Contadina Nestlé Case

Nestlé Refrigerated Food Company (NRFC) in 1993 was one of the world’s largest food
companies with sales of over $37 billion. Its 500 plants operated in 60 countries with 195,000
employees, producing a wide range of food and beverage products. After the great success of
product Contadina pasta and sauces, NRFC was thinking to grab the opportunity through
extension of the Contadina brand by beginning a product development process for a
refrigerated pizza concept. The pizza market was an $18.4 billion market and 75% customer
of pizza are those who prefer takeaways/ deliveries rather than sitting in the restaurant. In US
more than 10,000 franchised pizza restaurants, 25,000 pizza outlets and the frozen pizza market
is more fragmented without a clear market leader.

After to test some infeasible concepts, in 1990 NRFC commissioned BASES, a market research
firm, another market research study [BASES Line II] to estimate potential sales volume and a
combination with a product taste test on two new pizza concepts products: Pizza Kit with the
option of available toppings and the Pizza Kit with no additional toppings sold separately. The
study was focus to determine the impact on trial kit by availability of separate toppings and
analyze strengths and weaknesses of both concepts, considering volume, repeated purchases,
topping calculations, revenue estimation, sensitivity analysis to see the penetrations of both
concepts in the different markets. Afterwards calculations we recommend that NRFC should
launch Pizza Kit with topping because from the quantitively perspective the total factory sales
of it ($55.2M in factory sales) exceeds their basic business requirement for pizza ($45.0M in
factory sales); moreover, total retail sales ($82.8M) exceeds their target market share (0.3% of
the retail pizza market: Retail pizza market $18.4B * 0.3% = $55.2M). Besides that, Pizza Kit
with toppings requires at least 7% market penetration to meet Basic Business Requirement of
$45 million factory dollar sales ($45,423,334).

Regarding some quantitively aspects, we confirm this desition due no competitor in the market
for its specific product, so NRFC can get first-mover advantage, although Kraft already test-
marketed, NRFC could move faster. 60% of pizza were eaten at home but 88% sold by
restaurants. There is a lot of space to grow for refrigerated pizza
Contadina brand has already existed among consumers and that mean an asset in terms of
brand awareness. Additionally, component marketing strategy of pizza kit and topping already
proved successful in pasta market (pasta and sauces) because consumers feel less guilty, also,
the product has a longer shelf life compared to other products (pizza sold in restaurants etc.)

According to the new product development process of NRFC after the quantification of
volume, if a product proved financially viable a detailed marketing plan was developed,
production desition made and the product is prepared to launch. In this phase we have a couple
of more recommendations before the launching. Nestlé should work more to refine the taste,
bulling a strong point of differentiation related its potential competitors and also probably it
can work more on the price promotions. Moreover, to start the production NRFC can tune its
manufacturing facilities before the product launch, considering that the company
noticed [specifically Stephen Cunliffe, president of NRFC] the existing facilities were not top-
class and the factory lacked the sanitation standards required of a national company and the
existing retail outlets were not part of our strategy for the future. To sell perishable product
also demand a highly efficient system of distribution to achieve that NRFC can use for Pizza
Kit the same distribution network used for Pasta products. Finally, the new product should be
also supported by big advertising investments during its launching.
One of the main similarities related to pizza`s and the pasta`s opportunities are based on the
first-mover advantage that Nestle explored and wanted to capitalize on, because with these
two-products Contadina achieved first mover advantages in the market of refrigerated
products. Based on the fact that competitors were going through the same cycle, the decision
to purchase of an existing business or to re-invent a product presentation such as the
refrigerated Pizza Kit was a better option than starting to produce something from the scratch.
Overall, this was something very similar in the rationality of both product development
opportunity. Also, the significant market niche was similar for both products and besides that
the company took advantage from the umbrella brand name of Nestlé an resulting as an strong
support for both, which could use a sufficient supply chain management and network already
existing in US market, for instance.

Moreover, other big similarity was the effective research methodology used to quantify the
volume and market potential as a determinative and consistent key tool in the decision making
and development concept process of the company. Finally, with these high quality and
premium positioned products pasta and pizza NRFC could also to reach high- players and build
up a significant brand, alliances or product loyalty in the market of refrigerated products, before
the competitors like Kraft enter the market. Beyond the fact that the options for pasta and pizza
look similar and beyond the fact that refrigerated pizza can be a logical continuation of the
refrigerated pasta business, when analyzing the launch of both products there was a much more
context favorable and permissive for pasta than for pizza. At the time there were not many
subtitle products for pasta and on the contrary the number of restaurants, franchises and
retailers that sold pizzas were many, which was a big threat to penetrate the market.

How does the pizza concept test data compare to the pasta concept tes