Thursday, 25 September 2014

TruEarth Healthy Foods: Market Research for a New Product Introduction

Introduction
1980s saw an increasing account of dual income households in America. With mothers, wives and sisters working out of homes to contribute towards the family income for a better lifestyle; there was also the incidence of ‘time poverty’ with less time remaining to cook meals at home. DeRosa founder of TruEarth started the company to take advantage of the opportunity and sell ready to eat healthy gourmet meals to the rising middle class.
TruEarth launched Cucina Fresca, its gourmet pasta range which was an instant hit in the market. It now deliberates over launching a healthy ready to eat pizza range. Given the market size of $4.4 billion of this particular category, launching the pizza offering is quite lucrative to TruEarth. However, it has to be careful in choosing the right course of action by taking into account, reception by the prospective customer and the strategies of its various competitors in this segment.

Problem Analysis

The estimated size of pizza market in the USA is about $53 billion (2007). Of this two thirds of the turnover comes from restaurants, deliveries and take aways. Just about 11% which is approximately $4.4 billion from the total turnover, comes from the refrigerated pizza sales. This is the segment TruEarth is eyeing. However, as players such as Nestle and Kraft already have presence in the segment with their low cost offering and a close competitor Rigazzi is gearing up to launch a similar product as TruEarth’s, focus of TruEarth is on coming up with a pizza which is not only rightly priced but is also healthy and tastes good.
 TruEarth can take over this segment by simply materialising on the fact that most pizza consumers do not want to cut on their pizza consumption. Almost 33% have expressed that they’d want a pizza offering which is healthier than the usual pizza. Hence the need gap is quite obvious and moving at the right time can bring huge profits to the company.

Problem Statement

Thus, gauging from the situation, TruEarth’s problem is deciding between two proposed ways to proceed. That is, either to capitalise on a first mover’s advantage with its unique offering or to wait for Rigazzi to take the first step and then follow it afterwards.

Alternatives

The alternatives present in this case are two and our explained below:
1.       The first option is to gain on a first mover’s advantage; taking the market by storm and establishing a substantial market share by aggressive marketing.  
2.       The second option is to launch after Rigazzi and gain a better idea of how the market is likely to react to the offering by TruEarth. This is a safer approach if TruEarth is unsure of the results of the various researches it conducted.

Recommendation

The best approach for TruEarth will to launch first and take the first mover’s advantage. The company has already successfully launched Cucina Fresca on the basis of Nielsen BASE research method; and if the results of the study are to be believed for this new offering than surely TruEarth should kaunch first and capture the market.
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. If the product turns out to be excellent, TruEarth may see approximate total revenue of $22.6 million. Thus, the company gains in either case, should the product turn out to be mediocre or excellent.

Conclusion

The case analysis has been successful as far as arriving at the best possible solution to the problem is concerned. However, it is recommended for the managers at TruEarth to double check the results of various studies conducted under the Nielsen BASE method. Also, corrective measures should be taken according to the knowledge unearthed about consumer preferences (such as making crust less chewy and making the pizza reasonably priced). Lastly managers should endeavour 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.           


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