AssignmentCanadaHelp Sample About TruEarth Healthy Foods Case

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Executive Summary

In 1993, Gareth DeRosa of St. Louis, Missouri, saw an opportunity to start a company selling healthy gourmet pasta and sauces using superior ingredients. This company became known as the TruEarth. People wanted higher quality, authentic, and healthy food, and this is where TruEarth came in. They successfully entered the market as they introduced Cucina Fresca, which made TruEarth one of the first companies to focus on whole grain products and built the company a regional following. TruEarth maintained its’ competitive edge via differentiation by targeting the niche market (a segment of the ready-made foods industry with tremendous sustainable growth). They became successful by continuously innovating, taking bold risks, and making rash decisions.

The company experienced tremendous success as a result of Cucina Fresca. Still, company growth slowed as competitors began offering similar products, and with the market becoming oversaturated, TruEarth has decided it’s time to extend their product line and offer their own whole-grain pizza to be the first to do so. TruEarth deciding whether or not to introduce the whole grain pizza product is an important decision, but it’s complicated because the Rigazzi is about to launch their own similar product. Rigazzi, more than any other competitor, is the only company that really serves as a real threat to TruEarth’s success. Rigazzi offers very similar products to TruEarth’s offerings. The company is positioning itself as the healthy option consumers should choose when the craving is widely eaten foods such as pasta and pizza.

Among the alternatives I suggested, TruEarth should immediately launch the whole grain pizza product and supply it to supermarkets. This alternative has the most potential for providing the highest profit and maintaining/enhancing the company’s brand awareness and would do a good job at acquiring market share. While it may not be the least costly or least risky option, neither was Cucina Fresca, and that product was very successful.

However, whole-grain pizza and pasta products have notable differences, and the risk and cost of the alternative are a necessary part of the alternative. The recommended course of action that I stated will be implemented over an approximately one-year time period that will involve the participation of several departments. In short, the plan will begin with the development of a marketing campaign, retooling the equipment and facilities, finding the short-term demand and production requirements, contacting potential vendors and establishing purchase orders, beginning production of the pizza kits, beginning the advertising campaign, measuring the performance of the product, considering other venues to expand consumer awareness, and offering gluten-free pizza to ensure the company stays ahead of the market.

Issue Statement

TruEarth has maintained an edge over the competition by being a first-mover by introducing healthy and high-quality gourmet food products. One of their most notable products, Cucina Fresca, was a success because it tapped into unmet demand. The product grew in popularity very rapidly until a competitor, Rigazzi, introduced their own similar product, which declined TruEarth’s revenue. With competitors entering the whole grain pasta market and oversaturated, TruEarth decided to introduce a pizza product line into the gourmet food market segment.

An extensive amount of market research was subsequently done to gauge the possible success of the new product line. The predominant issue currently facing TruEarth is the company is in a situation where they must decide whether they should launch the product or not, and they need to decide immediately as their main competitor, Rigazzi, is about to introduce a whole grain pizza product line of their own.

Situational Analysis

Company: TruEarth is a gourmet food manufacturer that traces its origins back to 1993 when Gareth DeRosa from St. Louis, Missouri, had a vision for creating a company, which became TruEarth Healthy Foods. When the demand for healthy, gourmet products grew, and people desired greater quality and authenticity in their food over mass-produced and highly processed food, DeRosa saw an opportunity to satisfy this demand. TruEarth became one of the first companies to offer whole grain products when they offered 60% and 100% whole grain portions of pasta.

The concept was successful with using high-quality ingredients such as extra virgin oil instead of canola oil and real tomatoes instead of paste or puree. The company now has a regional loyal following. Several mainstream supermarket chains carry TruEarth’s products, and consumer awareness is steadily increasing via promotional programs, magazine advertisements, coupons, and in-store demonstrations.

The objective of this company is to provide high-quality gourmet food products to cater to the health-conscious segment of the market, along with catering to the growing trend of consuming healthy alternatives to food that is typically perceived as unhealthy. TruEarth hopes to establish itself as the market leader in the gourmet food product market, which is seeing rapid growth.

The company was really put on the map when they brought Cucina Fresca to market. There are several notable reasons why Cucina Fresca pasta was so successful, and the first is the in-depth market research they conducted before selling the pasta.

