a significant brand and product loyalty in the market of refrigerated products,
before the competitors (Kraft) enter the market.

ESTIMATION FOR “PIZZA WITH TOPPINGS” CONCEPT

 The concept purchase intent for “Pizza with Toppings” according to the BASES II research study is 17%
for “definitely would buy” and 59% for “probably would buy” [Exhibit 21].
 80% of “definitely would buy” respondents and 30% of “probably buy” respondents will actually
purchase the product in practice. Therefore the adjusted trial is (0.8*0.17) + (0.3*0.59) = 0.313, which
means 31.3% of the consumers.
  The value of all commodity volume (ACV) is estimated 58%, thus after the Marketing plan adjustment
the trial rate is 0.313*0.37*0.58 = 0.0672, or 6.72%. The concept test indicated average purchase
amounts of 1.2 units for the “Topping concept”. Therefore the trial volume is 95.5 million households
* 6.72% * 1.2 average purchase units = 7.7 million and the repeat volume is 7.7*22% (repeat rate)*2
(repeat purchase occasion)*1 (average repeat transaction amount) = 3.388 million units. [Table D,
Exhibit 9]

ESTIMATION FOR “PIZZA ONLY” CONCEPT

 The concept purchase intent for “Pizza Only” according to the BASES II research study is 15% for
“definitely would buy” and 43% for “probably would buy” [Exhibit 21].
 The adjusted trial using the industry rule of thumb is 24.9%. After the environmental and marketing
plan adjustment phase the trial rate equals to 5.34%, so it is less than the case of “Pizza with
Toppings” concept.
 The concept test indicated average purchase amounts of 1.1 for “Pizza Only”. Thus the trial volume of
this concept is 5.61 million units. The repeat volume is 5.61*22% (repeat rate)*2 (repeat purchase
occasion)*1 (average repeat transaction amount) = 2.4684 million units, which is significantly lower
than the repeat volume of the “Topping concept”. [Table D, Exhibit 9]

PIZZA AND PASTA CONCEPT TEST DATA (ANALYSIS OF EX HIBIT 6, 19, 20, 21)

Among the “Pizza with Toppings” and “Pizza Only” concepts, “Pizza with Toppings” is more popular among the
consumers. However the concept interview for the “Pizza Only” option was brief. Therefore there are just
limited diagnostics.

 The likeability towards “Pizza with Toppings” was more significant amongst both users and non-users
of Contadina Pasta, than in case of the “Pizza Only” concept.
 In the pre-product launch research of Pasta there is more emphasis on the USP of the product which
is not being replicated while launching the pizza. The point of understanding the market perception
with regards to the packing of the product at hand has not been taken care of in the case of pizza.
 The percentage of respondents who indicated a high probability of buying is almost the same in
concept testing for Contadina Pastas and Contadina “Pizza with Toppings” (75% and 76%
respectively); the percentage is lower (58%) in case of Contadina “Pizza Only” concept
 Respondents have rated availability of variety, easiness and quickness in preparation, freshness,
general taste and flavor as the major attributes in refrigerated pasta and pizza as well.
 Major contrast can be observed in the concept test data for Pastas & Pizzas is case of pricing.
Respondents in favor of Pastas did not have issues with pricing of units (only 3% of favorable and 23%
of unfavorable thought they were expensive). However, in case of Pizza, both respondents in favor
and not in favor of refrigerated pizza quoted the units were too expensive (21% and 44 %
respectively).
ANALYSIS OF EXHIBIT 23, 24 AND 18

 The determined price for the pizzas is too high for the respondents.
 33% noted that it is an unfavorable reason against purchase intent, that the product is too expensive.
Both respondents in favor and not in favor of refrigerated pizza argued that the units were too
expensive (21% and 44 % respectively).
 The mean price of the research in related to typical price consumers would pay for different pizza
products shows as well, that the current price of the pizza line is not favorable for the consumers, it is
higher than the price of the takeout pizza, which may indicated that the product is not competitively
priced.

ANALYSIS OF WHETHER PIZZA SHOULD BE LAUNCHED OR NOT

LAUNCH NOT LAUNCH

$16 Million opportunity Real opportunity unknown. Sensitive to parent

brand penetration, topping purchase etc.

Significant first mover advantage Research indicates price/value and positioning

problems

Only requires a .3% share of huge pizza market Cross-selling opportunities may be over-
estimated

Manage risk – If share does not materialize from If this product were viable, Kraft would have
delivered/takeout, NRFC can take share from entered with pizza and not pasta
frozen

Staged rollout – if price/value becomes an issue Conduct a test market to gauge problems,
adjust product size, advertising, price etc. modify product size, pricing as demanded by
market.
RECOMMENDATIONS

HOW LARGE A MARKET HE WOULD FIND?

 Market for pizza is very large in USA. As per the statistics 76% of all the US families had eaten pizza at
a restaurant within certain previous months that includes delivery and takeout.
 Delivered/takeout pizza accounted 75% of pizza consumption frozen pizza account 16% fresh pizza
from grocery 5% and homemade account 4%.(Exhibit 15)
 The Pizza Kit concept registered a high probability of buying similar to that of Nestlé’s successful pasta
& sauce product, and the refrigerated pizza market is not currently serviced by any of its competitor.
 The NRFC believed that they could reasonable expect a market penetration of 25% of the current
Contadina users (24% of the 95.5 M target households). This base of parent brand users represents
sales of $36.6M, or 81% of Cunliffe’s figure for market success.

Exhibits 19, 23 shows that NRFC should focus on the following attributes to position Contadina Pizza:

 Would taste fresh

 Comes in varieties I like
 Is appropriate for special meals
 Would taste good
 Would not have a soggy Crust.

Contadina as a parent brand is well known for its fresh and tasty easy-to-cook pasta. This can be factored in to
leverage the brand awareness.

According to me I would launch the pizza product on the one hand because:

 Of the market niche

 The first mover advantage on the refrigerated product market
 The strong parent and umbrella brand support
 The capability of distinguishes the product
 The lower marketing and positioning costs

The Topping concept was estimated to be profitable even with the worst error. Reiterating NRFC’s president’
view, they need to launch a quality pizza product in the market before Kraft to repeat the success of Contadina
Pasta & Sauce.