TruEarth Write Up
Gavin Spesock
1. Why was Cucina Fresca pasta successful? How would you compare the pizza
opportunity to that for pasta? How would you compare the actual product
development process for each?
They thrived with this product offering providing customers with a
healthier choice. Their products included fresher, superior ingredients. Due to a
shift in the market place consumers were moving away from purchasing highly
processed foods and moving towards healthier option. This began to open up an
new market for companies to begin battling for market share. TruEarth found
extremely good market penetration with their whole-wheat pasta lines. Previously
whole-wheat pastas were considered not as tasty as other forms of pasta but with
TruEarth’s recipe they were able to produce a product that customers responded
well to.
Though out the 1990’s there were some important developments with
regard to the food industry. First, there was a trend towards products that fit into
the “Home Meal Replacement” category. These meals options were gaining
traction due to the fact that many individuals found themselves to be busier then
they were previously. Often times a household would have two working adults
with less time in a day, thus less time to spend in the kitchen. In order to cater to
the evolving household suffering from what is called “time poverty”, TruEarth
developed product lines in keeping with this trend. They decided to move towards
the fresh refrigerated pastas that had previously been unachievable for
technological reasons.
The new technology allowed TruEarth to start manufacturing fresh
refrigerated pastas in portioned sizes. They were able to market there pasta and
sauces as a viable HMR. They had found an additional effective way to market
their whole-wheat pastas and tap into a $4.2B market dominated by companies
like Kraft, and Nestle. TruEarth was able to also add fresh tortellini, and ravioli to
their product offering which blustered their position in the market. Due to their
success they developed one major competitor Rigazzi who had soaked up enough
of the market to slow TruEarth’s growth in the Fresh pasta market. Due to
TruEarth’s Fist mover advantages they had secured good distribution channels
and the extremely valuable refrigerated self-space.
The opportunity that pizza presents is huge. Also, the opportunity fresh
pasta presented was huge. The pizza opportunity is bigger then the pasta
opportunity because the market for store bought pizza is roughly $1B larger then
the pasta industry. TruEarth defiantly has an the potential to make millions of
dollars creating a healthy pizza option that consumers can make at home. Since
the pizza opportunity requires less up front cost in terms of tooling and such, the
initial capital outlay is appealing.
The product development process has changed dramatically over the years
for TruEarth. They have gone from a company that considered themselves food
artists with little structure, to a company that now has a lot to loose and a more
formal structure. The new structure as it pertains to product development has
changed, and become more calculated. The reason for this change stems from the
fact their distribution channels have grown large enough and the cost of getting a
new product on the shelves costs more then it did when they has much less shelf
space to fill. Meaning if a product were to fail they would take a large loss on the
amount of inventory they would have to put on the market initially. This is one
reason they are questioning the validity of the pizza launch altogether.
2. Using the forecast model for pasta shown in Exhibit 5, what is your forecast of
the demand for pizza?
The target household for this product is 30% larger then the original target
market for the pasta launch. They estimate they will capture about 50% of their
current customer base. These estimates along with the lower initial go to market
cost associated with the product launch make this an enticing prospect. However,
further math is needed to make any accurate accretions and or assumptions. We
will use the same projection model used by TruEarth on the product launch of
their fresh pasta line.
Below is the projection model used to determine demand for the fresh
pasta. It has been modified to adapt to the new pizza product that TruEarth is
considering launching. The same methodology was used for this table as was used
in the original table for the pasta.
Below is a graph of total revenue in millions of dollars for gross wholesale
sales. We can see by this graph that the pizza has to perform somewhere between
mediocre and average to meet the $12M in wholesales sales required to meet the
companies return requirements.
25
20
15
10
5
0
Mediocre Product
Average Product
Excellent Product
Total Revenue in Millions Wholesale
Below is a graph of total revenue in millions of dollars for gross wholesale
sales. We can see by this graph that the pizza has to perform somewhere between
mediocre and average to meet the $12M in wholesales sales required to meet the
companies return requirements.
35
30
25
20
15
10
5
0
Mediocre
Average Product
Excellent
Product
Product
Total Revenue in Millions Retail
3. What can the TruEarth team learn from Exhibit 6 about how consumers view
pizza?
They can lean a lot about how customers view pizza from the data in Exhibit 6.