Second, an abundance of easily customizable options allowed consumers to purchase pasta that catered to their taste preferences. The ease of using the product was also a contributing factor; the target market doesn’t have a lot of time, but a desire for fresh food and the easy to prepare pasta gave consumers what they needed.

Third, TruEarth catered to an unmet demand for healthy pasta that actually tasted very good as well. TruEarth acknowledged the growing trend of health-consciousness including the growing concern the public had over ‘bad’ carbohydrates in the market and decided to produce something healthy; the pasta served as a replacement for refrigerated pasta, which is perceived to be less tasty and authentic and the cooking of the pasta was quick, and the instructions were easy to follow. As for the comparison of the pizza opportunity to the pasta opportunity, both pizza and pasta have significant prospects for growth and success considering the size of their respective markets.

However, the refrigerated pizza market was larger than the refrigerated pasta market ($5.8 billion vs $4.4 billion). Not to mention, the incremental investment for pizza was much less than that of pasta since TruEarth was able to take advantage of the capital expenditure they spent to make the pasta (e.g. equipment, technology, etc.) and use it for the pizza instead.

Furthermore, unlike the pasta, which was launched as a new brand (Cucina Fresca), the pizza will already have brand awareness as a result of Cucina Fresca’s success; however, there is also a larger perceived gap between value and price for the pizza than for the pasta, which the company may have to fix via a price reduction. The first-mover advantage in pizza does share similarities with Cucina Fresca, but it also has certain differences. Specifically, when Cucina Fresca hit the shelves, the fresh pasta industry was just getting started, and TruEarth was the only company offering a whole wheat option that tasted good.

On the flip side, the refrigerated pizza market is not a new product category as it has been around for decades and has some major companies dominating it. It’s important to note that TruEarth does have somewhat of a first-mover advantage, albeit a much less significant one, as their whole wheat and modular design concept makes it a unique option that hasn’t been seen in the refrigerated pizza market yet.

Consumer: Pizza is considered an indulgence and not something people eat when thinking of eating healthy. Consumers view pizza as a typical family treat since it’s easy to prepare and conveniently accessed. Pizza appears to be viewed as an unhealthy food option as it tends to be eaten only on occasion since people make an effort to try to steer clear of such foods, although pizza is still very widely consumed. This provides an opportunity for TruEarth to cater to people’s desire for pizza by providing a healthy pizza. They can eat pizza and not feel guilty about it, which may even increase their pizza consumption if they’re only eating the healthy TruEarth pizza.

TruEarth’s new whole grain pizza product line has a target market that includes families with children in which both parents work or a single-parent family in which the parent works (essentially the same market as Cucina Fresca). As such, the company’s offerings provide convenience. It saves time that working parents don’t have enough of while also being easy to make and a healthy option for the parents and the kids, who parents want to make sure they are eating high-quality and healthy food. TruEarth products would also be enjoyed by students in Canada, who need university assignment help in Canada and don’t have much time on their hands and strive for a quick and easy way to make food, especially since many college students may not be excellent cooks. TruEarth should also target people who buy delivery/take-out pizza because they get it for its convenience. It certainly isn’t healthy, so providing a quick and convenient way to eat something people love that is healthy would allow TruEarth to eat to acquire consumers from this market.

There was an increase in dual-income households, which led to high disposable incomes and increased time poverty because workers would find themselves without enough time in their day to prepare and cook meals and clean up afterwards. Consumers were also tired of unhealthy carryout and fast food and sought more healthy, fresh, and high-quality food.

As a result, a new food category known as home meal replacements was created, which TruEarth products would become a part of. There was also greater consumer awareness regarding the importance of incorporating whole grains into one’s diet, and people also actively began avoiding ‘bad’ carbohydrates; however, the healthy alternative to unhealthy snacks typically didn’t taste nearly as good, but TruEarth’s whole grain pasta was one of the best tasting options, and it was healthy.

The purchase intent for non-customers is less for the whole grain pizza test than the whole grain pasta test for “definitely would buy” and “probably would buy”. At the same time, TruEarth customers have a higher percentage of people who would probably buy but less than those who would definitely buy for the pizza compared to the pasta. I believe this is no cause for concern because, considering the much larger size of the pizza market, I think the impact of this slightly lower level of interest won’t impact sales very much; in other words, a slightly lower percentage of a higher number can yield similar or even better sales.

