MKTG 6010
Nestle Refrigerated Foods: Contadina Pasta & Pizza
Anthony Garver
Issue: In 1990, Nestle Refrigerated Food Company (NRFC) considered the release of a refrigerated pizza
product into the U.S. market. Stephen Cunliffe, President of the NRFC, had managed the release of refrigerated
pasta and sauce three years earlier, but this time faced production challenges, distribution challenges, and an
unknown sales volume for the proposed product. Would there be enough demand for the pizza and would there
sufficient sales volume to warrant moving forward with the decision?
The NRFC uses a seven-step process in product development as follows: idea generation, concept screening,
product development, volume quantification, test marketing, commercial evaluation, and introductory tracking.
This process was intentionally flexible to allow product development teams to innovate effectively. Many
times, NRFC’s marketing research department (MRD) would outsource volume determination to BASES, a
marketing research firm. A BASES-I test (for volume) was used to project awareness and usage for pasta and
sauce. MRD decided to use the more thorough BASES II test (Line Extension Study) for projecting sales
volume of the pizza concept.
Prior to the launch of the pasta and sauce several surveys were conducted by BASES to test consumer likes and
dislikes of the products. As referenced above, the pasta and sauce concept tests did not include taste tests. The
majority of those surveyed “liked” the pasta and sauce concept with most having a “high intent” to purchase.
When pizza was tested it received similar subject approval. With the pizza, however, respondents who
indicated they would “likely” purchase the pizza were allowed to take a sample home for trial. The
respondent’s intent to purchase was very positive after the take-home trial.
The BASES II test for pizza sale volume was conducted in high-potential markets. This concerned the MRD as
they felt the penetration calculations would vary more widely than BASES presented. Test subjects were
entirely female and in close proximity to shopping malls. Although the survey method, mall intercepts,
required the respondent in close proximity to a mall, consideration for rural areas should have been made. Male
participants should have been involved in the survey process as well since they made up almost half of those
who indicated positive purchase intent in earlier tests.
Recommendation: The case concludes with Stephen Cunliffe indicating that the hurdle for proceeding with the
pizza project was $45 million in “Factory Dollar Sales.” The BASES analysis in Exhibit 1 uses factory dollars
defined as two-thirds of suggested retail. The BASES analysis in Exhibit 1 was performed by using the NRFC
projection of 24 percent penetration of 95.5 million households. Exhibit 2 (Trial Volume–Stress Test) details
calculations for 5 percent, 10 percent and 15 percent penetration. Exhibit 3 contains supporting information for
the BASIS analysis in Exhibit 1.
The BASES results for each product: pizza with toppings and pizza only, given the NRFC projected penetration
(24%), exceed the factory dollar sales hurdle set by Cunliffe’s. Volume stress tests of 5, 10, and 15 percent
yield similar results and exceed the given hurdle. Given these results, NRFC should proceed with the roll-out.
They should, however, do so only in markets that they tested in because the BASES test was skewed toward
high penetration areas. If these results are satisfactory, NRFC could then widen their distribution.
The surveys by NRFC and BASES indicate consumer support for a refrigerated pizza option. It appears that
consumers would be highly likely to try Contadina’s pizza. Testing related to attributes supports releasing the
product as does testing for substitutes to existing options with Contadina’s pizza. After taste testing, consumers
continue to have a high intent to purchase the product. Based on these results, NRFC does to have support in
the areas that they tested in. NRFC should roll-out the product in the test areas and proceed to expand if
successful results are attained.
Finally, NRFC should exercise caution as refrigerated products have a limited shelf-life. The projected
frequency of toppings purchase is less than that of for pizza. As a result, there risk of spoilage and lost stock
due to spoilage. In addition, the consumer might purchase non-NRFC toppings, which would exacerbate the
spoilage potential by leaving unsold Contadina toppings sitting on store shelves.
Exhibit 1: BASES Volume Estimate
Concept Purchase Intent (CPI)
Pizza w/Topping(Pwt)
Definitely Would Buy
Probably Would Buy
Two Top Box
User
30%
57%
87%
Non
15%
59%
74%
Pizza Only(Po)
User
22%
48%
70%
Non
12%
42%
54%
Adjusted Trial (AT)
Industry Rule of Thumb Actually Buy
Definitely Purchase
80%
Probably Purchase
30%
Definitely Would Buy
Probably Would Buy
Adjusted Trial
Pizza w/Topping
User
Non
24%
12%
17%
18%
41%
30%
Pizza Only
User Non
18% 10%
14% 13%
32% 22%
Environmental Adjustments (EA)
None
Marketing Plan Adjustments (MPA)
Advertising $9,000,000
GRP's
n/a
Adjusted Trial
Awareness (AW)
Overall Awareness
ACV
MPA (AT x AW x ACV)
Pizza w/Topping
User
Non
41.1%
29.7%
60.0%
30.0%
37.0%
37.0%
58.0%
58.0%
14.3%
Pizza Only
User Non
32.0% 22.2%
60.0% 30.0%
37.0% 37.0%
58.0% 58.0%
5.2% 11.1% 3.9%
Exhibit 1: BASES Volume Estimate, Continued
Trial Volume with NRFC Estimate of Pennetration (24%)
Target HH
Target HH
Marketing Plan Adj.
