Nestlé Global Proposal Part One

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Running head: MARKET ANALYSIS
1
Market Analysis Section:
Nestlé Gluten-Free Cookie Dough
Whitney Chadwick, Chris Holle,
Erin Howard, & Brittanie Turner
California State University, Monterey Bay
BUS 306-81
MARKET ANALYSIS
2
Table of Contents
SITUATION ANALYSIS
3
MARKET SUMMARY
4
Geographics
4
Demographics
4
Psychographics and Behavioral Factors
5
Market Needs
5
Market Trends
5
Market Growth
6
SWOT ANALYSIS
6
Strengths
6
Weaknesses
7
Opportunities
7
Threats
8
COMPETITION
8
PRODUCT OFFERING
11
Ingredients and Nutritional Factors
11
Different Packaging Types
12
Customer Satisfaction Guarantee
12
KEYS TO SUCCESS
13
Growing Population with Gluten-Intolerance
13
Increasing Level of Health Awareness
13
CRITICAL ISSUES
14
REFERENCES
15
MARKET ANALYSIS
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SITUATION ANALYSIS
In a growing health food trend, the gluten-free movement has been gaining traction. With
the knowledge of celiac disease and many other gluten intolerances, many consumers have an
increasing need and desire for gluten-free products. According to a survey, nearly 18 percent of
Americans prefer gluten-free products (Amidor, 2014). This is a vast market that is virtually
untapped. The plan is for Nestlé to make a gluten-free cookie dough. The current problem with
most gluten-free products is they sacrifice taste to provide a product that many people can eat.
Nestlé can provide the same great quality taste they have always offered, while also providing a
product that offers health benefits to many Americans. Another advantage is that the price will
stay relatively the same as the current Nestlé Tollhouse Products.
On a global scale, Nestlé scored 54th in brand recognition (Ranking The Brands).
Competitors like Pillsbury and Betty Crocker did not even place in the top 100. Nestlé has the
tools to not only infiltrate the gluten-free snack market and have success, but also the ability to
enter the market and dominate it. Nestlé has been known to provide great tasting snacks and
always aims to improve the healthiness of its products. According to the Smart Cookie Dough
Cook, a website that reviews various cookie dough brands, Nestlé’s Tollhouse cookie dough
were not only better tasting than Pillsbury’s cookie dough, but also had better texture. On top of
that, Nestlé has the resources to make these cookie dough happen. According to Nestlé’s official
webpage, it owns 4 corporate locations, 32 manufacturing locations, and 5 distribution centers.
This is sufficient to use existing machinery to produce gluten-free cookie dough. In order to do
so, Nestlé must clean and retool the machinery to make them safe to produce products.
Currently, local companies are the main source of competition. However, there are also
several major brands that are already in the existing market. These brands include Pillsbury and
Betty Crocker, which offer gluten-free cookie dough that is sold in stores.
The product Nestlé would be offering is pre-packaged, gluten-free cookie dough. The current
price of its regular Tollhouse products is approximately five dollars. The goal with the new
gluten-free dough (16.5 oz.) would be to keep it at a consistent price with the regular Tollhouse
products. Nestlé holds vast resources and numerous market connections. Nestlé products are
featured in nearly every chain supermarket in the U.S. This allows them to infiltrate a new
market fairly easily. According to CBS News, Nestlé already holds a 41% market share of the
MARKET ANALYSIS
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prepared cookie dough market. The main distribution channel for the Nestlé gluten-free
Tollhouse cookie dough will be through large chain stores, including: Safeway, Target, WalMart, Albertsons, Kroger, and many more. This in itself creates a big opportunity for Nestlé. The
gluten-free market is vastly untouched by large corporations, and under the right management
and utilizing the right resources, Nestlé has the ability to make it happen. These attributes can be
used to transition to a gluten-free cookie dough line easier. For sales promotions, it would be
easy for Nestlé to market its gluten-free cookie dough as a healthy choice for everyone, not just
for people with celiac disease.
MARKET SUMMARY
Geographics
For the purpose of the project, the geographic focus will be the United States of America
as a whole. There will be a good testing grounds to see how the product does. If it does well, the
product could expand into Canada and then move into Europe. According to the European Food
Information Council (EUFIC), celiac disease is on the rise. This would be a great investment into
the future as the more people that have celiac disease, the more awareness there will be.