Besides, consumers seem to be highly favourable of the pizza concept. As found in Exhibit 8, people like the key attributes of the whole grain pizza, including the fact that it’s whole grain, it looks appetizing, all items can be purchased in one place, and it’s easy to prepare. So, the concept seems to resonate well with consumers. However, it’s important to consider that many people found the product a bit too expensive and didn’t enjoy the limited selection or the limited time to expiry.

Although to counter these arguments, I think it’s important to note that these dislikes are inherently going to be associated with the product because the production costs may be higher as it typically is for healthier options, the limited selection should be suspected if the product line is fairly new, and the expiry date shouldn’t be too far in the future considering the product is based upon the premise that it’s fresh.

Competition: There are several major competitors (both direct and indirect) that TruEarth faces, with the most prominent being Rigazzi. Nestle and Kraft, along with restaurants and takeout/delivery pizza chains, are the primary competitor’s TruEarth faces. Nestle and Kraft are dominant in the frozen pizza market. While TruEarth isn’t prospecting an entrance into the frozen pizza market, it is still an alternative pizza product that has a similar target market it’s catering to.

These two companies are huge and have the edge over TruEarth regarding marketing expenditure and having a more solid relationship with supermarkets since Nestle and Kraft’s products are prevalent in most supermarkets. Their products are also cheaper to produce, and the spoilage rate is significantly lower than the more fresh and refrigerated pizza that TruEarth offers. However, frozen pizza is generally viewed as more unhealthy, so people looking for healthier options likely wouldn’t opt for frozen pizza.

Rigazzi, on the other hand, sells the same products as TruEarth, has a similar market size to TruEarth, and Rigazzi targets TruEarth’s high-priority cities as they did when they sold their whole-grain fresh pasta. Although some supermarkets are happy to hold both companies’ products, there’s often a preference exhibited by supermarkets to hold just one, which results in fierce competition for limited shelf space. Other indirect competitors include takeout pizza places and restaurants such as Pizza Hut and Dominos and homemade pizza.

Both options offer the freshest experience and are widely available, but delivery pizza requires little time and effort to attain while homemade pizza requires the most time and effort. Although pizza chains are viewed as being more unhealthy, they are moving to offer more healthy options, and this can be a direct threat to TruEarth, while homemade pizza requires time that TruEarth’s target market doesn’t have a lot of.

Strengths

• TruEarth’s whole grain pasta line was considered one of the best tasting options

• TruEarth has been positioned to be a producer of healthy, high quality, and tasty refrigerated whole grain products

• High consumer awareness due to promotional programs, magazine advertisements, in-store demonstrations, etc.

• Heavily invested in marketing research to minimize the risk of failure and maximize the potential for success

• Attained a loyal regional following since they were the first to offer high-quality whole grain pasta

• Plentiful options to customize pizza with a wide variety of toppings available

• High-quality ingredients

Weaknesses

• Declining revenue because of new market entrants entering with similar products

• Price of their refrigerated pizza is expensive compared to competitors’ alternative pizza products

• A considerable percentage of consumers don’t like whole-grain pizza, and there’s a perception that whole-grain products don’t taste good

• Offers a limited product offering which could be a let-down for people who seek a variety

Opportunities

• There’s a growing consumer trend toward healthier and fresher products

• Increase in dual-income families has led to higher disposable income and time poverty which has increased the need for semi-prepared products

• Innovation of existing product lines; expanding on products they’re already offering

• Consumers are becoming increasingly aware of incorporating whole grain food products into their diets

• Can exploit the untapped market of fresh whole grain pizza (opportunity to expand product line)

• Growth of demand for Home Meal Replacements (HMR) with more women entering the workforce

• Consumers don’t want to cut out pizza but also desire healthier options (large market to cater to)

Threats

• Major competitors with significant resources such as Nestle and Kraft offer frozen pizza at a low cost, and pizza chains which offer quick and convenient access to pizza

• Potential threat from Rigazzi as they are about to introduce their own refrigerated whole grain pizza

• Only high potential markets have been studied, so a solid idea of true market penetration can’t be gauged from these studies

• Pizza market’s saturated, and there are a lot of competing alternatives to refrigerated pizza

Alternatives

Alternative 1: Launch the whole grain pizza product line immediately and supply it to retail grocery stores.