Units at Trial
Total Trial Units
Repeat Rate
# Repeat Purch. Occasions
Avg. Repeat Trans. Amt.
Total Repeat Units
Total Units
Factory Unit Cost-Pizza
Factory Sales-Pizza $
Pizza w/Topping Sales $
Pizza w/Topping
User
Nonuser
22,920,000
72,580,000
14.30%
5.17%
1.2
1.2
3,933,842
4,500,947
22.0%
2.0
1.0
1,730,891
122.0%
2.0
1.0
10,982,311
22.0%
2.0
1.0
1,235,348
122.0%
2.0
1.0
7,524,917
5,664,733
15,483,258
4,042,956
10,608,899
$4.26
$4.26
$4.26
$4.26
24,143,827 $ 65,991,658 $ 17,231,604 $ 45,216,507
90,135,485
Topping Sales
Total Units Sold
0.5 of Fav. Purch at Trial
0.25 of Fav. Purch at Trial
0.5 of Fav. Purch at Retrial
0.25 of Fav. Purch at Retrial
Pizza Only Sales $ 62,448,111
Favorable Users
5,664,733
1.50
4,248,549
0.75
1,062,137
1.00
2,832,366
0.50
708,092
Total Units Sold
8,851,145
$0.86
Factory Unit Cost-Toppings
Factory Sales-Toppings $ 7,615,790
Pizza w/Topping Sales $
Total Toppings Sales $
Total Sales $
Pizza Only
User
Nonuser
22,920,000
72,580,000
11.14%
3.86%
1.1
1.1
2,807,608
3,083,982
90,135,485
28,431,821
118,567,306
Favorable Nonusers
15,483,258
1.50
11,612,443
0.75
2,903,111
1.00
7,741,629
0.50
1,935,407
24,192,591
$0.86
$ 20,816,031
Pizza Only Sales $ 62,448,111
Exhibit 2
Trial Volume-Stress Test
Target HH
Target HH
Marketing Plan Adj.
Units at Trial
Total Trial Units
Repeat Rate
# Repeat Purch. Occasions
Avg. Repeat Trans. Amt.
Total Repeat Units
Total Units
Factory Unit Cost-Pizza
Factory Sales-Pizza
Pizza w/Topping Sales $
Pizza w/Topping
User
Nonuser
4,775,000 90,725,000
14.30%
5.17%
1.2
1.2
819,550
5,626,184
Pizza Only
User
Nonuser
4,775,000
90,725,000
11.14%
3.86%
1.1
1.1
584,918
3,854,978
Target HH
22.0%
2.0
1.0
257,364
122.0%
2.0
1.0
9,406,146
Repeat Rate
# Repeat Purch. Occasions
Avg. Repeat Trans. Amt.
Total Repeat Units
1,180,153 19,354,072
$4.26
$4.26
$5,029,964 $82,489,573
842,282
$4.26
$3,589,917
13,261,124
$4.26
$56,520,633
Total Units
Factory Unit Cost-Pizza
Factory Sales-Pizza
87,519,537
Pizza Only Sales $ 60,110,551
Favorable Users
1,180,153
1.50
885,114
0.75
221,279
1.00
590,076
0.50
147,519
Total Units Sold
1,843,988
$0.86
Factory Unit Cost-Toppings
Factory Sales-Toppings $ 1,586,623
87,519,537
2,719,006
90,238,543
Favorable Nonusers
842,282
1.50
631,712
0.75
157,928
1.00
421,141
0.50
105,285
1,316,066
$0.86
$ 1,132,383
Pizza Only Sales $ 60,110,551
Target HH
Marketing Plan Adj.
Units at Trial
Total Trial Units
Repeat Rate
# Repeat Purch. Occasions
Avg. Repeat Trans. Amt.