According to Statista (2009), the gluten-free market was worth $2.3 billion globally. This is a
great financial opportunity.
Demographics
As for the demographics, the main focus is on people with celiac disease or other gluten
intolerances, and targeting families. Targeting people with celiac disease (and other gluten
intolerances) is an obvious choice, since this product will allow them to have a healthy and
delicious snack. The second option is seeking a healthier alternative to families. According to
Celiac Central (n.d.), “it is estimated that 83% of Americans who have celiac disease are
undiagnosed or misdiagnosed with other conditions.” An interesting point is that many people
living with Celiac disease either do not know they have it, or they are misdiagnosed. Providing
gluten-free cookie dough will allow families to play it safe and provide a delicious cookie dough
that is healthier than a traditional cookie dough.
MARKET ANALYSIS
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Psychographics and Behavioral Factors
A large portion of the target market is people who are gluten conscious. This consists of
people who have celiac disease, other gluten intolerances, people on gluten-free diets, or families
trying to eat healthier.
Market Needs
Within the food industry, there is a constant struggle between health, flavor, and cost. It
is difficult to create product that fulfills all three criterion; this is especially true for gluten-free
cookie dough. In the current market, there are limited options for gluten-free cookie dough. The
options that are currently available generally consist of local companies with products more
expensive than their mass-produced counterparts. According to the Statistics Portal’s survey
(2012) conducted in 2012, “U.S. Gluten-Free Target Market,“ concluded that nearly 18 percent
of the population in the U.S. prefers and buys gluten-free products. However, there is a huge
need for affordable, healthy, mass-produced gluten-free cookie dough.
Market Trends
As the health trends throughout America continue to grow, the average consumer is
becoming more health conscious and more aware of how their bodies react to the foods they eat.
For example, five years ago, a consumer may not have known that they had Celiac Disease or
had gluten sensitivity. Now, over 3 million Americans have been diagnosed with Celiac Disease
and 18 million suffer from gluten sensitivity (National Foundation for Celiac Awareness: Celiac
Disease: Fast Facts, 2014 & National Foundation for Celiac Awareness: Non-Celiac Gluten
Sensitivity, 2014). Of the 68 persons surveyed, nearly 50 percent responded that they or someone
they know has celiac disease or any other gluten-intolerance (Survey Monkey, 2014). Though
the demand for healthier, and more specifically, gluten-free products increases, the supply has
yet to meet the needs of the consumers. This marketing plan focuses specifically on the glutenfree cookie dough market, as there are very few affordable, healthy, mass-produced gluten-free
cookie dough options within the market today.
MARKET ANALYSIS
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Market Growth
In the 2000s, terms such as “celiac disease” and “gluten-free” were unfamiliar to those
even in the culinary industry. Today, with an estimated 1 in 133 Americans having celiac
disease, the appearance of allergen-related claims such as “gluten-free” on restaurant menus has
increased by 200 percent (Amidor, 2014). According to market research by Mintel, a market
research firm, the gluten-free food category is expected to generate more than $15 billion in
annual sales by 2015. Furthermore, the household purchases of gluten-free products more than
doubled from 5 percent in 2010 to 11 percent in 2013 (Amidor, 2014).
SWOT ANALYSIS
Strengths
Unmatched Product Offerings and Brand Portfolio
Nestlé upholds supreme brand portfolio and manufacturing capabilities than many
competing firms. The company placed within the top three global food and beverage
manufacturers in the Access to Nutrition Index, March 2013. Nestlé recognizes offering diversity
within their brand portfolio allows them to serve a broad range of demographics. (Nestlé
Global, 2014.)
R&D Capabilities
Nestlé devotes extensive funds - averaging $1.5 million - toward research and
development annually. The company continuously brings to market new and redesigned products
corresponding to market trends, ensuring the firm’s competitive edge. (Nestlé Global, 2014.)
Distribution Potential
Nestlé maintains widespread distribution channels and geographic presence, which
supports its operation globally. Currently, the company operates 14 product categories,
manufacturing more than 2,000 brands worldwide. Moreover, the company operates in 86
countries with employee strength of more than 330,000. (Nestlé Global, 2014.)