Description: Pizza is a food that is loved almost universally from young children to senior adults. With the trend of people becoming more health-conscious and becoming more concerned about their eating habits, whole grain products such as the whole grain pizza kits TruEarth offers seems to be a product that should be in high demand. TruEarth has already invested a considerable amount of money, time, and effort into the marketing research packaging equipment. All the company is waiting for is the green light to start rolling out the new product. A major reason for TruEarth’s most notable success, Cucina Fresca, being such a hit was because it had the advantage of being a first-mover as the company satisfied an unmet demand.

Although the new whole grain pizza product would need to be advertised extensively because of the market’s unfamiliarity with the concept of whole-grain pizza, the marketing research that has been conducted suggests that this new product line would be successful. Still, it is important to note that it’s just a prediction and is not guaranteed success. The first-mover advantage has worked well in TruEarth’s favour, and this alternative builds on that mentality. Although there are inherent risks involved with being the first to market a new product category, the timing must be right (the product mustn’t be rushed to market).

Pros:

• Becoming the first-mover for whole-grain pizza has the potential to bring the same success Cucina Fresca did for being the first-mover in providing whole grain pasta

• Being a first-mover allows TruEarth to make a lasting impression on consumers, which in turn, can enhance brand recognition and brand loyalty to the product

• Potential for increased market share, and with it, higher profit and consumer awareness of the product (if they enter after a competitor, they will have to compete for market share)

• TruEarth has extra time to refine their processes and perfect the recipe that they have based on consumer feedback

• Can establish exclusive contracts with major distributors before other companies enter the market

Cons:

• Their product creates a new market that other competitors can exploit

• Very costly because of heavy investment required for equipment, technology, and potential for costly mistakes

• Expensive and extensive marketing campaign would be required

• Potential for introducing whole-grain pizza when the market isn’t ready for the product yet (perhaps they’re acting too early because of fear of missing an opportunity)

• Must take it upon themselves to convince people of the nutritional benefit pizza can deliver because of the perception people have and have always had on pizza being considered unhealthy

Alternative 2: Postpone introducing the new whole grain pizza product line by allowing Rigazzi or any of the other competitors to introduce it to the market first.

Description: This option requires TruEarth to wait until another company introduces the whole grain pizza product first. This would prevent TruEarth from enduring the risk of failure by a considerable amount. By observing the actual sales and success exhibited by the first-mover and the consumer demand, TruEarth can be better prepared to enter the market. TruEarth can also ensure they don’t make the same mistakes the first-mover makes, proving to be costly. However, it is important to note that they need to figure out the right time to enter the market. If they enter too late, then consumers may lose interest in trying another brand of whole-grain pizza when there are already so many available in the market.

Pros:

• Can learn from the mistakes of competitor’s actions which reduces risks and can inhibit TruEarth from enduring costly mistakes that would cost the company quite a bit

• TruEarth can examine the processes that competitors use in the making of their product and modify their own production processes to become more efficient and cheaper

• There is still high potential for TruEarth to become successful because of its’ well-known brand and consumer awareness of the high quality and good-tasting products they offer

Cons:

• By not being the first-mover, TruEarth can lose out on market share (losing customers to first-mover)

• If the first-mover is successful in the introduction of their product, TruEarth may have to delay the introduction of their pizza or engage in a costly procedure to make their product better or at least appear better than the first-mover’s product

• If the first-mover’s product satisfies consumers, they may not want to switch to another product line as they become loyal to its brand. Consumers are risk-averse and may not want to risk switching to a different whole grain pizza product

• Consumers credit companies that are the first to do something, and they reward this risk with their favourable attitude. So, being a late entrant may paint an image of TruEarth as being a copy-cat or not possessing any creativity or initiative

Alternative 3: Introduce the new whole grain pizza product to fast-food restaurants and become their supplier for a healthy pizza.

Description: This alternative involves TruEarth reaching consumers through fast-food restaurants such as Pizza Hut and Dominos. With consumer’s growing trend toward healthy food, fast-food restaurants are focusing more on providing healthy food options but are doing a poor job at doing so; TruEarth can fill this void by partnering with them. Fast-food restaurants can arrange a fast delivery and sufficient supply by ensuring an effective and efficient supply chain is built.

