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Nestle S.A. is a Swiss multinational food and beverages company headquartered in Vevey, Switzerland. Nestle has 468 factories in 86 countries around the world and around 330 000 employees. Nestle has more than 2000 local and global brands. Largest food company in the world, measured by revenues.
TIMELINE
1866: Nestles milk and infant products
Chocolate, Instant coffee, culinary, ice cream, mineral water & pet foods
1985: Carnation Co; coffee mate creamer & Friskies pet foods. 1986: Lamberts Pasta & Cheese
Refrigerated Foods
In the Prepared Dishes and Cooking Aides line, they planned to introduce the refrigerated foods category in the U.S. market 7% of their global sales came from refrigerated foods in the European market. Attempt to enter through a pudding dessert product but pre-empted by Jell-O. The next step was the Ethnic Foods category with refrigerated pasta and sauces.
Refrigerated Pasta
Pasta available in the U.S. market either as fresh pasta in gourmet restaurants or as dry pasta in ethnic foods aisles in grocery stores. Refrigerated pasta was branded under Carnations Contandina brand as it was associated by the market with authentic Italian food. The Contandina Pasta & Sauces was highly successful growing to more than $100 million in sales by 1990.
Refrigerated Pizzas
Following the success of the refrigerated Pasta line and the possible tapering off of sales in the refrigerated foods market, Nestle contemplated launching refrigerated pizzas. They planned to launch it under the Contadina brand name as people recognized that brand. This case considers the possible launch of refrigerated pizzas.
Idea Generation
Success of Pasta-$100 million sales by 1990. Pasta- New companies entered (Kraft). Ethnic similarity between pasta and pizza. Target $18.4 billion pizza market which did not have refrigerated foods. Nestl's expertise in refrigerated goods. First mover advantage in the pizza market.
Product Development
Pizza Pre assembled
Pizza Kit
Pizza Kit (Crust + Cheese + Sauce )+ Toppings(optional) Separate Packets 12 pizza- $6.40 $1.30 extra toppings
Heat and Eat Variants 1) Italian Pepperoni 2) Italian sausage 3) Italian Three-cheese 4) Italian Mushroom 12 pizza- $7.60
14.400% 12.600%
Weighted Trial
Adjustments Awareness ACV Adjusted Trial rate Trial Households Units Purchased at Trial Trial Pizza units Total Pizza units
41.1%
29.7%
32%
22%
30% 58% 5%
30% 58% 4%
REPEAT PURCHASES
Pizza Kit & Toppings Contadina Users Non-Users Repeat Rate Repeat Households No. of Purchases Repeat Occasions No. of Repeating Units Repeat Units Total Units Total Units 22% 721204.2 2 1442408 1 1442408 5375890 11527185 22% 825173.6 2 1650347 1 1650347 6151294 Pizza Only Contadina Users Non-Users 22% 561521.7 2 1123043 1 1123043 3930651 8248226 22% 616796.4 2 1233593 1 1233593 4317575
Total Pizza Units Total Pizza Units with Toppings Trail Transaction size Total Trail Topping Units REPEAT TOPPINGS CALCULATIONS Repeat Units Repeat transaction size Total Repeat Topping Units Toppings Total Topping units
REVENUE ESTIMATION
Pizza Kit & Toppings Pizza Only
Users
Total Market Units Pizza Toppings 5375890 4589483
Non-Users
6151294 5251105
Users
3930651
Non-Users
4317575
25116860
27589304
Difference($)
12568710
-9862557
Consumer Perception
Pricing
Pizza Contadina Fresh Takeout/delivered pizza Frozen pizza from supermarket $6.39 Toppings $1.29 $8-$10 $2-$3
Price competition with delivered pizza 75% of pizza consumption at home was delivered/takeout pizza There is always the cheaper frozen pizza that can be cooked at home but requires de-freezing before heating
Promotion criteria
Promotion strategies
Leverage the successful Pasta platform, Contadina brand Capitalize on the growing Italian food market segment
Distribution
NRFC has a highly efficient distribution system for transporting refrigerated products
Using brokers to sell rather than relying on the traditional sales force
Pizza Kit
Packaging
cheese
12 inch pizza
Toppings
Italian Sausage
Italian 3 Cheese
Italian Pepperoni
Competition(Presumed)
Recommendations
The simulated test result shows that the users rated delivered pizza over the refrigerated pizza. The new product was pitted directly against the delivered/take away category. No data proves that there was a latent demand for refrigerated pizza. The decision to enter the market with refrigerated pizza solely based on a market research conducted by the competitor Kraft Foods. The new product has no value proposition to attract newer customers. The only means of becoming profitable was to eat into the existing market share of delivered pizza..