MARKET ANALYSIS
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Expansion Aptitude
Over the years Nestlé has been successfully generating increased joint ventures and
acquiring other businesses in order to continue growth over market shares (Nestlé Global, 2014).
The company’s brand is recognized globally with highly regarded customer loyalty (About Us
Nestlé Global, n.d.). APCO Worldwide ranked Nestlé number five in the global survey regarding
The 100 Most Loved Companies (Nestlé’s Brand Ranking, 2014).
Weaknesses
Inconstant Quality
Nestlé has been recalling several goods from the market due to food contamination,
package mislabeling, and/or inability to provide constant quality within supplies (Nestlé Global,
2014). Most recent recall occurred June 2014, regarding unidentified allergy prone ingredients
within Häagen-Dazs® Chocolate Chip Ice Cream (Recalls, Market Withdrawals, & Safety
Alerts, 2014). This does not only decrease the company’s sales but lessens their consumer trust
when presenting new allergen free products, such as gluten-free cookie dough.
Opportunities
Increasing Demand for Healthier Products
Food allergies and health benefits are a rising consumer purchasing concern. As a result
increased demand of customized products meeting distinct dietary requirements are occurring.
Particularly, the market for gluten-free products has begun to skyrocket. Calculated from U.S.
retail sales statistics, by the year 2020 the gluten-free market is estimated to be valued at $23.9
billion. Nestlé now has the opportunity to introduce a gluten-free health-based snack product,
and expand possible consumer demographic. (U.S. Gluten-free Foods Market - Statistic &
Facts|Statista, n.d.)
Acquire Health Based Startups
Several new businesses are generating and introducing products for health conscious
consumer, as well as developing sustainable manufacturing methods. Nestlé is currently
concentrating on providing healthier products with added nutritional value, and acquisitions such
as these are great opportunity to expand the company’s brand portfolio. (Nestlé Global, 2014.)
MARKET ANALYSIS
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Threats
Company Reputation
Due to Nestlé’s continual recalls because of mislabeling and food contamination the
company’s manufacturing reputation has decreased (Nestlé Global, 2014). It is the company’s
responsibility to regulate quality checks to prevent consumer dissatisfaction. Repeated
contamination will lower the company’s ability to successfully enter the allergen free market.
Failure to expand with current market trends will result in losses (Nestlé Global, 2014).
Cost of Raw Materials
The global increase in the cost of raw material is cutting into corporate profits, declining
stocks, and resulting in increased consumer prices (Gandel, 2011). As a result Nestlé’s cost of
production has increased (Nestlé Global, 2014). For example, dairy – key ingredient in chocolate
products – costs have increased by more than 25% this year (Sheets, 2014).
Growth of Private Labels
The expanding number of supermarkets who are generating their own label products that
cost less will increase competition for Nestlé’s product portfolio (Nestlé Global, 2014).
COMPETITION
Within the niche market of gluten-free prepackaged cookie dough products a few
competitors are notable. One of the competing firms, Pillsbury, makes gluten-free chocolate chip
cookie dough, and Betty Crocker also produces a few gluten-free cookie dough dry mixes. Both
organizations are owned by General Mills, but operate independently. Nonetheless, in the
general gluten-free snack market competition would include several gluten-free items: cereals,
pre-baked cookie dough, health bars, and chips etc. Some major competitors in the gluten-free
snack market are companies like Kellogg and Pamela’s Products.
Pillsbury has been providing families’ mealtime specials for nearly 150 years, whether
it’s breakfast, lunch, dinner or dessert (General Mills: Pillsbury). Pillsbury has their brand
recognition in place. The company primarily targets family homes, and distributes products
MARKET ANALYSIS
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throughout major retailers, such as Safeway or Target (General Mills: Pillsbury). The company
launched their first gluten-free products line on August 6, 2013 (Food Business). These products
contain items such as pizza dough, pie and pastry dough, and most importantly, cookie dough
(Food Business). Pillsbury, which is owned by General Mills, has a head start in a market that is
currently dominated by local bakeries.
