Although NRFC believe estimation of pizza sales could base on Contadina pasta's 24% market-penetration rate, more conservative calculation should take different ranges of penetration rate into consideration. By choosing three possible penetration rates of 5%. 15% and 25%, the estimated results are demonstrated in Exhibit 1. In all three scenarios, kit only concept will not make up to company's expectation. For kit and topping concept, only if penetration rate reach to 15%, launch decision could be supported.
1.2 Sensitivity analysis shows that pizza sale will be largely influenced by penetration rate of Contadina pasta (Exhibit 2).
Q2 Similarities: Both launches of refrigerated pasta and pizza are aim to catch up the growing trend toward ethnic foods. Both of these two lines try to capture this growing trend by providing convenience and freshness at the same time. In terms of competition, none of the refrigerated pizza and pasta category has a big brand play yet. Therefore, by taking quick reaction to the demand, both pasta and pizza opportunity might empower Nestle to become a market leader in both categories with first mover advantage.
Differences: Although both lines are new product concept, which try to target similar customer segment who are interested in Italian food, market potential might vary for different product line. First in terms of positioning, in pasta market, dry and frozen pasta occupied large market share due to its higher accessibility than fresh past sold at specialty store and restaurants. This might explain the fact revealed by research that 77% of respondents in favor of fresh pasta concept never purchased fresh pasta before. Therefore, wide distribution of refrigerated pasta will serve customers?desir...
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Total retail (users+non-users)MM $65.98 $39.68
Total factory sales (2/3 of retail)MM $43.99 $26.45
NRFC hurdle (factory sales)MM $45 $45
?Pizza kit and topping: 43.99 MM, reach company's projected factory sales of 45MM
?Pizza kit only: 26.45 MM, Fail to reach company's projected factory sales of 45MM
Exhibit 2 Sensitivity analysis
Change in penetration rate Change in pizza sales Percentage change in pizza sales
25% to 15% - 7.11M -12.2%
25% to 5% - 14.26M - 22.48%
15% to 5% - 7.15M - 13.98%
Calculation shows the high sensitivity between Contadina pasta's market success and estimated pizza sales.
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