TruEarth Healthy Foods: Market Research for a New Product Introduction

Introduction

The late 1980s saw a growing demand for healthy, gourmet food products vis-à-vis mass produced highly processed food. The trend of dual income households where homemakers were eventually coming out to earn for a better lifestyle was on the rise. However this trend also implied that there was increasing time poverty at the hands of a usual household to prepare meals at home. Hence, there was also the incident of increasing guilt among mothers and wives who were not able to provide healthy home cooked meals to their family. DeRosa started TruEarth to capitalise on this opportunity of providing ready to eat healthy gourmet preparations to these growing dual income households.

In 2006, Eckstein a brand manager at TruEarth spearheaded the launch of a new product line Cucina Fresca, under which fresh whole grain pasta meal kits were promoted. Although a break even sales of only 12 million $ was required in the first year (to meet the advertising, promotional and other costs), the product brought a total revenue of 18 million $ in the first year and 35 million $ in the second year. By far it was one of the most successful launches in the company’s history. However, sales began to drop as competitors such as Rigazzi, Nestle and Kraft geared up in promoting similar products. However, sustaining its first mover advantage and sizeable market share, TruEarth is thinking on the lines of launching a unique healthy pizza offering.

Pizzas are a prime menu option in the Italian-American food category. With over $53 billion in estimated annual sales in 2007, Pizza is one of the most lucrative food categories for a player like TruEarth. The store-bought Pizza market estimates to around 11% of this $53 billion market and stands around $4.4 billion in sales (2007). However, Pizza sales in recent years have been hit by rising health concerns and popularity of diets which restrict unhealthy food intakes. TruEarth intends to capitalise on this opportunity by introducing a healthy pizza option since it has been observed as a result of various surveys that the target population craves for pizza although it wants them to be ‘healthy’ too. Also, little modification is needed to the existing infrastructure to produce the new product. This provides a positive impetus to monetize on the opportunity at hand.

Situation and Problem Analysis

As stated earlier the estimated size of the American pizza market in 2007 was around $53 billion out of which two thirds of the pizza sales came from delivery, take outs and restaurants. Only 11% of the total revenue came from store bought refrigerated pizza, which equals to around $4.4 billion in sales. This is the segment of interest to TruEarth. However, TruEarth competes with the likes of Nestle, Kraft and Rigazzi for a share in this market. As pointed out by Rosie Carlton (Director of business development at TruEarth) success of the pizza range will depend on delivering a crust as good as a take-out pizza; as Kraft and Nestle already have low priced pizza offering in the market.

TruEarth also has to compete for space in consumer preferences for options such as restaurants, deliveries and take-away.

The major opportunity for TruEarth comes from the fact that people don’t want to cut out on their pizza consumption and also want a healthier option – with 33% restaurant goers citing a strong interest in healthy crusts, in a survey. Although certain pizzerias in metropolitans offer whole wheat or multi grain crusts, opportunity exists for providing a pizza fresher than frozen pizza, healthier than take away and one which allows consumer to modify taste suitably, to give that special home cooked feel. Hope is provided by the fact produced by a mall intercept survey, which shows how people are willing to change to TruEarth pizza consumption in subsequent eating pizza eating occasions as compared to previous pizza eating occasions.

Stated below is a brief SWOT analysis to arrive at the core problem at hand:

Strengths

The core strength of this proposition lies in the fact that firstly, the offering is going to be a nutritious and healthy one, and close to substitutes such as fresh home cooked meals. Secondly, by providing the options for various toppings flexibility has been provided to the consumer to mould the product according to individual tastes. Lastly, 30% of the population which favoured TruEarth (determined in various surveys and research initiatives) stated that no improvements were needed to the offering designed by the company; this was a positive indicator since 30% of the population is a large part of the market targeted.

Weakness

It was determined that the Pizza offering by TruEarth would feed only 2-3 people. Also, 29% of the population participating in home trials concluded that the price needed to be revised downwards. When compared to pricing by restaurants and take away, the prices were still high. So conclusively there was a need to reduce the prices in order to appeal to the pockets of the target consumer. Also a requisite product modification found in the surveys was that around 7% of the population in favour wanted the crust to be less chewy; also 20% of the population which was unfavourable cited the same change in the crust.