Pizza is one of the most popular foods offered in the fast-food industry and giving people a healthy option that allows people to go to their favourite fast-food chain and get something healthy that still tastes great. This product could be purchased by people trying to cut back on their unhealthy food intake or just people wanting to eat more healthy; it would serve a segment of the fast-food market that is in desperate need of healthy options. Not to mention, costs such as marketing costs can be split between fast-food restaurants and TruEarth.

Pros:

• By using fast-food restaurants as a means of getting their product to the consumer, TruEarth can reach a significantly larger market and increase brand recognition

• The advertising expenditure can be split between TruEarth and fast-food restaurants, which eases the economic burden on the company

• TruEarth can get its’ foot in the door by making its product available in fast-food restaurants, and if it’s successful, the company can look for new means of distributing its product (perhaps via supermarket chains)

• Can piggyback off the brand names of more well-known companies (such as Pizza Hut)

Cons:

• TruEarth doesn’t have any experience with partnerships such as ones with fast-food restaurants, so a new supply chain would be required along with an inherent amount of uncertainty as this would be new to the company

• Legal assistance is required to ensure TruEarth gets a good deal and associated legal costs

• Fast-food restaurants don’t have a reputation for being healthy, and including TruEarth products in a fast-food restaurant may negatively impact their reputation of being healthy and high-quality

• TruEarth would have to adhere to fast-food restaurants’ strict rules and regulations, which may contradict their own strategy, feeling of sovereignty, and restrict their cut of the profits

Decision Criteria

Alternative 1 Alternative 2 Alternative 3

Cost (lowest cost) 1 2 3

Profit (highest profit) 3 2 1

Market Share (potential for achieving the highest market share) 2 1 3

Risk (least risky) including lowest time requirement 2 3 1

Brand Recognition and Loyalty (maintains or elevates brand awareness and loyalty) 3 2 1

Total: 11 10 9

*1 is the worst option, while 3 is the best option for each attribute listed on the left side of the table

Recommendation

I would recommend enacting Alternative 1 as this alternative scores the highest in the decision criteria table above. Although this option is costly and risky, I believe it has the greatest profit potential, maintaining and elevating TruEarth’s brand awareness and loyalty and achieving a considerable percentage of market share. This alternative would protect the brand of TruEarth the most and maybe even enhance it because this alternative maintains TruEarth’s image as a healthy and high-quality food company and even maintains its reputation as a pioneer in offering high quality, healthy, and convenient meals by being the first to offer the whole-wheat pizza option. For risk, the alternative is somewhat risky because it requires entering the market first, in which case, there is no established benchmark for TruEarth to compare themselves to. Still, it’s less risky than going into fast-food restaurants since such a move would render the company at the mercy of fast-food restaurants, the company would lose significant control over its product, and people may perceive the product as being low quality and/or unhealthy just for being found in a fast-food restaurant.

Alternative 2 is the winner regarding risk because it allows the company to play it safe by allowing another company to enter the market first so TruEarth can better gauge the customer demand/sales for the product and plan/make changes accordingly. Alternative 3 wins for market share because offering the pizza in a restaurant chain such as Pizza Hut would make the pizza more widely available than distributing it in grocery stores.

However, Alternative 1 would still capture a considerable amount of market share by being a first-mover and attaining customer loyalty instead of waiting for some other company to distribute the whole grain pizza product first. As far as profit goes, alternative 1 has the best prospects because although it would be the most costly, it would still be a fairly cheap alternative that would bring about a large revenue since most of the equipment/production facilities to make the pizza need slight adjustments to make pizza instead of pasta and the revenue potential is high as the market share would be fairly high along with repeat purchases from loyal customers. Profit would be lower for alternative 3 because fast-food restaurants get a significant profit cut, and alternative 2 may result in lower revenues due to customers being lost to the first-mover.

However, alternative 1 will cost the most since I’m considering the potential for mistakes and the cost these mistakes can have (higher probability for mistakes if a company enters the market first). Alternative 2 would be cheaper because such mistakes can be avoided. In contrast, alternative 3 would be the cheapest as fast-food restaurants would likely share the costs of moving the product across the supply chain.

