PROBLEM STATEMENT:

Feasibility of the launch of ‘Whole Grain Pizza’ i.e. whether it should launch the product or

not. In case it goes for launching, what should be the marketing volume.

BACKGROUND:

TruEarth Healthy Foods, a maker of gourmet pastas, sauces, and meals, wants to build on its

successful introduction of fresh whole grain pasta, by introducing a similar product concept

for pizza. In an increasingly competitive market, TruEarth is focused on beating its

competition and wants to act quickly and decisively. The company conducts extensive market

research, first using focus groups to test the concept and then following up with take-home

trials.

SWOT ANALYSIS:

STRENGTHS:

Large Pizza Market: Pizzas were a core component of the Italian-American food category,

annual sales in the USA estimated at $53 bn in 2007. (Para 2, pg 6)

First Mover Advantage: Immediate release of the pizza kit would give TruEarth

Healthy Foods the first mover advantage, leading to better market penetration

Brand awareness of TruEarth and Cucino Fresca: The launch of a whole grain

pizza kit will capitalize on the same consumer trends that prompted the release of

Cucina Fresca

Health Trend: TruEarth pizza marked the highest for healthy ingredients(9.1 on a

scale of 10: Exhibit 6), which might have resulted from the 'healthy’ brand image of

TruEarth, as well as the brand's core value to use 'top-of-the quality' and 'healthy-

conscious' ingredients

WEAKNESSES:

Popularity of competing categories: Presence of existing players like Nestle and

Kraft in low price pizza market- an easy alternative to the consumers (Para 5, pg 6)

Expensive as per study: Price perception is on the higher side. In the key reasons for

unfavorable purchase intent, high price contributes 45% . (Exhibit 9, pg 12)

Perceived lack of taste: Whole Grain Pizza’s taste is perceived to be lower. (Exhibit

9, pg 12)

Challenges of Marketing: 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 time consuming and costly.

OPPORTUNITIES:

Chances of reducing use of substitutes: As shown in Exhibit-6(Page-10), TruEarth

Pizza would lessen use of substitutes.

No large player at the moment: The demand for whole grain has still been untapped

from perspective of store-bought refrigerated pizza market and has been addressed

only by local pizzerias

Suitable Product: This type of product depicts the perfect mix for addressing the

time and health related issues of the American consumers

Larger Market than pasta: The market for pizza is 30% more than the existing

product line of pastas. So this fact can be leveraged (Table B, page 7)

Incremental investment for pizza less than that for pasta (para 2, page 7)

THREATS:

Rigazzi- New pizza concept test was already done and was likely not far from an

introduction (Last para, page 7)

Risk of authenticity of BASES test: BASES test might be proved wrong leading to

business risk

MONETARY AND VOLUME ANALYSIS:

During trial period , the product is consumed by 3 types of households:

1) Consumers of Cucina Fresca Pasta

2) Non-consumers of brand who are already aware of the product.

3) Non-consumers of brand who become aware of the product due to additional advertising

and promotion.

Calculations for trial volume: ( using Exhibit 5, page 9 and Table B, page 7)

1) Number of household (Pasta Consumers)

= [Target household] * [CF Customer Rate] * [Trial rate for TruEarth customer(by thumb

rule)] * [ACV] * [Customer awareness]

= 55.8 * 0.11 * [26*0.8 + 53*0.3] * 0.4 * 0.5

=0.47 MM

2) Number of household (Aware Non Customers)

= [Target household] * [Non Customer Rate] * [Trial rate for Non-customer(by thumb rule)]

* [ACV] * [Customer awareness]

= 55.8 * 0.89 * [15*0.8 + 39*0.3] * 0.4 * 0.12

= 0.65 MM

3) Number of household (Unaware Non Customers)

= [Non consumer household] * [ Rate of unaware non consumer] * [Trial rate for non-

customers(by thumb rule)] * [ACV] * [Customer awareness from additional advertisement]

= (55.8 * 0.89)(1-0.12) * [15*0.8 + 39*0.3] * 0.4 * 0.17

= 0.81 MM

Therefore, volume for whole trial = (0.47 + 0.65 + 0.81) MM = 1.9 MM

Calculations for repeat volume: ( using Exhibit 5, page 9; Exhibit 9, page 12 and Table B,

page 7)

Only people who are favorable to the product will affect repeat rate of it. With given prices,

28% of the population which is favorable to the product suggested that it needs no

improvement (Exhibit 9).

Hence in worst case, 28% of the trial households, would participate in the repeat process.

Repeat Volume

= [Trial household] * [Repeat purchase occasions] * [Repeat transactions amount] * [Repeat

Rate]

= 1.9 MM * 2.0 * 1.25 * 0.28

= 1.3 MM

Therefore total wholesale volume during financial year

= ( Trial Volume + Repeat Volume)

= (1.9 + 1.3) MM

= 3.2 MM

The price of 1 kit = $ 12.38

Thus, Retail Sales Volume

= [Whole volume] * [Price per kit]

= 3.2 MM * $ 12.38

= $ 39.6 MM

Calculation of Investment (using para 2, page 4 and para 2, page 7)

Investment = Company Return requirement + Cost of Marketing plan

= $ 12 M + $ 10M

= $ 22 M

Calculation of Gross Revenue

Gross Revenue = Retail Sale Volume * [1- Retailer’s part]

= $ 39.6 MM * 0.65

= $ 25.7 M

Calculation of Gross Profit

Gross Profit = (Gross Revenue – Investments)

= ($ 25.7 M - $ 22 M)

= $ 3.7 M

CONCLUSION:

We can see that, even in the worst case scenario, the firm would meet its requirements with $

3.7 M of Gross profit and the expected volume to produce exceeds 3.2 MM units.

Thus, the firm should definitely enter into the new market and produce whole grain

pizza. To sustain the business and increase the profits even further, it should improve its

accessibility, user-friendliness (easy-to-prepare), freshness while maintaining price

competitiveness against its more-direct competitors, namely take-out or delivered,

refrigerated and frozen pizzas in order to win consumers’ heart and mind as well as to sustain

its competitive advantage.