Truearth Health Foods
Background Gareth DeRosa founded TruEarth Health Foods in 1993 in St. Louis, Missouri when he saw a rapidly growing demand for gourmet sauces and pastas made from whole grains and natural, better quality ingredients. TruEarth took an informal approach to product development using their test kitchen to develop new products through intuition, then releasing limited-edition variations to test market new products. They eventually developed a four step process for research and development where new ideas would be screened and tested their limited focus groups.
Promising products would then be put through a quantification of volume test process using the Nielsen BASES I&II, (Rangan & Yong, 2009). In late 2004 TruEarth developed a product to take advantage of the latest trend in home meal replacements. They came up with the Cucina Fresca line of whole grain precooked pasta and sauces. These products were put through the Nielsen BASES I&II and based on the findings the company decided to go to market with them. The Cucina Fresca line was rolled out in 2006. Their pasta line was successful at utilizing first mover advantage and quickly gained the lead in that market segment.
However, a year later, their main competitor, Rigazzi Brands, introduced its own whole-grain fresh pasta, which has been successfully competing for market share ever since. TruEarth Healthy Foods is now looking at a healthy, whole-grain refrigerated pizza kit. They have already tested and developed whole-grain pizza kit with a line of separate topics. The pizza kit would price eight dollars but the additional topping packs at $3. 50 each, (Rangan & Yong, 2009), making a standard one topping pizza $11. 50 each.
In order for this product to be successful, Cucina Fresca will need to correctly calculate sales volume and consumer acceptance of this product and whether the projected penetration rate will result in a first mover advantage. Market Comparison Cucina Fresca has a product penetration rate of approximately 5% to 15% of fresh pasta market. While this is a good comparison to use when launching another fresh pasta or similar product, the pizza market they would be competing with, includes a large volume of frozen pizza producers and even larger volume of takeout pizza chains.
The choices consumers have in the pizza market far outweigh the choices they have in the fresh pasta market. A few more of the hurdles to get over are relative price, competition, and the fact that pizza is far from being considered healthy food choice. The high price of $11. 50 for the equivalent of a small one topping pizza made fresh and delivered from a local pizza shop. At the high price of $11. 50 they will not likely retain first mover advantage for long enough to regain their return on investment. Even if it did catch on at that price, it would not take long for their many competitors to imitate the product and dilute market share.
In addition to that is the fact that Stouffer’s lean cuisine already has several “healthy conscious” pizzas, launched as early as 2005. (leancuisine. com) There’s also the fact that pizza has always been considered an indulgence and not a healthy meal choice. Well it is true that according to the survey results in Exhibit 10 of the Rangan & Yong article, that as many as 79% of existing Cucina Fresca customers definitely or probably would buy their home grain pizza product, that may not be the best data to rely on. It is easier to retain customers and to go out and get new ones, (Kotler & Keller, 2009).
However, the result may be that existing Cucina Fresca customers simply substitute the pizza for the pasta product they would’ve already bought. Similar to the marketing plan for Diet Pepsi, the idea is not to attract current Pepsi users to Diet Pepsi, but to attract other diet cola users to Diet Pepsi. Otherwise there would be no overall boost in revenue for TruEarth Health Foods. Conclusion I do believe it is a good idea for TruEarth Health Foods to launch the whole-grain pizza, but maybe not on a large scale that they had originally planned.
I do not believe the massive marketing campaign would result in a sustainable first mover advantage. However, since the retooling of their factory would be minimal and the additional options for their existing customers would not likely result in a loss of revenue, it may be a better idea to hold off on watching the product, but not hide their intent on developing a product. This may cause the competition to rush toward developing a similar product and shoulder all the costs associated with becoming the first mover.
TruEarth Health Foods could then use second over advantage and enjoy the free ride by their competition, most likely Rigazzi Brands. References: Kotler, P. , & Keller, K. L, (2009), 5th Ed. A Frame Work For Marketing Management. Prentice Hall, Upper Saddle River NJ Rangan V. , Yong S. 2009, “TruEarth Healthy Foods:Market Research for a New Product Introduction” Harvard Business School Publishing. Taken From JWMI 2012 Stouffer’s Lean Cuisine Website:2012 http://www. leancuisine. com/Products/Details. aspx? ProductID=10510