Total Repeat Units
Total Units
Factory Unit Cost-Pizza
Factory Sales-Pizza
Pizza w/Topping Sales $
2,360,305 18,335,437
$4.26
$4.26
$10,059,928 $78,148,016
1,684,565
$4.26
$7,179,835
12,563,170
$4.26
$53,545,863
88,207,944
88,207,944
5,438,012
93,645,956
15%
Pizza Only
User
Nonuser
14,325,000
81,175,000
11.14%
3.86%
1.1
1.1
1,754,755
3,449,191
122.0%
2.0
1.0
8,416,025
3,540,458 17,316,802
2,526,847
$4.26
$4.26
$4.26
$15,089,892 $73,806,460 $10,769,752
11,865,216
$4.26
$50,571,093
Topping Sales
Total Units Sold
0.5 of Fav. Purch at Trial
0.25 of Fav. Purch at Trial
0.5 of Fav. Purch at Retrial
0.25 of Fav. Purch at Retrial
Pizza Only Sales $ 61,340,845
Favorable Users
3,540,458
1.50
2,655,343
0.75
663,836
1.00
1,770,229
0.50
442,557
Total Units Sold
5,531,965
$0.86
Factory Unit Cost-Toppings
Factory Sales-Toppings $ 4,759,869
Pizza w/Topping Sales $
Total Toppings Sales $
Total Sales $
122.0%
2.0
1.0
8,911,086
22.0%
2.0
1.0
772,092
88,896,352
122.0%
2.0
1.0
12,282,848
88,896,352
8,157,018
97,053,370
Pizza Only
User
Nonuser
9,550,000
85,950,000
11.14%
3.86%
1.1
1.1
1,169,837
3,652,084
22.0%
2.0
1.0
514,728
Pizza Only Sales $ 60,725,698
Favorable Users
2,360,305
1.50
1,770,229
0.75
442,557
1.00
1,180,153
0.50
295,038
Total Units Sold
3,687,977
$0.86
Factory Unit Cost-Toppings
Factory Sales-Toppings $ 3,173,246
Pizza w/Topping Sales $
Total Toppings Sales $
Total Sales $
10%
122.0%
2.0
1.0
13,005,368
Topping Sales
Total Units Sold
0.5 of Fav. Purch at Trial
0.25 of Fav. Purch at Trial
0.5 of Fav. Purch at Retrial
0.25 of Fav. Purch at Retrial
Pizza w/Topping
User
Nonuser
14,325,000 81,175,000
14.30%
5.17%
1.2
1.2
2,458,651
5,033,954
22.0%
2.0
1.0
1,081,807
22.0%
2.0
1.0
721,204
Pizza w/Topping Sales $
Trial Volume-Stress Test
Target HH
Pizza w/Topping
User
Nonuser
9,550,000 85,950,000
14.30%
5.17%
1.2
1.2
1,639,101
5,330,069
Target HH
Marketing Plan Adj.
Units at Trial
Total Trial Units
122.0%
2.0
1.0
13,727,889
22.0%
2.0
1.0
360,602
Topping Sales
Total Units Sold
0.5 of Fav. Purch at Trial
0.25 of Fav. Purch at Trial
0.5 of Fav. Purch at Retrial
0.25 of Fav. Purch at Retrial
Pizza w/Topping Sales $
Total Toppings Sales $
Total Sales $
Trial Volume-Stress Test
5%
Favorable Nonusers
2,526,847
1.50
1,895,136
0.75
473,784
1.00
1,263,424
0.50
315,856
3,948,199
$0.86
$ 3,397,149
Pizza Only Sales $ 61,340,845
Favorable Nonusers
1,684,565
1.50
1,263,424
0.75
315,856
1.00
842,282
0.50
210,571
2,632,133
$0.86
$ 2,264,766
Pizza Only Sales $ 60,725,698
Exhibit 3
Industry Rule of Thumb (ROT)
Target Households
Actually Buy
Definitely Would Buy
80%
30%
Probably Would Buy
Pennetration Stress Test
Percentage Pennetration
5.0%
# of User Households 4,775,000
# of Nonuser Households 90,725,000
# of Households* =
95,500,000
Pennetration Est.
5.0%
10.0%
15.0%
20.0%
25.0%
# of HH
4,775,000
9,550,000
14,325,000
19,100,000
23,875,000
NRFC Est. 24%
22,920,000
NRFC Estimated Pennetration (24%)
Pizza w/Topping
User
Pennetrated HH 22,920,000
Pizza Only
Nonuser
72,580,000
User
22,920,000
Nonuser
72,580,000
Estimated Pennetration Stress Test
Pizza w/Topping
Estimated Pennetration
10%
Awareness
User
9,550,000
Table D
Pizza Kit
Pizza Only
Non
85,950,000
Pizza Only
Contadina Pasta & Sauce Users
Nonusers
Overall Awareness
60%
30%
37%
60%
30%
37%
All Commodity Volume (ACV)
58%
58%
Purchase Assumptions
Pizza Kit
Units Purchased at Trial
1.2
Repeat Rate
22%
Repeat Purchase Units
1.0
Repeat Purchase Occasions
2.0
Pizza Only
1.1
22%
1.0
2.0
Purchased Toppings
0.5 of Fav. Purch at Trial
0.25 of Fav. Purch at Trial
0.5 of Fav. Purch at Retrial
0.25 of Fav. Purch at Retrial
1.50
0.75
1.00
0.50
User
9,550,000
Non
85,950,000