Betty Crocker has been accepted as a part of families’ food traditions for more than 90
years, providing packaged goods as well as wonderful recipes. Recently, the company had first
hand experience with employees whom could not partake in the company’s products due to
gluten intolerance. The experience drove them to develop great tasting gluten-free items
everyone could enjoy. The company began marketing towards the idea nothing should affect
sweet moments with friends and family. Targeting the modern family home, the company
MARKET ANALYSIS
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distributes their product through several major retailers. (Our Story - Betty Crocker, n.d.)
.
Kellogg is a company of devoted individuals producing quality products for a healthier
world. The company has innovative marketing strategies, governance structures, and corporate
policies that help to implement their social and corporate responsibilities into everyday
operations. Currently, Kellogg’s is capitalizing on the gluten-free cereal market by reformulating
or relabeling in some cases their existing brands. The idea behind this movement is to offer
families healthier options to start their busy mornings. Kellogg’s is taking gluten-free rice/corn
based products and turning them mainstream through distribution in major retail chains. (Cereal:
The Complete Story, n.d.).
Pamela’s Products is primarily an online gluten-free product line with baking mixes,
cookie dough, crackers, chips and snack bars. The company, established in 1988, focuses on
MARKET ANALYSIS
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providing consumers affordable natural and gluten-free options, made from top-quality
ingredients. Pamela’s Products currently remains a top leader within the gluten-free snack
industry, marketing to the preferred gluten-free and natural food consumer. With ongoing
research and development, Pamela’s Products continues to grow and embrace the many
upcoming opportunities this industry is predicted to offer. The company is determined to remain
the top provider of gluten-free snacks. (Pamela's Products: About Us, n.d.).
PRODUCT OFFERING
Ingredients and Nutritional Factors
The Nestlé corporation will offer this product with the currently used ingredients. The
current ingredients include: bleached enriched flour, semi-sweet chocolate, sugar, margarine,
sodium benzoate (preservative), flavor and artificial flavor, citric acid, vitamin A, palmitate,
color, liquid whole eggs, cooking molasses, corn syrup, sodium bicarbonate, flavor, and salt
(Nestlé Professional, 2013). However, the current bleached enriched flour will be replaced by
gluten-free flour substitute. The options for the gluten-free flour substitute include: quinoa flour,
teff flour, and almond flour.
Quinoa flour is a nutritious grain that contains protein, calcium, and iron. The other option, teff
flour, is a gluten-free whole grain. It offers protein, calcium, and iron nutritional factors. Lastly,
almond flour is a low-carb alternative. It offers calcium, iron, and protein as well. All three of
these options are capable of replacing the bleached enriched flour completely (Nuts.com, 2014).
MARKET ANALYSIS
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Price and taste are two factors that must be considered when choosing the gluten-free
flour substitute. Quinoa is the highest priced at $9.99 per pound (Nuts.com: Organic Quinoa
Flour, 2014). It can also hold a bitter taste. Teff flour is the cheapest price offered at $4.99 per
pound. Teff flour has a mild, nutty flavor (Nuts.com: Teff Flour, 2014). Almond flour is
moderately priced at $8.99 per pound. Almond flour is considered to be flavorful with its nutty
taste. Furthermore, it contributes to a light and moist product while baking (Nuts.com: Almond
Flour, 2014). However, the only drawback of almond flour is the need to consider nut allergies.
Of all the flours listed, teff flour would be the most ideal option. Not only is Teff the
cheapest, but it provides the health benefits that Nestlé is striving for. By providing protein,
calcium, and iron, Nestlé is adding more nutritional value than their traditional bleached enriched
flour, which ensures a healthier product to their consumers and keeps the goal of providing a
gluten-free cookie dough product.
Different Packaging Types
Nestlé offers its cookie dough products in a variety of packaging. This variation of
packaging will be transferred to the gluten-free cookie dough product line. There are four types
of packaging: refrigerated cookie bar dough, refrigerated cookie dough in a tube, refrigerated
mini cookie bar dough, and refrigerated cookie dough tub (Nestlé Toll House: Products, n.d.).
