ANALYSIS

TruEarth Healthy Foods: Market Research for a New Product Introduction

Situational Analysis Customers: Dual income households with higher disposable income but less time to cook a meal and clean up afterward Tired of unhealthy fast food and seeking greater variety and freshness Interested in semi-prepared single serving meal kits

Context: Market shift from mass-produced, highly processed foods towards greater quality and authenticity Growing demand for quick home meal replacements, refrigerated and whole grain food options that did not sacrifice taste Pizzas were a core component of the Italian- American food category and were very popular, 77% consumers had pizza at least once a month Annual sales for pizzas were $53billion in2007 with refrigerated pizza market accounting for 11% of the sales, totaling $5.8billion making it larger than refrigerated pasta market

Company: One of the first to focus on whole grain products, without compromising on taste Had built a loyal regional following through the years and had successfully launched refrigerated pasta Already has the necessary capital investment in packaging of refrigerated products

Complementers: Several mainstream market chains carry Tru-earth products 35% gross margin for retailers through all categories Retails had asked for markdowns and high guaranteed sell-through performance to avoid excess inventory, in cases of overestimation of demand

Competitors: Rigazzi Brands is the main competitor, selling similar products at same scale. It has also tested a pizza concept and was likely not far from an introduction

It had targeted Tru earths high priority cities in the past with its new line, offering substantial trade discounts and promotions

SWOT Analysis Criteria examples Large capital expenditure in packaging equipment have already been made 11% of the target population tried the product in the past year New product, Cucina Fresca achieved sales of $35 million in 2007 Successful market experience in launching new products Strengths Incremental investment for pizza was substantially less than that for pasta Higher awareness of pizza product among Cucina Fresca customers Strong consumer loyalty and brand name awareness Product for the whole family, 28% of home-trial users believe there is no need for improvement 33% of respondents in mallintercept considered the TruEarth name a favorable advantage Weaknesses Consumers will have to buy toppings separately Pizza kit can feed only 2-3 people Expensive than other frozen and Takeout pizzas 11% family dislikes it Criteria examples Avg. retail price is $12.38 vs. $10.09(me an price) and $11.72(tak eout)

Criteria examples Independent surveys of Restaurant-goers showed that 33% people had strong interest for whole grain crust Sourced high quality durum wheat from North Dakota for pastas Market size of pizza was estimated to be $53 billion, with storebought refrigerated pizzas($5.8 billion) greater than refrigerated pasta($4.4 billion) Problem Statement:

Opportunities Strong interest among consumers in a whole grain crust

Threats Many consumers view pizza as an indulgence-not a meal Consumers have wide range of options to choose from Can cannibalize pastas market share

Good relations with suppliers of raw materials Pizzas were a core component of Italian-American food category Leverage TruEarth brand name to enter the pizza market

Criteria examples Kraft and Nestle were huge players with lowcost frozen pizza Rigazzi had also tested a pizza concept and would soon launch it

The basic problem can be identified as if it should Go or Not Go with New product-Whole Grain Pizza. Growth of Cucina Fresh had slowed down in 2008 due to similar offerings by competitors. Rigazzi emerged as the main competitor by launching whole grain fresh pasta and giving offering substantial trade discounts to supermarkets and high value coupons to consumers. They were also competing for a very limited shelf space as supermarkets to have only one vendor for whole grain pasta. There were some players in market with deep pockets such as Nestle & Kraft who were offering lowcost frozen pizza. Rigazzi had also tested a pizza concept and they believed that they were also about to launch. So pressure was high on them to gain the first mover advantage.

Possible Alternatives Alternative I: Launch Whole Grain Pizza Product Pizzas were a core component of the Italian-American food category.($53 billion sales in 2007 and 77% of consumers ate pizza at least once a month) People were getting more health conscious. (market shift towards quality and authenticity/New trend for whole grain in diet) Whole grain pizza can take advantage of the same trend that provoked the release of Cucina Fresca. Increasing demand was met by local pizzerias. Low Investment. (Re-tooling cost and the market planning).

Alternative II: Do Not Launch Whole Grain Pizza Product Consumer perception. (view pizza as an indulgence) High competition. (dominated by prominent players like nestle and kraft) Looks less appetizing than white floor Can focus solely on Cucina Fresca

Demand estimate Demand Estimation for Whole Grain Pizza for Year 1(Excellent) Definitely would buy 18% Probably would buy 43% Trial Rate 27.300% Target Household 5,88,00,000 Cucina Fresca Pasta Customers 6468000 Non-Cucina Fresca Pasta Customers 52332000 Customer Awareness 50% Non-Customer Awareness 12% ACV Distribution 40% Marketing-Adjusted Trial Rate 5.4600% Non-Cucina Fresca Customer Adjusted Trial Rate 1.310400% Cucina-Fresca CustomersTrial Households 353152.8 Non Cucina-Fresca Customers Trial Households 685758.528

Total Trial Purchases 1038911.328 Repeat Purchase Occasions 2 % Repurchasers(Excellent Product) 49% Repeat Volume 1018133.101 Total Purchases 2057044.429 Retail Sales Volume 25466210.04 Tru Earth Sales Volume 16553036.52 Return expected 12000000 Excess Returns 4553036.524 Demand Estimation for Whole Grain Pizza for Year 1(Mediocre,Average) Definitely would buy 18% Probably would buy 43% Trial Rate 27.300% Target Household 5,88,00,000 Cucina Fresca Pasta Customers 6468000 Non-Cucina Fresca Pasta Customers 52332000 Customer Awareness 50% Non-Customer Awareness 12% ACV Distribution 40% Marketing-Adjusted Trial Rate 5.4600% Non-Cucina Fresca Customer Adjusted Trial Rate 1.310400% Cucina-Fresca CustomersTrial Households 353152.8 Non Cucina-Fresca Customers Trial Households 685758.528 Total Trial Purchases 1038911.328 Repeat Purchase Occasions 2 % Repurchasers(Mediocre Product) 21% Repeat Volume 436342.7578 Total Purchases 1475254.086 Retail Sales Volume 18263645.58 Tru Earth Sales Volume 11871369.63 % Repurchasers(Average Product) 37% Repeat Volume 768794.3827 Total Purchases 1807705.711 Retail Sales Volume 22379396.7 Tru Earth Sales Volume 14546607.85 Proposition and our stand Pizza is one of the American consumers' favorite dish. The whole grain pizza product resolves the time- and health-related concerns of American consumers. There is a growing demand for whole grain pizza crust and no one has till now addressed the store-bought refrigerated pizza market. One of the reasons for the success for TruEarth had been that it was one of the first companies to focus on whole grain products, offering both 60% and 100% whole grain pastas in its line. So, since sustaining a competitive edge in the fresh Italian food

category required continual innovation, TruEarth can benefit from being the first mover advantage in the storebought refrigerated pizza market. The immediate release of the pizza kit would allow TruEarth to penetrate the market before Rigazzi, its competitor who has already tested a whole grain pizza concept and is not far from introduction. Our Stand:The Company would benefit the most by launching the new whole grain pizza product. Refrigerated pizza is considered tastier, more authentic than frozen pizza and TruEarth can benefit from being the first mover advantage in the store-bought refrigerated pizza market. TruEarth must venture into new categories in order to raise brand awareness, seek new customers, and increase our profits. TruEarth can retain their leadership as a gourmet, healthy alternative because of the health-conscious trend and hence should expand their product line.