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Case Study: Nestle Refrigerated Foods

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Case study: Nestle Refrigerated Foods
Problem Statement:
Nestle Refrigerated Food Company (NRFC) in the year 1990 while in the late 1980s the company has successfully captured the category by introducing refrigerated pasta and sauces in the markets which improved the shelf life of the earlier selling products in the U.S markets.
NRFC is wondering whether or not they should launch a pizza product into the refrigerated foods market, and if it should have additional toppings sold separately or not.
Objectives:
Sustain the first-mover advantage
Extend their product line
Increase market share
Alternatives:
Maintain the status launch the Pizza Kit with toppings sold separately launch the Pizza Kit with no additional toppings sold separately

Consequences of Alternatives:
Recently, the company’s major competitor in the global markets ,Kraft is expected to launch refrigerated pizza in about six months .NRFC want to replicate the success of its earlier product to pizza market, NRFC has to launch its product well before Kraft to enjoy the first mover advantage over the competitor.
The first option - Maintain the dominant status in pasta market, not entering the pizza market. The entry of pizza into the refrigerated food category was new as people never tried it. Because the Pizza market was dominated by restaurants where the people either ate it or carried for eating it at home. Therefore it will be more risky and costly for Nestle to enter the pizza market. Nestle could damage its current Contadina Pasta & Sauce product line if the Pizza Kit product is not received well in the marketplace due to the brand penetration.
The second option- launch the Pizza Kit with toppings sold separately.
NRFC gained the first-mover advantage when they enter the pasta market, and then use the advantage to sustain the threatened by Di Giorno.
NRFC’S brand penetration can be increased to improve the total sales by launch the pizza kit, because pizza and pasta are in the same ethnic food group, it would help in improving the image of the brand as a whole and the total sales would increase of all product lines and would also help in any further launch of new or improved product. The third option - launch the Pizza Kit with no additional toppings sold separately.
According to Exhibit 21 the buying tendency is higher in Pizza kit with topping than the pizza kit without topping.
Tradeoffs / Analysis of Alternatives:
The first objective for NRFC is to obtain the first-mover advantage to prevent Kraft dominate to pizza market. Therefore, according to Table2, the best solution is launching Pizza Kit with toppings to gain the first movers advantage.
However, there are some tradeoffs should be made:
Firstly ,on comparing the data of the Pizza kit sample the findings were in favor of take-out pizza rather than Contadina kit. The take-out pizza scored high ratings on almost every aspect surveyed , easy to prepare , convenient, add taste etc. which meant that product awareness was not enough among the their target customers .
The new eating habits were also required to be developed in the people as they were not known to the refrigerated pizza earlier. Therefore, the success results shown by pasta after its launch were not a guarantee for the similar results with pizza.
On the second hand, NRFC estimated that they need to capture more than 0.3% share of the retail pizza market to meet their investment costs($12 million).
According the exhibition 21, customers will be more willing to buy the pizza kit with toppings, launching the pizza kit with toppings will be more profitable for NRFC.

Recommendations:
In Table2, the alternative of pizza kit with toppings got the highest score (60)
Nestle should bring the Pizza Kit with toppings to market and position it as a high quality, reasonably priced alternative to both the takeout/delivered and frozen pizza segments.
However, Nestle should do more tests to refine the taste of its pizza before the launch. Nestle should improve its manufacturing facilities before the product launch. Besides, Nestle should use the same distribution network as it did for Pasta to enhance the brand penetration. Finanlly, Nestle can gain the profit by their complete product line.

Table1: Consequence Table Strategies →Objectives ↓ | Maintain the status | Pizza Kit with toppings | Pizza Kit with no additional toppings | first-mover advantage | Advantage:Less risky for company operationDisadvantage:More difficult to enter the pizza market after Kraft’s entry | Advantage:being the market leader, gaining the more profit Disadvantage: increasing product acceptance is risky and costly | Advantage:Disadvantage: product awareness was need among the customers | Extend the product line | Advantage:keep dominant status in the pasta marketDisadvantage:The width of product is limited. | Advantage: diversify the offer of ethnic productsDisadvantage:Topping costsMore technologies acquired from toppings products | Advantage: meet the variety needs of customersDisadvantage:Less revenues than the sales of pizza with topping | Increase market share | Advantage:Obtain more market share on pasta marketDisadvantage:gain the profit limited in pasta market | Advantage: gain more profit by parent brand penetrationDisadvantage:Investment cost $12million | Advantage:No topping costsDisadvantage:Customers buy toppings from other brands |

Table 2: Weighted Consequence Table Strategies →Objectives ↓ | Weights(1-5) | Maintain the status | Pizza Kit with toppings | Pizza Kit with no additional toppings | first-mover advantage | 4 | 4(16) | 5(20) | 2(8) | Extend the product line | 3 | 2(6) | 5(15) | 4(12) | Increase market share | 5 | 2(10) | 5(25) | 3(15) | | Ranked Total: | 8 | 15 | 9 | | Weighted Total: | 32 | 60 | 35 |

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