TruEarth Healthy Foods: Market Research for a New

Product Introduction
Case Analyses:

Isabel Eckstein the brand manager had let the introduction of the most
successful product of the company (Pasta Kit) in 2006 which means

that she has a very strong marketing background.

Competitors began offering similar products in 2008 which cause the growth to

slow.
Some of their competitors are Nestle and Kraft.
The do not make a rash decision. The success of Cucina Fresca was a

calculated risk based on significant research.

The company only uses high-quality durum wheat and mostly organic

ingredients.
The company further raised consumer awareness through several promotional
programs, using coupons, magazine advertisements, and in-store

demonstrations.
Idea generation. As the company grew, the idea generation process became a
more systematic evaluation of consumer trends, with formal management

brainstorming sessions.
Three important developments reshaped how consumers purchased groceries.
The first important trend was a new, loosely defined food category in the United
States home meal replacement (HMR). An increase in dual-income
households had led to higher disposable incomes coupled with time poverty, as
both workers found themselves lacking the time to cook a meal and clean up
afterward. Further, consumers had tired of unhealthy carryout and fast food and
started seeking greater variety and freshness. Supermarkets began meeting

HMR needs by enhancing their fresh, prepared food offerings.

There was no fresh whole grain pasta with broad distribution, with 85% of those

in favour of the concept having never purchased it before.

Competitive Threat: Rigazzi Fresh Whole Grain Pasta.
Pizzas were a core component of the Italian-American food category, with annual

sales in the United States estimated at $53 billion in 2007.

suggested that 77% of consumers ate pizza at least once a month.

The store-bought refrigerated pizza market was 11% of sales and totaled $5.8
billion, making it a larger market than refrigerated pasta, which was

approximately $4.4B in 2007.

pizza demand in key demographics had been hurt by health concerns and the
popularity of diets that restricted or cut out carbohydrates. Eckstein believed this

presented the perfect opportunity for TruEarth.

Independent surveys of restaurant-goers showed that 33% of people had strong

interest in a whole grain crust.

Major chains like Papa Johns and Pizza Hut had introduced whole wheat or

multi-grain crusts
Kraft and Nestle are already huge players here with low-cost frozen pizza.

RECOMMENDATION HAI YE FUU

MEMORANDUM
DATE:
January 11, 2009
TO:
Isabel Eckstein
Brand Manager
FROM:
Brett Matlack
RE:
Introduction of Whole Grain Pizza Product
The slowing growth of Cucina Frescas sales has placed our competitive
edge in the fresh Italian food category in jeopardy. In an attempt to retain our
leadership position and extend our product line, we have invested in the
development of a new whole grain pizza. We must decide whether to launch our
pizza offering. Our decision must take into consideration that the new products
wholesales volume estimates must exceed $12 million to meet our return
requirements. The decision-making process is time sensitive because one of our
competitors, Rigazzi Brands, has already tested a whole grain pizza concept and is
not far from introduction. Given these factors, we can either debut or suspend the
product. Based on sales volume estimates and situation analysis, I recommend that
the company launch the pizza. The introduction will result in a wholesales volume

that exceeds our return requirements and these additional funds can be reinvested
into the firm.
Option I: Launch Whole Grain Pizza Product
The launch of a whole grain pizza kit will capitalize on the same consumer
trends that prompted the release of Cucina Fresca: growing demand for quick,
customizable home meal replacements that are refrigerated and available in tasty,
whole grain options. Also, pizza is a core component of the Italian-American food
category that we cannot ignore because it is frequently purchased by customers on
a monthly basis. Our whole grain pizza product resolves the time- and healthrelated concerns of American consumers in one of their favorite dishes (see Exhibit
1: SWOT Analysis for Whole Grain Pizza Product). The growing demand for a whole
grain crust has been addressed by local pizzerias and take-out franchises, but not
in the store-bought refrigerated pizza market. The immediate release of the pizza
kit would allow us to penetrate this market before Rigazzi and benefit from first
mover advantages. As a result, our 1st year wholesale volume estimates would
exceed our return requirements by approximately $4.5 million (see Exhibit 2:
Whole Grain Pizza Concept Purchase Volume Estimate, Year 1 [Excellent]). The
excess returns can be reinvested into the firm and used to expand our
manufacturing facilities or further extend our product line.
If the pizza kit is launched, the firm must consider the potential
consequences. We must assess the impact it will have on Cucina Frescas success
and production, as well as the TruEarth image if the product flops (see Exhibit 1:
SWOT Analysis for Whole Grain Pizza Product). Likewise, we must review the
potential consequences if the wholesale volume estimate is calculated using the
percentage repurchases when the product is perceived to be of mediocre or

