Class: Consumer Marketing

For: Prof. Harmon

By: Jennifer Woodsum
Date: November 29, 2016
TO: Prof. Harmon TOPIC: Nestle Refrigerated Foods: Contadina Pasta & Pizza
CLASS: Consumer Marketing FROM: Jennifer Woodsum

Section I: Marketing Options

1. Should Nestle continue to sell refrigerated foods due to its competition?

Section II: Facts

1. Stephen Cunliffe, President of Nestle: Nestle Refrigerated Foods entered the U.S.

market with Contadina pasta and sauces. We took risks. We acquired a small

company at a premium in order to be the first company to bring refrigerated pasta

to market on a national basis. We invested heavily in distribution to get the

product to market without high spoilage rates. We broke away from the traditional

sales force and used brokers to sell our product. These risks paid off and

Contadina became the market leader in refrigerated pasta and sauces, but to

continue our rapid growth, we need other new product opportunities.

2. 1993 Nestle was one of the worlds largest food companies with sales over $37

billion.
3. 1987, refrigerated foods were responsible for approximately 7% of Nestles global

sales despite little contribution from the potentially large U.S. Market.
4. According to Restaurants & Institutions annual survey, pasta was one of the Top

20 foods on menus.
5. 1987 Nestle outbid one of its international rivals, Kraft (now part of Phillip

Morriss Kraft General Foods subsidiary), for the purchase of a small New York-

based pasta company called Lamberts Pasta & Cheese.

6. Lamberts develop a process which extended the shelf life from the usual 2-3 days

to 40 days by a series of technical innovations which include replacing the

residual oxygen in the pasta package with nitrogen. The 38-day extension allowed

for a creation of a feasible distribution systemThe key was that this extended

product life was accomplished without impairing quality.

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TO: Prof. Harmon TOPIC: Nestle Refrigerated Foods: Contadina Pasta & Pizza
CLASS: Consumer Marketing FROM: Jennifer Woodsum

7. Nestle paid a very high multiple of earnings for a small firm (Lamberts) which

would soon become known as Contadina Fresh.

8. In 1987, pasta was in two forms in the United States. Fresh pasta was available in

gourmet stores and restaurants, but was not widely sold in grocery stores. Dry

pasta, however, was a staple item in grocery stores located in either the ethnic

food aisle, or the dry prepared foods aisle with rice, Kraft dinner, etc. Macaroni

was the leading type of dry pasta sold, followed by spaghetti, and extruded shapes

such as rigatoni and lasagna noodles fresh pasta was considered to be of

superior quality. It invariably sold at a price premium, needed to be cooked within

2 days of purchase, and required a trip to a specialty store.

9. Nestle, Kraft, and Unilever compete against each other on a global basis. For

Nestle, and the future on Contadina, it was strategically important that we win the

competitive battle against Kraft in the United States with this product (packaged

pasta dinners).
10. Before its purchase by Nestle, (Lamberts) Pasta & Cheese had started to develop

a pizza product.
11. Pizza was a part of the large Italian ethnic food category, with pizza available in

three forms: frozen, deli-made, or freshly prepared in restaurants for eat-in

dinning, home delivery, or takeout.

12. 1988, NRFC developed two new pizza concepts: a pizza kit and a

preassembled, heat-and-eat pizza. Both products were intended to serve two to

three people. The kit was refrigerated and consisted of a crust packaged together

with separate packets of cheese and sauceThe product development group

expected the 12 crust, sauce, and cheese to sell for approximately $6.40. The

second concept was a refrigerated, pre-assembled pizza available in four

varietiesthe expected selling price of a 12 pizza was $7.60.