First of all, there is a heavy bias to ordering take out pizza. In fact, take out pizza
dominates the pizza market and dwarfs almost every other pizza segment. Very
interestingly people feel that pizza in general is relatively un-healthy. This plays
to the hand that TruEarth is holding. It also says they have read the market right
and know now from this data that a healthier option for pizza should be appealing
to many customers. TruEarth can use the data in Exhibit 6 to help craft
appropriate marketing and advertising collateral. Based on the Reponses they
know to play up certain buzzwords or concepts that scored well in relationship to
other types of pizza on the market. They would most definably want to talk up the
health and quality of the pizza along with the “whole family” idea. Included in the
list of buzzwords would also be the fresh taste the pizza would have over other
competing brands.
4. How do the pizza concept test results (Exhibits 7 and 8) compare with the
findings for pasta (Exhibits 3 and 4)?
First off the purchase intent regarding non-customers is significantly less
for the pizza test then it was for the pasta test. When you add into the mix the
purchase intent for pizza taking into account the sentiment of current TruEarth
customers we see a slightly different picture which is still less then the test results
for pasta but is more comparable.
The lower percentage of customers willing to defiantly or probably
purchase the product should not be all that alarming. The reason for this lies in
the fact that the market we are looking to enter is larger. Thus from a the
prospective of gross revenue and units purchased we can reasonably assume that a
slightly lower percentage of a higher number will yield similar if not better
results.
When it comes to the concept and responses to descriptions of the concept
people generally favored the concept. Approximately 20% more people had a
favorable reaction to the concept over an unfavorable concept. This tells us that
when people are faced with certain descriptor words that describe the quality,
taste, ingredients, and modular concept the surveyed population responded well.
This test is to be taken as a good sign that the things that are trying to be
achieved are things that will resonate well with consumers of the product in
general. The majority of individual will have a positive reaction to the product
concept and the product details. They value healthy, fresh, modular make your
own pizza design.
5. Is there a first-mover advantage in pizza similar to fresh pasta?
The first mover advantage TruEarth had with pasta was in fact a real first
mover advantage. The fresh pasta space was just opening up and they were the
only ones with a viable whole-wheat option for customers that also tasted good.
The premade refrigerated or frozen pizza industry is not in any way shape or form
a new product category. It has been around for decades and has some major
players that dominate the space. They mostly occupy frozen shelf space which
would be beneficial for TruEarth since they would not be competing for shelf
space already occupied by pizza.
TruEarth does have some element of a first mover advantage with respect
to the whole-wheat and modular design concept this pizza offers. They have a
unique take on what store bought bake at home pizza should look like, taste like
and what ingredients should be incorporated in the product. This however does
not create the same type or equal strength first mover advantage as they have
enjoyed with the fresh pasta line. In all reality I don't believe whatever amount of
first mover advantage you could possibly justify should be considered a deciding
factor with regard to this product launch.
6. How do you interpret the findings of Exhibit 9 and 10 to evaluate interest in
pizza?
When looking over Exhibit 9 and 10 the general interpretation is that there
is a large segment of the test population that believes the price is too high. That
said when we take a closer look at the number of people who were “favorable” vs
“unfavorable” we see that people favored the product approximately 2x more the
people having an unfavorable reaction.
There are two major issues that in my opinion would not delay the launch
but would be thing I would work on fixing as soon as possible. First is the price,
obviously from this data people think the price needs to come down. In my
opinion it really needs to hit closer to the $9.00 mark to capture both the
unfavorable crowd and the frozen pizza crowd. This price point could possibly be
adjusted up as they gain market share. However, entering such a tough market
TruEarth needs to enter with a splash and convert frozen pizza consumers
quickly.
The bottom line with regard to the interest level of the pizza from the data
shown in Exhibit 9 and 10 is that there is an overwhelming amount more interest
then disinterest but the product should continued to be refined and improved to
meet the demands of more individuals.
7. Would you launch the pizza?
Based on the data in the case study and the mathematical projections, I
would launch the product. I believe that the product has above average acceptance
rates based on the test results. Given the fact that just an average product launch
will more then exceed the revenue numbers needed to meet the companies return
requirements the launch this product is a go.
With an average product launch the company will gross in wholesales
sales $2.5M more then is needed to meet the $12M capitol return requirement by
the company. This coupled with the fact that TruEarth is working with some
slightly incomplete research data and some assumptions relating to the interest of
consumers. The product should still be successful in its first year and hopefully
gain market share in its second year.