Case Study Solution
Marketing Management 6301
Nestle, S.A. one of the world’s largest food companies originally founded by Henri Nestle in 1866 has a sales of over $37 billion in 1993. Nestle Refrigerated Food Company (NRFC), located in Glendale, California, was a wholly owned subsidiary of Nestle.
This case illustrates many market researches which has been done for the introduction of refrigerated pizza to the refrigerated food category product in the U.S. markets by Nestle Refrigerated Food Company (NRFC) in 1990. After the great success of Nestle Refrigerated Food Company (NRFC) Product Contadina pasta and sauces, company plans to enter the refrigerated pizza market in U.S., in order to continue their big success, they needed to get new product opportunities.
Therefore, they built several steps to help them reach the success again. They are idea generation, concept screening, and product development, quantification of volume, test market, commercial evaluation, and introductory tracking. Using these methodology NRFC came up with the idea of extending Contadina by introducing refrigerated pizza in the line.
After the successful launch of Contadina Pasta and Sauces in 1987 company made a sale of over $100 million by 1990 in the same product category. Then NFRC started to think about extending the product line by introducing refrigerated pizza.
But NFRC was in a dilemma to choose between “Pizza & Toppings” and “Pizza” only.
Nestle was facing various issues while contemplating about the launch of refrigerated pizza. They are,
Dubious Notion: crust packaged together with separate packets of cheese and sauce ready for home use was itself a new idea which was never tested before.
Product Positioning: the product was designed in such a way to attract most of its customers from the take away or delivered segment (76% of total market).
Brand awareness: since the product was an extension in the line of refrigerated food, if it was perceived as a low quality one, it could hamper the total image of the brand.
Competition: Knowing that Kraft has already tested the market of refrigerated pizza and was expected to launch its new product in the same line within 6 months, it was indispensable for them to take the advantage of first mover gain without making any delay.
Success of pasta
Product Development: The Company believes in purchasing small local brands and their facilities to enter the new markets and then invest in there up gradation to make their product compete at the national and international levels. Moreover due to the acquisition of Lambert Inc., two plants, a package technological innovation, a longer shelf life and efficient supply chain was a benefit of the product as well.
Market Demand: There was strong demand for pasta in the market. Survey figures show that 90% purchased dry pastas and 17% were consumers of frozen pasta, indicating pasta consumption and preparation was mostly at home. So introduction of easy to cook of good quality had a good market potential.
Marketing & Distribution: NRFC gain success on the first mover advantage and on strong research methodology. First mover advantage here means building the brand equity before it being created by your competitor. Component Marketing helped increase sales and improve quality and shelf life. Also concept testing for pasta positioning gave clear idea on projecting refrigerated pasta in the market.
Comparison between Pizza and Pasta opportunity
If Nestle Refrigerated Food Company step into the pizza market before Kraft, than ultimately it will gain the first mover advantage. As most 75% customer of pizza are those who prefer takeaways or deliveries rather than sitting in the restaurant.
There is a need to develop a product that can satisfy the need of this segment who like to have pizza at home rather than in restaurant.
We can even infer that the offering for crust and