A CASE STUDY ON Nestle refrigerated foods: Contadina pasta & pizza (A)

Case Overview
Nestls new product development process is designed along the steps of an ideal new product development process. The case also mentions flexibility in following the methodology on the basis of the risk factor, investment requirements. One of the positive aspects is testing for both the acceptability of the concept and the preferred positioning among the consumers. Volume forecasting helps reduce losses due to over-production and helps in doing a cost-benefit analysis for launch of new products. An example of NFRCs competent product development

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process is the success of Contadina Pasta which involved detail concept testing. Other factors that attributed to the success are: Market Demand: There was a strong consumer demand for convenient, good tasting food products. Pasta was one of the staple diets and one of the Top 20 foods on menus. According to market assessment, 90% of those surveyed purchased dry pastas and 17% were consumers of frozen pastas, indicating that pasta consumption and preparation was mostly at home. So introduction of easy-to-cook pasta of good quality had a good market potential. Marketing & Distribution: NRFC had biggest advantage in the form of first-mover gain. They formed brokers organization to gain larger sales time. Component marketing helped increase sales and improve quality and shelf life. Also, concept testing for pasta positioning gave a better idea on how to project refrigerated pastas to the consumers. The above market opportunities are not available for pizza. Most of the pizza consumption is in the form of take outs, 88% pizzas are sold by restaurants and large pizza franchises like Pizza Hut and Dominos including numerous regional and local retail outlets. Market survey indicates that only 15% and 4% of those surveyed consumed frozen and home-made pizza against the 17% and 90% users of frozen and homemade pastas. Thus the market available for refrigerated pizza was limited to 15%. However there is scope for offering varieties in crust and toppings for refrigerated pizza considering the limited choice of combinations of crust and toppings available in the restaurants and retail markets. We can infer that the offering for crust and toppings will be the USP of refrigerated pizza. This inference limits the market for pre-assembled pizza (Pizza Only) option. Despite being an entirely new product in the market, Contadina pastas had a favorable response from the users. The percentage of respondents who indicated a high probability of buying is almost the same in concept testing for Contadina Pastas and Contadina Pizza & Toppings (75%and 76% respectively); the percentage is lower (58%) in case of Contadina Pizza-Only. Respondents have rated availability of variety, easiness & quickness in preparation, freshness, general taste and flavor as the major attributes in refrigerated pasta and pizza.

Problem statement
NRFC is contemplating the launch of Contadina Pizza following the success of its previous product in the refrigerated food category Contadina Pasta. The marketing department of NRFC had conducted a number of concept testing for Contadina Pizzas. There were a number of drawbacks with respect to the rough estimates drawn by the staff. BASES study was conducted only in the high potential markets (Northern and eastern parts of US) whereas their target market was estimated to 95.5 mm throughout the nation. They assumed that since users of Contadina pastas & sauces were aware of the brand, they could estimate the brand awareness for Contadina among the users to be double that of the non-users and estimated it to 60% and 30% respectively. NRFC was unsure of the option to
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select from Pizza & Toppings and Pizza Only. 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. Q1. (a) Pizza only Forecasted trial volume = No of target customer x trial rate x awareness rate x availability rate x purchase unit per customer =95.5 M x 24.9% x 37% x 58% x 1.1 = 5.6M Forecasted repeat volume= No of trial customer x repeat rate x frequency x purchase unit per customer = 5.1M x 22% x 2.0 x 1.0 = 2.2M Factory dollar sales/unit = 66% of 6.4 = $4.2 In dollars, (5.6M+2.2M) x $4.2 = $32.8M. This is less than threshold of $45M.

(b) Pizza & topping For Pizza, Forecasted trial volume = No of target customer x trial rate x awareness rate x availability rate x purchase unit per customer =95.5 M x 31.3% x 37% x 58% x 1.1 = 7.7M Forecasted repeat volume= No of trial customer x repeat rate x frequency x purchase unit per customer = 6.4M x 22% x 2.0 x 1.0 = 2.8M For Topping, Forecasted trial volume= forecasted trial volume x ratio of favourable) x (50% + 25% x 0.5) x 1.5 = 7.7M x 76% x (50% + 25% x 0.5) x 1.5 = 5.9M Forecasted repeat volume= forecasted repeat volume x 69% x (50% + 25% x 0.5) x 1.0

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= 2.8M x 69% x (50% + 25% x 0.5) x 1.0 = 1.2M

In dollars, (7.7M+2.8M) x $4.2 + (5.9M +1.2M) x $0.86 = $50.2M. This is larger than threshold.

Q2. The three exhibits clearly indicate the popularity of the takeout pizza to be the highest among the three. The takeout pizza scored high ratings on almost every aspect surveyed: easy to prepare, convenient, add taste etc. which meant that product awareness was need among the target customers The Pizza kit is way behind in the popularity charts. This can be attributed to the factors like the taste, the crust of the pizza etc when compared to the takeout pizza. Similarly, the pre assembled pizza lags far behind the takeout pizza too. Again the soggy crust and the taste can be said to be the differentiating factors between the two pizzas. Also the lack of customisation and variety available according to customer needs is a big factor for the preassembled pizza to be less popular. Also, in exhibit 15, it is shown that if the Contadina pizza is introduced into the market the sales and market shares for the other existing pizzas will decline. Q3. Analysis of exhibits 19, 20 & 21 Among the Pizza and toppings & Pizza only, Pizza and Topping are a clear favourite. The concept interview for the Pizza only was very brief. An extensive behavioural study has been conducted on Pizza and topping. The likeability towards Pizza and toppings was unanimous amongst both users and nonusers of Contadina Pasta, the same doesnt hold true for Pizza only. In the pre product launch research of Pasta there is a lot of emphasis of 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 analysis of exhibit 6 shows that Pasta product was evaluated on 3 scales: Likes, Dislikes and Uniqueness. a) A total of 301 respondents were chosen. b) 224 had a favourable opinion about the product while 77 had unfavourable opinion. c) The freshness of the product, natural and convenience of the product were most liked features. d) Most of the unfavourable respondents were dissatisfied with the pricing.
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e) Most of the favourable respondents were happy with the product being new and different. Q4. The Exhibit 23 tells us about the favourable and unfavourable conditions qualities of the pizza product and the suggested improvements needed in the pizza to make it more favourable. While, in exhibit 24 the pricing comparative is given according to what price the customer is willing to pay for the 12 pizza. The survey sample for the In house testing was almost in good agreement with the taste and convenience of Contadina Pizza. They were more or less happy with the product. A few did want the pizza to be bettered but most of the sample population was happy with the marketed product and did not want many alterations for improvement in it. Hence the majority was in favour of the pizza. The pricing table clearly indicates that the sample population is willing to pay almost the same price for Contadina pizza as for the takeout pizza. This indicates that the product is competitively priced in the market. Q6. The success of Pasta can be attributed to the following reasons: a) b) c) d) e) f) g) h) Nestle had First Mover Advantage at the time of launching their Pasta product. Strong Research methodology adopted prior to launch. It is refrigerated and not frozen. Majority of the population was in favour of the concept. Large variety. Good Quality and Fresh. Quick and Convenient to make. Efficient Supply Chain Management.

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