average quality (see Exhibit 3: Whole Grain Pizza Concept Purchase Volume
Estimate, Year 1 [Mediocre, Average].
Option II: Do Not Launch Whole Grain Pizza Product
The competitive environment of the pizza market and quality-related issues
discovered in the BASES studies indicate that the whole grain pizza product should
not be launched. Although the market generates high sales, it is extremely
crowded and dominated by powerful players like Kraft and Nestle. Furthermore,
the ability to market a tasty whole-grain pizza crust and communicate its benefits
will be difficult because the American public perceives whole grains to be less
appetizing than white flour. Attempting to change consumer preferences is timely
and costly.
By foregoing the release of the pizza kit, the company can focus solely on
Cucina Fresca. The operating facilities will not have to worry about manufacturing
two different product lines and our distribution infrastructure will not be
overworked (see Exhibit 1: SWOT Analysis for Whole Grain Pizza Product).
Likewise, our marketing team could concentrate on attempting to revive the pasta
meals. This product has proven to be successful at one time. Investing all of our
resources into the pizza product could be both disastrous and expensive
considering we have no experience in this market category. However, by shelving
the pizza, an opportunity is lost because our company would be ignoring the needs
of a potentially profitable market. The health-conscious trend is not going away
and our firm needs to expand our product line in order to retain our leadership as
a gourmet, healthy alternative.
Recommendation
At this time, our company would benefit the most by launching the new
whole grain pizza product. By not launching the pizza kit, our investments and

time can be focused on expanding the pasta line and retooling the marketing
campaign to improve sales; however, in order to diversify the TruEarth brand
name, innovation is needed. Although the pasta market may seem safe, we must
venture into new categories in order to raise brand awareness, seek new
customers, and increase our profits.
Exhibit 1: SWOT Analysis for Whole Grain Pizza Product
Strengths
Weaknesses
Highly selective about ingredients
Pizza kit only feeds 2-3 people
Existing infrastructure for coupons, Consumers have to buy toppings
magazine advertisements, in-store
separately
demonstrations
Limited selection of toppings and
Existing formal 4-step process for
varieties offered
research and development
Considered too expensive ($12.38 vs.
Incremental investment for pizza less
$10.09 for other refrigerated options,
than pasta
$11.72 for takeout)
Higher awareness of pizza product
Only received 10% favorable to
among Cucina Fresca customers
product in overall taste, texture, and
quality
Successful market experience in
launching new products (brand name Limited time to product expiration
awareness)
(similar refrigerated manufacturing
issues as Cucina Fresca)
Existing manufacturing equipment
o If using same equipment, this
and distribution infrastructure to get
may lead to bottlenecks in both
fresh food to shelves quickly
operating facilities and
Easy preparation, but gives
distribution network
customers the chance to be involved
in the cooking process
Permits customers to customize
Refrigerated pizza is considered
tastier, more authentic than frozen
pizza
Is a product for the whole family
(8.6/10 in mall-intercept)
28% of home-trial users believe there
is no need for improvement
33% of respondents in mall-intercept
considered the TruEarth name a
favorable advantage
Opportunities
Threats
Leverage relationship with North
Health conscious mindset (e.g. low
Dakota durum wheat supplier to
carbohydrate diet) has hurt key
supply wheat for pizza dough
demographics in pizza demand
Expand serving size options
Consumers may not purchase

o Offer single serving sizes for

individual meals; whole pizzas to

feed a family
Expand topping offerings
Contract with local cafes and other
gourmet specialty restaurants to offer
products in other store formats
Create a packaged bundle which
includes Cucina Fresca and the pizza
kit
Leverage TruEarth brand name to enter
the pizza market
o TruEarth is well-liked and
considered to be high quality
Utilize this to demonstrate the
benefits/product attributes of the
pizza product

additional toppings
Rigazzi has tested a pizza concept
and is preparing to introduce it
Competitors may quickly replicate
whole-grain pizza kit and price them
lower to win larger share of the
market
Nestle and Kraft dominate the
frozen-pizza market
Our pizza doughs quality may not be
comparable to freshly made takeout
Pizza market is extremely crowded
(options include takeout, delivery,
refrigerated)
If product succeeds, product
facilities may struggle to
manufacture two lines (Cucina
Fresca placed on back burner,
limited production)
If product fails, damage to TruEarth
name may make it harder to launch
new products in future

Exhibit 2: Whole Grain Pizza Concept Purchase Volume Estimate, Year 1

(Excellent)
Total Purchase Intent
Definitely would buy
% of Definites who actually buy
Definite Purchases
Probably would buy
% of Probables who actually buy
Probable Purchases
Trial Rate
Marketing Plan Adjustment
Target Households
Cucina Fresca Pasta Customers
Non- Cucina Fresca Pasta Customers
Customer Awareness
Non-Customer Awareness
All Commodity Volume Distribution (ACV)

18.00%
80.00%
14.40a%
43.00%
30.00%
12.90b%
27.30c%
58,500,000
6,435,000d
52,065,000e
50.00%
12.00%
40.00%

a Definitely would buy x % of Definites who actually buy: 80% x 18%

b Probably would buy x % of Probables who actually buy: 30% x 43%
c Definite Purchases + Probable Purchases: 14.4% + 12.9%
d Target Households x 11%: 58,500,000 x 11%
e Target Households x 89%: 58,500,000 x 11%