Opportunities

There are only three main opportunities with regards to launching the pizza. Firstly, the market’s size itself ($53 billion out of which 11% is the core target market for TruEarth). Secondly, the fact that the American consumer does not want to cut out on Pizza consumption and still rising awareness about health concerns and ill effects of available pizza options is making the consumer crave for a healthier pizza meal. Almost 33% of population on a survey ‘strongly desired’ a healthy pizza meal option. Thirdly, the real opportunity lies in providing an option healthier than take away (or restaurants) and fresher than frozen pizza, and one which is pocket friendly too.

Threats

 TruEarth faces some serious threats concerning its pizza product launch intentions. One of the major threats concerning the proposition comes from the likes of Nestle and Kraft, which already have low cost frozen pizza preparations in the market. To counter these TruEarth need to have real good crust which matches that of take out. Second threat comes from Rigazzi which is one of the closest competitor of TruEarth and is planning to launch a similar offering as TruEarth’s very soon. The problem facing the company in this regard is the pressure to capitalise on a first mover’s advantage or toe in line with Rigazzi as the leader. The last of threats, manifests itself in the lack of an in depth study of the situation. Since the research and study has been conducted in high potential markets only, a fair idea of true market penetration and reception of the product cannot be gauged from these studies.

Problem Statement

Summing up from the above, TruEarth’s problem with regard to the new product proposition, is essentially of choice and lies in the pressure to either act swiftly and gain a first mover’s advantage over Rigazzi; or, to launch after Rigazzi, and lose on the first mover advantage but gain on insight.

Alternative courses of action

If we study the nature of the problem itself, the alternative courses of action are quite evident in the statement of the problem. The alternatives present in this case are two and our explained below:

1.       The first alternative present is to launch before Rigazzi and gain a first mover’s advantage. The benefits of this approach will be that launching first will provide better time to TruEarth to penetrate the market properly and establish hold before other players come in (this first move is also to be teamed up with aggressive marketing efforts for desired effects). The advantages of launching first have been enjoyed by TruEarth in success of Cucina Fresca.

2.       A second alternative is to launch after Rigazzi’s pizza offering launch. This will provide TruEarth with a better and realistic insight into market trends with regards to the proposed product. Hence, TruEarth will be in a better position to modify according to market needs or take pre-emptive steps in this regard. This should be the alternative of choice, if TruEarth is doubtful about the appeal of its offering or is not satisfied or fully convinced by the research Nielsen has undertaken.

Recommended Course of Action

I would recommend TruEarth to take a first mover’s advantage in launching its pizza offering. The company has already seen the advantages of moving first in case of its pasta offering Cucina Fresca.

Being a niche product present due to a clearly defined opportunity of a demand for healthy ready to eat meals, it suits TruEarth better to launch first and capture market share by Gorilla marketing efforts to guard itself against biggies such as Nestle and Kraft. Should it choose to penetrate into markets already held by Nestle, Kraft and the likes, it will find itself in deep trouble since competitors as Nestle can easily oust competition by huge marketing budgets and influence in the localities they operate in.

Also, one must pay attention to the results of various research findings unearthed by Nielsen’s Base I and II method:

The company needs only about $12 million of sales revenue to break even in the first year. As the survey and studies point out that, even if the product turns out to be mediocre the revenues will be approximately $14.5 million in the first year (the consumer’s taste and other buying preferences have been studied thoroughly in various surveys and studies so a reasonable estimate about the mediocrity or excellence of the product can be made).

If the product turns out to be excellent, TruEarth may see approximate total revenue of $22.6 million.

So in both the cases (mediocre or excellent) the revenue is higher than what the company needs to break even in the first year. Hence, gaining on the first mover’s advantage should be the preferred course of action in this case.

Conclusion

Concluding from the case study analysis by way of studying the situation, determining the problem and analysing the available alternatives, we have been able to recommend a course of action that should be taken by the company. However, it would do good to the managers at TruEarth to carefully study and analyse the BASE research findings in context of the proposition made, to take pre-emptive action to modify the offering on the basis of consumer feedbacks in various surveys (such as making crust less chewy and making the pizza reasonably priced) and to find out about the attitudes and trend in markets other than the high potential ones to have a clearer understanding of the product’s appeal and its prospect of gaining a sizeable market share and penetration.