SUBJECT: FUNDAMENTALS OF MARKETING

CASE STUDY: NESTLÉ REFRIGERATED FOODS: CONTADINA PASTA & PIZZA (A)

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 (Pizza & Topping; Pizza Only). There were a number of drawbacks with respect to the rough estimates drawn by the staff:

1. 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.

2. 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 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.

Case Analysis

Nestlé’s 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 NFRC’s competent product development 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 broker’s 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 takeouts, 88% pizzas are sold by restaurants and large pizza franchises like Pizza Hut and Domino’s including numerous regional and local retail outlets. Market survey indicate that only 15% and 4% of those surveyed consumed frozen and home-made pizza against the 17% and 90% users of frozen and home-made 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 favourable 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. Comparing the concept test data for Contadina Pastas and Pizzas we see that the ratings for ‘Likability’ and ‘Concept uniqueness’ is same. Respondents have rated availability of variety, easiness & quickness in preparation, freshness, general taste and flavor as the major attributes in refrigerated pasta and pizza. (Exhibit 4 & 21)

Major contrast observed in the concept test data for Pastas & Pizzas is the pricing. Respondents in favor of Pastas did not have issues with pricing of units (only 3% of favourable and 23% of unfavourable 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) (Exhibit 4 & 21)

Pizza is an extension of the parent brand; hence there is more awareness and affiliation to the brand. The higher numbers in favour of the Pizza concept is mainly due to the respondents who are users of Contadina Pastas. Pastas even without much brand support showed positive response during concept testing. Pasta concept test included positioning which was absent in the pizza concept test.

Exhibit 13, 14 and 15 compares and contrasts Contadina Pizza Concept (Pizza & Topping, Pizza Only) with the substitutes available in the market through relative concept attribute ratings by users in favour of either of the two forms of Contadina Pizzas, heavy users of Takeout Pizza and users of Frozen Pizza

Following inferences can be drawn from the data in the above mentioned exhibits:

1. Attribute ratings given by the frozen pizza users are way below the ratings given by other 2 set of users. So frozen pizza is less preferred compared to others.

2. The users who are in favour of the pizza kit concept have given ratings which are close to the ratings for users of takeout pizzas except for 2 attributes “Would taste good” and “Is appropriate for special meals”. So NRFC needs to concentrate more on the taste factor and also make it suitable for special meals.

3. The ratings given by users favouring pre-assembled pizzas imply that they are apprehensive about the freshness, taste, availability of specific crust and toppings varieties and quality of the crust. If NRFC plans to go in for pre-assembled pizzas they need to take special care of the above mentioned attributes like ensuring the crust does not become soggy post production, crust and toppings have varieties that consumers would like. Once the final product is produced after taking care of all these attributes the marketing strategy should emphasis these attributes so as to change the general perception of the people.

4. Exhibit 15 gives us the likely trend post-trial of Contadina Pizza:a. There is no change in the consumption of homemade pizzasb. Almost no consumption of fresh pizza from supermarketc. 50% and 22% reduction in consumption of frozen and takeout pizzas respectivelyd. 3 out of 10 times, they would prefer eating Contadina pizzas

So, Contadina pizza becomes the 2nd most preferred product for the user after take outs.

We use the BASES model to forecast trial and repeat purchases for Contadina ‘Pizza & Toppings’ and ‘Pizza only’.

BASES Model is based on assumptions that the sample size used, analysis of in-home product usage is a representative of the entire target market. It assumes that the estimates market plan is similar to the actual launch plan. Any inconsistency in the above assumptions can result in incorrect forecasting of the success of the product.

However the figures estimated for advertising awareness and purchase intent are subject to limitations (Refer points 1, 2 in Problem Definition). This involves risks with respect to:

1. The Product not living up to the benefits promised in the concept2. Respondents may like a concept but not buy the product or overstate preferences due to

social desirability factor.3. Concept tests cannot predict how many people will use the product regularly – high trial

alone does not predict product success4. Limited diagnostic information about concept does not provide insight into the complex

structure or interests and attitudes

(Concept Testing With Conjoint Analysis, Paul E. Green & Abba M. Krieger, Wharton School, University of Pennsylvania)

  Pizza & Toppings Pizza only

 Contadina

UsersContadina Non-Users Overall

Contadina Users

Contadina Non-Users Overall

Concept Purchase Intent (From Exhibit 21)        

Definitely will buy 17% 15% 17% 22% 12% 15%

Probably will buy 57% 59% 59% 48% 42% 43%

         

Adjusted trial        

80% of Definitely buy 13.60% 12.00% 13.60% 17.60% 9.60% 12.00%

30% of Probably buy 17.10% 17.70% 17.70% 14.40% 12.60% 12.90%

         

Trial 30.70% 29.70% 31.30% 32.00% 22.20% 24.90%

         Marketing Plan adjustment (From TABLE D)        

Advertising Awareness 60.00% 30.00% 37.00% 60.00% 30.00% 37.00%

Adjusted ACV 58.00% 58.00% 58.00% 58.00% 58.00% 58.00%

         

Trial after Marketing plan Adjustment 10.68% 5.17% 6.72% 11.14% 3.86% 5.34%

Units Purchased at Trial 1.2 1.2 1.2 1.1 1.1 1.1

Target Households (Millions) 95.5 95.5 95.5 95.5 95.5 95.5

         

Trial Units (Millions) 12.24 5.92 7.70 11.70 4.06 5.61

 (From TABLE D)        

Repeat Rate 22% 22% 22% 22% 22% 22%

Repeat Purchase Units 1 1 1 1 1 1

Repeat Purchase occasions 2 2 2 2 2 2

         Trial Units for Repeat (Millions) 5.39 2.61 3.39 5.15 1.79 2.47

Recommendations

Market for refrigerated pizza

Exhibits and related data given reflect a positive market for Contadina pizza, provided NRFC works on ensuring good quality, variety and taste of pizza. If the shelf-life of the pizza is increased without degrading the quality they can easily penetrate market for frozen pizza. NRFC should go in for manufacturing of Pizza & Topping kit, which leverages the advantage of component marketing (similar to that used for pasta) with respect to cost, quality ans ease of production. The market for pre-assembled pizza is not very encouraging and as the case mentions has manufacturing and quality issues. NRFC can use a similar distribution and sales strategy as used for the pasta.

Target market share

Although NRFC is targeting 0.3% share of the retail pizza market, it should focus on the frozen pizza market which approximately forms 16% of the total market share (Exhibit 15) since respondents have rated frozen pizza lower on the attribute ratings. Also 32% of respondents have chosen to replace frozen pizza for Contadina; whereas only 2% chose to replace restaurant pizza (Exhibit 18).

Positioning

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’ and ‘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.

Positioning for Pizza & Toppings:

“From the kitchens of Contadina, a new line of easy-to-make, fresh and tasty Pizzas with a wide range of crusts and toppings to choose from”.

Positioning for Pizza only:

“From the kitchens of Contadina, a new line of ready-to-eat, fresh Pizzas in your favourite mix of crunchy crust and tasty toppings”.

Reiterating NRFC’s president’s view, they need to launch a quality pizza product in the market before Kraft to repeat the success of Contadina Pasta & Sauce.