1. food and drink
2. food
3. condiments and dressings

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
•Refrigerated foods were responsible for 7% of
Nestlé's global sales despite little contribution
from the potentially large U.S. Market
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
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
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
Nestlé's Research of at Home Pizza
Consumption
delivered/take-out
5% 4%
frozen pizza
(supermarkets)
16%
75%
fresh pizza (grocery
stores)
homemade pizza
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
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)
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
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
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
NRFC Data on Consumer Awareness
& Purchase Assumptions
Pizza Kit &
Toppings
Pizza Only
Awareness
Users
60%
60%
Non-Users
30%
30%
Overall
37%
37%
ACV
58%
58%
Units @ Trial
1.2 Kits
1.1 Kits
Repeat rate
22%
22%
Repeat Purchase
Units
1 Kits
1 Kits
Repeat Purchase
Occasions
2
2
Purchase Assumptions
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
Analysis:
Volume Estimation
Fixed Data
Pizza Calculations
US Households
Trial Penetration [%]
Trial Unit Households
Definitely Buy
Adjustment 80%
Probably Buy
Adjustment 30%
Weighted Trial
Adjustments for:
Awareness
Distribution (ACV)
Adjusted Trial Rate
Trial Households
Trial Transaction Size
Trial Units
Option A: Pizza Kit & Toppings
Contadina Users
Non-Users
Option B: Pizza only
Contadina Users
Non-Users
95,500,000
80%
30%
24%
22920000
30%
24%
57%
17%
41%
76%
72580000
15%
12%
59%
18%
30%
24%
22920000
22%
18%
48%
14%
32%
76%
72580000
12%
10%
42%
13%
22%
60%
58%
14%
3278201.76
1.2
3933842
30%
58%
5%
3750789.24
1.2
4500947
60%
58%
11%
2552371.20
1.1
2807608
30%
58%
4%
2803620.24
1.1
3083982
8,434,789
5,891,590
Analysis:
Repeat Purchases
Option A: Pizza Kit & Toppings
Contadina Users Non-Users
Repeat Purchase Calculations
Repeat Rate
Repeat Households
Repeat Purchases
Repeat Occasions
Repeat Purchase Units
Repeat Units
Total Units
22%
721204
2
1442409
1
1442409
22%
825174
2
1650347
1
1650347
5376251
6151294
11,527,545
Option B: Pizza only
Contadina Users Non-Users
22%
561522
2
1123043
1
1123043
22%
616796
2
1233593
1
1233593
3930652
4317575
8,248,227
Analysis:
Pizza Toppings
Option A: Pizza Kit & Toppings
Contadina Users
Non-Users
Toppings Calculations
Topping Trial Rate Calculation
50% Buy Topping Every Time
25% Buy Topping Half the Time
Trial Pizza Units
Trial Units with Toppings
Trial Transaction Size
Trial Toppings Units
Repeat Toppings Calculations
Repeat Units
Repeat Topping Trial
Repeat Toppings Transaction Size
Repeat Toppings Units
Total Toppings
63%
63%
3933842
2458651
1.5
3687977
4500947
2813092
1.5
4219638
1442409
63%
1
901505
4589482
1650347
63%
1
1031467
5251105 9,840,587
Analysis:
Revenue Estimation
Revenue Estimation for Nestle's Refrigerated Pizza Launch
Fixed Data
Total Market [Units]
Pizza
Toppings
Total Market at [$]/unit
Pizza
Toppings
Revenue [$]
Total Retail Market
Total Factory Market
NRFC Business Requirement
Option A: Pizza Kit & Toppings
Contadina Users Non-Users
5376251
4589482
$6.39
$1.29
6151294
5251105
$34,354,243.16 $39,306,770.92
$5,920,432.38 $6,773,925.37
$40,274,675.54 $46,080,696.29
$86,355,372
$57,570,248
$45,000,000
$12,570,248
Option B: Pizza only
Contadina Users Non-Users
3930652
4317575
$25,116,864.03 $27,589,305.33
$25,116,864.03 $27,589,305.33
$52,706,169
$35,137,446
$45,000,000
-$9,862,554
Analysis:
Sensitivity Analysis
• 5% Penetration
Pizza & Toppings
Pizza Only
Total Trial Units
6,445,734
4,439,896
Total Retail Market
$65,991,428
$39,719,312
Total Factory Market $43,994,285
$26,479,541
• 15% Penetration
Pizza & Toppings
Pizza Only
Total Trial Units
7,492,605
5,204,552
Total Retail Market
$76,709,293
$46,554,500
Total Factory Market $51,139,529
$31,036,333
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
Pizza
Topping
5%
8,809,170
7,52,023
15%
10,239,894
8,741,373
24%
11,527,545
9,840,587
• Market Share
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.
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.
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
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.
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
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
What Happened?
Marketscan: Americans Hunger for a More Homey Pizza, WSJ, June 29, 1993
1993
• Kit sold for $5
• Held 15% of the $170 mil-a-year market for
refrigerated pizzas & pizza kits
• Kraft introduced Boboli Shells
• 1997 – Nestlé sold Contadina to Del Monte
– Excluded from sale was line of
refrigerated pasta & sauces
• Nestlé's changed name of refrigerated
pasta and sauces to Buitoni
Volume Estimation
Revenue Estimation for Nestle's Refrigerated Pizza Launch
Option A: Pizza Kit & Toppings
Option B: Pizza only
Fixed Data
Contadina Users
Non-Users
Contadina Users
Non-Users
Total Market [Units]
Pizza
5376251
6151294
3930652
4317575
Toppings
4589482
5251105
Total Market at [$]/unit
Pizza
$6.39
$34,354,243.16
$39,306,770.92
$25,116,864.03
$27,589,305.33
Toppings
$1.29
$5,920,432.38
$6,773,925.37
Revenue [$]
$40,274,675.54
$46,080,696.29
$25,116,864.03
$27,589,305.33
Total Retail Market
$86,355,372
Total Factory Market
$57,570,248
NRFC Business Requirement
$45,000,000
$12,570,248
$52,706,169
$35,137,446
$45,000,000
-$9,862,554