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TO: Prof. Harmon TOPIC: Nestle Refrigerated Foods: Contadina Pasta & Pizza
CLASS: Consumer Marketing FROM: Jennifer Woodsum

Section III: Recommendation

When it comes to Nestle selling refrigerated foods they have successful since entering

into that market. Stephen Cunliffe, President of Nestle stated Nestle Refrigerated Foods entered

the U.S. market with Contadina pasta and sauces. We took risks. We acquired a small company at

a premium in order to be the first company to bring refrigerated pasta to market on a national

basis. We invested heavily in distribution to get the product to market without high spoilage

rates. We broke away from the traditional sales force and used brokers to sell our product. These

risks paid off and Contadina became the market leader in refrigerated pasta and sauces, but to

continue our rapid growth, we need other new product opportunities. (1) Nestle has grown over

time, 1993 Nestle was one of the worlds largest food companies with sales over $37 billion (2)

and 1987, refrigerated foods were responsible for approximately 7% of Nestles global sales

despite little contribution from the potentially large U.S. Market (3).

Nestle took risks and worked its way up in the refrigerated food market. Nestle obtained

Contadina in 1987 Nestle outbid one of its international rivals, Kraft (now part of Phillip

Morriss Kraft General Foods subsidiary), for the purchase of a small New York-based pasta

company called Lamberts Pasta & Cheese. (5) With Kraft as a competitor, Nestle wanted to be

the head of the market even more than it already was which is good because them adding in more

things to the market makes them move toward the top faster than Kraft.

Knowing that, according to Restaurants & Institutions annual survey, pasta was one of

the Top 20 foods on menus, (4) Nestle took another risk which was the outbidding to get

Lamberts Pasta and Cheese. With this Nestle gained something no other competitor would get.

Lamberts develop a process which extended the shelf life from the usual 2-3 days to 40 days by

a series of technical innovations which include replacing the residual oxygen in the pasta

3
TO: Prof. Harmon TOPIC: Nestle Refrigerated Foods: Contadina Pasta & Pizza
CLASS: Consumer Marketing FROM: Jennifer Woodsum

package with nitrogen. The 38-day extension allowed for a creation of a feasible distribution

systemThe key was that this extended product life was accomplished without impairing

quality. (6)

When Nestle introduced Pasta into the market more with Lamberts Pasta and Cheese the

market did not have much to offer. 1. In 1987, pasta was in two forms in the United States. Fresh

pasta was available in gourmet stores and restaurants, but was not widely sold in grocery stores.

Dry pasta, however, was a staple item in grocery stores located in either the ethnic food aisle,

or the dry prepared foods aisle with rice, Kraft dinner, etc. Macaroni was the leading type of dry

pasta sold, followed by spaghetti, and extruded shapes such as rigatoni and lasagna noodles

fresh pasta was considered to be of superior quality. It invariably sold at a price premium, needed

to be cooked within 2 days of purchase, and required a trip to a specialty store. (8)

Soon after Nestle entered the pasta market they wanted to enter the pizza market. Before

its purchase by Nestle, (Lamberts) Pasta & Cheese had started to develop a pizza product. (10)

Entering the pizza market with what Lamberts had create helped Nestle grow even more as a

company. Pizza was a part of the large Italian ethnic food category, with pizza available in three

forms: frozen, deli-made, or freshly prepared in restaurants for eat-in dinning, home delivery, or

takeout. (11) Nestle used what Lamberts had started to develop to change the pizza market.

1988, NRFC developed two new pizza concepts: a pizza kit and a preassembled, heat-and-eat

pizza. Both products were intended to serve two to three people. The kit was refrigerated and

consisted of a crust packaged together with separate packets of cheese and sauceThe product

development group expected the 12 crust, sauce, and cheese to sell for approximately $6.40.

The second concept was a refrigerated, pre-assembled pizza available in four varietiesthe

expected selling price of a 12 pizza was $7.60. (12)

4
TO: Prof. Harmon TOPIC: Nestle Refrigerated Foods: Contadina Pasta & Pizza
CLASS: Consumer Marketing FROM: Jennifer Woodsum

Overall, Nestle has penetrated many markets with refrigerated foods and therefore they

should continue to grow in this market as a whole. They tend to be above their competitors, such

as Kraft, in this market.