Nestle Pizza Launch

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Casablanca, November 18th, 2010

Paper by: Ilham Bellamine

MBA ENPC-EHTP- 13TH PROMOTION

Module: Marketing Management

Case study: Nestlé refrigerated food

Professor : Marco Protano

I. Analytical summary:

The strategic opportunity that shows in this case is the extension of Nestle Contadina brand to the pizza market. The key decision makers should decide whether to launch the Contadina pizza line or not. If they decide to go with this new line, they should decide whether to launch the pizza option alone or pizza+ extra toppings option (Kit option).

The Industry analysis:

1. Category: the Italian ethnic food (Pasta), is dominated by Nestlé. • Pasta segment: Before the introduction of Contadina fresh, the market of pasta was divided into 2 products: i) Fresh pasta sold in restaurants, ii) dry pasta sold in grocery stores. Contadina has a superior value proposition, since it met the key criteria that differentiate good pasta in the mind of the consumers which are “main meal (41%), “quality” (39%) and “light meal/side dish” (20%). Nestle came with a differentiated approach, which is the component approach. Pasta and sauces were sold separately to offer a better quality product, give the opportunity to the consumers to assemble the dish in the kitchen and feel a home made product and finally reduce the shock of global price (paying separately 4$ for the sauce & 2.5$ the pasta rather than 6.5$ for the complete meal) • Pizza segment: it’s dominated by restaurants that are capturing 88% of share of market. 76% was consumed at home, of which delivery counted for 75% and thus there is a room to recover an important share from this segment.

2. Competition:
• Pasta segment: Main competitor that entered the pasta segment is Kraft’s Digiorni pasta right after Contadina fresh. Di Giorni entered the segment with a serious advantage : 90-day shelf life technology versus 40-day shelf life technology for Nestlé. It also launched a price war against Contadina and boosted its advertising support. • Since Nestle gained first mover advantage, Pasta sales increased as Kraft’s heavy promotion has widened primary demand for refrigerated pasta (Households buying refrigerated pasta grew by 20%). • Refrigerated pizza segment: Overall pizza Market is dominated by restaurants that capture 88% of retail market (including home delivery & take out). Refrigerated pizza is an uncontested market with no clear leader on the scene, but Kraft is expected to enter the market within six months.

3. Company:
• Nestle is a worldwide company offering a multiple products from various categories. The refrigerated food category represents 7% of global sales of Nestle. It entered the US market in 1987 with Pasta and sauce and met a great success with sales of $50MM, growing to 100$MM in 1990. Nestle chooses to acquire local small company (Lambert’s) with premium offers to be the first to bring the category to the market. • Further to the success of pasta & sauce line, NRFC top management thought to develop the business by extending the line to refrigerated pizza.

4. Consumer: they are perceiving Contadina brand as superior value proposition meeting their main criteria of selection for Italian ethnic food ie, quality, main meal and light dish. They are also financially averse, as they state the price as being the main barrier for Contadina pizza.

The above diagnostic led to 3 decision alternatives for NRFC:

1. Maintain the status quo
2. Launch the pizza alone
3. Launch the pizza+ extra topping

II.Assessement of the available alternatives:

|Alternatives |Advantages |Limits | |Maintain status quo |“bet farm strategy”, NRFC will concentrate |Pizza market represents $18.4 billion and | | |all efforts...
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