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140923 Gerber Case 13 Essay

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1990, Nestlé Refrigerated Food Company (NRFC) wanted to enter the refrigerated pizza product to US market.

1987, NRFC entered refrigerated food market with Contadina Pasta and Sauce.

1987: sales of $50 million.
1990: +$100 million.
Competitors entered the refrigerated pizza product to US market.

Stephen Cunliffe, President of NRFC: need another product. Need to see numbers to ensure viability.

NRFC subsidiary of Nesté, S.A.

1993, Nestlé, S.A. was one of the worlds largest food Co.
Sales +$37 billion. 500 plants, 60 countries, 195K employees. Sales of frozen foods and chilled pasta and sauces (among others). 1991: $14,956 million francs = 29.62% of sales of Nestlé`s product line. 1992: $15,718 million francs = 28.84% of sales of Nestlé`s product line. Nestlé was committed to R&D, quality improvements, but most importantly, adaptation of products to meet culture´s tastes in different markets

1985: Became major food force with purchase of Carnation Co. $3 billion.
Planned to use Carnation acquisition to develop refrigerated foods.

Joint Venture: Nestlé and Carnation = Nestlé USA. NRFC became parte of Nestlé Frozen, Refrigerated and Ice Cream Company (one of five subsidiaries of Nestlé USA)

Marketing departments were responsible for new product development, especially market research department (“MRC”). NRFC established 7-step process to take no products into market: 1. Idea Generation.

Ideas came from individuals, product management brainstorming, sales force, etc. MRD conducted focus groups and referred to secondary sources (demographic trends, category overview, market trends, etc.). 2. Idea Refinement:

MRD conducted survey to identify ideas with highest potential. Components of survey were: volume potential, purchase interest and frequency, price/value rating, product design, positioning and target market selection. 3. Product Development:

Prototypes developed by R&D, marketing and production staff. Products tested at central locations or in homes.
Number of products were variable (1 or 2).
Test either done blind or disclosed.
4. Quantification of Volume
Depending on risk, MRD recommended 1 of 3 studies by BASES:
Pre-BASES: concept with rough estimates.
BASES I: test with volume estimates between 25% accuracy.
BASES II: concept taste and product taste test; reliable between 20% accuracy. Major factors were:
Sample size used....

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