The first packaging type is the Nestlé Toll House refrigerated cookie bar dough. This
packaging offers a rectangular sheet of cookie dough that makes 24 cookie dough from pre-cut
bars (Nestlé Toll House: Products, n.d.). The second packaging type offers the product inside a
long, cylinder tube. It makes approximately 16 cookie dough (Nestlé Toll House: Products, n.d.).
The third type of packaging is essentially the same as the first type; however, the dough is cut
into mini bars, which makes smaller cookie dough. This package will make 40 mini cookie
dough (Nestlé Toll House: Products, n.d.). The last packaging type is in a tub. The tub allows the
consumer to scope out the desired amount and size of the cookie dough they wish to bake (Nestlé
Toll House: Products, n.d.).
Customer Satisfaction Guarantee
Nestlé can implement a customer satisfaction guarantee on the new gluten-free cookie
dough product line to further the line’s success. According to U.S. Legal Definitions (2014), a
MARKET ANALYSIS
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customer satisfaction guarantee gives “the buyer…the sole discretion to decide whether or not
the goods or services tendered by the seller are acceptable.” By offering a guarantee on its
product, Nestlé is keeping attune to its consumer’s demands. It can also raise the quality of the
product. Quality is defined as the “characteristics of a product or service that bear on its ability to
satisfy stated or implied customer needs” (Kotler, Armstrong, 2014, pg. 231). This can help
create customer loyalty and adjust the gluten-free cookie dough products accordingly.
KEYS TO SUCCESS
Growing Population with Gluten-Intolerance
The growing population with gluten-intolerances is a major component for Nestlé’s
gluten-free cookie dough’s success in the market place. As previously mentioned, 3 million
people are diagnosed with celiac disease and over 18 million people suffer from a glutenintolerance (Celiac Disease: Fast Facts, 2014, Non-Celiac Gluten Sensitivity, 2014).
Additionally, according to Partnership Capital Growth (2010), “one in three (34%) people have a
household member with celiac disease or wheat intolerance.” These populations make up a
significant portion of the United States that will become a critical target market for Nestlé’s
gluten-free cookie dough products.
For this to be successful, the growth of the population with gluten-intolerance must
continue to rise. A statistic from National Foundation for Celiac Awareness estimates that “83%
of Americans who have celiac disease are undiagnosed or misdiagnosed with other conditions.”
This large percentage of undiagnosed or misdiagnosed Americans with celiac disease determines
a continual growth of the gluten-intolerance population. Thus, the future growth is a key to
success for the gluten-free cookie dough product offered by Nestlé.
Increasing Level of Health Awareness
The current nationwide growth of health awareness is a major factor to this product’s
success. Moreover, people are becoming more aware of the health benefits a gluten-free diet can
bring. An article written by Simmons (2013) indicates that “sixty-four percent of consumers
today—up from 57 percent in 2010—agree that it is important to eat healthy and pay attention to
nutrition.” The rise of health conscious Americans entails a greater market demand for healthier
MARKET ANALYSIS
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food options. According to an article written by Kannall (n.d.), changing to a gluten-free diet
contributes a positive effect on digestion, inflammation, neurological, and energy levels within
the human body. This article signifies that a gluten-free diet has additional health benefits. In
order for Nestlé’s gluten-free cookie dough product to reach optimal success, the rise of health
awareness within the United States must continue.
CRITICAL ISSUES
Higher Price for Raw Ingredients of Gluten-Free Products
A critical issue that can be detrimental to the success of Nestlé’s gluten-free cookie
dough products is the high price of raw ingredients. The price of all-purpose flour is significantly
cheaper than its gluten-free alternatives. As previously stated, the gluten-free alternative price
range is approximately $5 to $10 per pound (Nuts.com, 2014). However, typical all-purpose
flour costs approximately 50 cents per pound (Walmart.com, 2014). This will increase the cost of
production; thus, increasing the sell price of the gluten-free cookie dough product to consumers.
According to a CBS news article (2014), a consumer went from spending $90 a week to
spending at least $130 per week on groceries, after being diagnosed with celiac disease.
Furthermore, it is estimated that it is twice as expensive to purchase gluten-free groceries (CBS,
2014). The cost to produce and the market price of gluten-free products can have a negative
effect on Nestlé’s market success.
MARKET ANALYSIS
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