Marketing Adjusted Trial Rate

Cucina Fresca Pasta Customers Adjusted
Trial Rate
Non- Cucina Fresca Pasta Customers
Adjusted Trial Rate
Cucina Fresca Pasta Customers Trial
Purchases
Non- Cucina Fresca Pasta Customers Trial
Purchases
Total Trial Purchases

5.46f%
1.31g%
351,351h
682,051.5i
1,033,402j,k

Repeat Purchase Inputs

Repeat Purchase Occasions

2.00

Repeat Rate, by Product Services

Excellent Product

49%

Repeat Volume, by Product Scenario

Excellent Product
Total Purchases
Total Sales Volume
Retail Sales Volume
TruEarth Sales Volume
In Excess of Return Requirements

1,012,733l,m
2,046,135n
$25,331,151.30o
$16,465,248.35p
$4,465,248.35q

f Trial Rate x Customer Awareness x ACV: 27.3% x 50% x 40%

g Trial Rate x Non-Customer Awareness x ACV: 27.3% x 12% x 40%
h Target Households x Cucina Fresca Pasta Customers Adjusted Trial
Rate: 58,500,000 x 5.46%
i Target Households x Non- Cucina Fresca Pasta Customers Adjusted
Trial Rate: 58,500,000 x 1.31%
j Cucina Fresca Pasta Customers Trial Purchases + Non- Cucina Fresca
Pasta Purchases: 351,351 + 682,051.5
k Rounded down because cannot include 0.5 of a household
l Total Trial Purchases x Repeat Purchase Occasions x Excellent Product
Repeat Rate: 1,033,402 x 2.00 x 49%
m Rounded down because cannot include 0.96 of a product
n Trial Purchases + Repeat Purchases: 1,033,402 + 1,012,733
o Total Purchases x Average Spent per Purchase: 2,046,135 x $12.38
p Retail Sales Volume x (1-Food Retailers 35% Gross Margin):
$72,835,811.1 x (1-0.35)
q TruEarth Sales Volume Minimum Return Requirement:
$16,465,248.35- $12,000,000

Exhibit 3: Whole Grain Pizza Concept Purchase Volume Estimate, Year 1

(Mediocre, Average)
Inputs from Exhibit 2
Trial Rate
Total Trial Purchases
Repeat Purchase Occasions

27.30
1,033,402
2.0

Repeat Rate, by Product Services

Mediocre Product
Average Product

21%
37%

Repeat Volume, by Product Scenario

Mediocre Product
Average Product

434,028.84r
764,717.48s

Total Purchases
Mediocre Product
Average Product

1,467,430t,u
1,798,119v,w

Total Sales Volume

Retail Sales Volume (Mediocre
Product)
TruEarth Sales Volume (Mediocre
Product)
Retail Sales Volume (Average Product)
TruEarth Sales Volume (Average
Product)

$18,166,783.40x
$11,808,409.21y
$22,260,713.22z
$14,469,463.59aa

Based on these wholesales volumes, the average product perception meets

our return requirements. We would gain $2,469,463.59 in extra cash if we were to
launch this product. However, the mediocre product does not meet our return
requirements (off by $191,590.79). We are only off of our return requirements by a

r Total Trial Purchases x Repeat Purchase Occasion x Mediocre Repeat

Product Rate: 1,033,402 x 2.0 x 21%
s Total Trial Purchases x Repeat Purchase Occasion x Average Repeat
Product Rate: 1,033,402 x 2.0 x 37%
t Total Trial Purchases + Mediocre Product Total Purchases: 1,033,402 +
434,028.84
u Rounded down because cannot have 0.84 of a purchase
v Total Trial Purchases + Average Product Total Purchases: 1,033,402 +
764,717.48
w Rounded down because cannot have 0.48 of a purchase
x Total Purchases for Mediocre Product x Average Spent per Purchase:
1,467,430 x $12.38
y Retail Sales Volume for Mediocre Product x (1-Food Retailers 35%
Gross Margin): $18,166,783.40 x (1-0.35)
z Total Purchases for Average Product x Average Spent per Purchase:
1,798,119 x $12.38
aa Retail Sales Volume for Mediocre Product x (1-Food Retailers 35%
Gross Margin): $22,260,713.22 x (1-0.35)

small margin (1.596%ab); thus, we may consider taking on this initial loss for the
first year. Considering the growth rate of Cucina Frescas retail sales between the
3rd quarter of 2006 and 2007 (194.44%ac), we may predict that the initial sales
volume will grow between the first and second year of the product launch. Our
future sales volume will most likely cover our initial return requirements in the 2 nd
year and our losses from the 1st year.

ab (TruEarth Sales Volume (Mediocre Product) Return

Requirement)/Return Requirement: ($11,808,409.21-$12,000,000)/
$12,000,000
ac [{ (2007 Retail Sales-2006 Retail Sales)/(2006 Retail Sales)} + 1] x
100%: [{($35,000,000-$18,000,000)/($18,000,000)} +1] x 100%