Implementation

Timeline:

Time Frame (When it Must be Done) Action (What Needs to be Done and Who Needs to do it) Description

Immediately Develop television advertising campaigns- Marketing Department Once TruEarth green lights the decision to sell the whole grain pizza product, the company must begin their advertising campaign by targeting dual-income families looking for healthy, convenient, delicious, and nutritious food for the family. Of course, before rolling out the television advertisements, the company should first run a focus group and survey them on how they feel about the new product after watching the advertisement(s). The advertisement(s) that get the best feedback will be the one(s) that are implemented. Packaging can also be determined in a “which one is best” manner (i.e. ranking).

1 month Complete any necessary retooling of equipment and/or production facilities- Operations Manager, Finance Department, Corporate Controller, Human Resources Department The incremental investment required for the pizza product will be minimal as most necessary equipment will already be in place. However, additional investment will be required, and the company must determine how it plans to account for these funds, whether through debt, equity, or retained earnings. The retooling must be done quickly to begin production as soon as possible and roll out the product since time is an issue, as they’re trying to beat competitors to the market (most notably Rigazzi). The Operations Department will oversee these changes in the production facilities. The Human Resources Department will cover additional staff training requirements or additional staff needs, safety training, etc.

1 month Determine the short-term demand and production requirements- Finance Department, Marketing Department TruEarth must determine the short-term demand for the product to plan the production and materials requirements. One important thing to consider is the short shelf-life of the product; if too much product is produced, the company may suffer losses from spoiled inventory, but if they underestimate demand, they can lose out on potential sales.

1 month Contact the vendors that already hold TruEarth products (e.g. grocery stores) to discuss the new whole grains pizza kits and determine purchase orders- Sales Department, Marketing Department TruEarth needs to contact the vendors that already hold their products, such as Cucina Fresca, to discuss their new product offering. This discussion will involve topics such as pricing, shelf space, product quantities, etc. Purchase orders will need to be confirmed so the company can begin production. TruEarth should also make sure they have purchase orders in place so they can minimize risk by not producing products that don’t even have somewhere to go when they’re finished

1-3 months Begin the production of the new pizza kits- Operations Department Now that the company has the short-term demand forecast and purchase orders have been made, the company can begin production. Of course, the production process will be monitored, and quality assurance will ensure the product is up to TruEarth’s standards.

1-3 months Begin the television advertising campaign-Marketing Department Once the product has been delivered to grocery stores and has entered the market, TruEarth can begin its advertising campaign to generate greater consumer awareness of its new product offering.

3-6 months Measure the performance of the product’s success- Finance Department, Marketing Department, Sales Department Key performance indicators will be established to ensure the product is successful and to find any areas where the product may need improvement. These indicators include market share, customer satisfaction, rate of spoilage, unit and dollar sales, return on investment, etc.

6-12 months Consider using additional venues to market the product Once TruEarth has its foot in the door in generating greater consumer awareness, the company can begin to use an alternative, perhaps cheaper means of advertising their product. An interactive social media campaign using sites such as Facebook can track consumer preferences and satisfaction. This advertisement can establish a direct connection between the company and its consumers while promoting positive word-of-mouth advertising. Other means of advertising include sales promotions, in-store cooking demonstrations and tasting of the product, and perhaps further television and radio advertisement.

1 year+ Begin providing gluten-free pizza TruEarth needs to stay on top of changing consumer trends to stay ahead of competitors. Being a first-mover has worked well for them, and continuing to do so will likely yield them further success. That being said, there has been a trend and demand for gluten-free product offerings. At this point, I believe TruEarth should begin looking into doing some research and development for offering a gluten-free pizza (maybe even gluten-free pasta as well) without compromising the taste and quality that the company is known for having.

Question 3 (forecast of demand financial analysis)

Store-bought refrigerated pizza represented 11% of the $58 billion pizza market, with TruEarth estimating a 5-15% market penetration. TruEarth is planning to leverage the current consumers to drive up sales of their new pizza product. The incremental investment costs are less than pasta’s because of the necessary capital expenditure already largely spent when producing the pasta. With TruEarth planning to sell the product for $12.38, the sales volume needs to exceed $12 million for the company to meet its rate of return and need a gross margin of 35%.

So, minimum sales of $16.2 million or 1 308 562 units (16 200 000/12.38) must be sold.