Truearth Healthy Foods

1) Brief Summary

Gareth DeRosa founded TruEarth in 1993 to tap on the opportunity of offering healthy gourmet pastas and sauces. The company focused greatly on high-quality and stressed on being selective about ingredients.

Isabel Eckstein, a Brand Manager at TruEarth, ran the launch of the brand’s most successful product Cucina Fresca – a fresh whole grain pasta meal. The factors that significantly contributed to the success of Cucina Fresca included thorough market research and heavy investments in new manufacturing equipment and distribution. Following the new process of research and development, it came into light that, in early 1990s, there were three prominent consumer trends that would change the shape of consumer purchases – increasing demand for quick home meal replacements (HMR), refrigerated pasta, and whole grain food with good taste. TruEarth took advantage of this information and of the positive results from BASES, and launched a full range of fresh whole grain pasta comprising of cut pasta, filled pasta and sauces in 2006. After being remarkably successful in the first 2 years, the sales dropped in 2008 due to intense competition by Rigazzi Brands, which introduced a similar product to the market in late 2007.

Despite maintaining sizeable market share, TruEarth had to come up with new products to cope up to sustain competitive edge in the market. It was estimated that the market for refrigerated pizza was much larger than refrigerated pasta. Seeing that concerns for healthy food and bad carbohydrates, were increasing, TruEarth wanted to enter into this market by offering healthy and fresh whole grain pizza that tasted great and that allowed customization by the consumers. Criticism by some employees at TruEarth, particularly by Rosie Carlton, highlighted that major players Nestle and Kraft were already offering low-cost frozen pizza. After conducting various tests, interviews and surveys as part of BASES I and BASES II, it came into light that the target market demands pizza, and some want it to be healthy as well. In addition to this, as TruEarth had already invested on manufacturing and distribution, only little investment was needed for re-tooling and marketing plan. Analyzing the results from market research, TruEarth needs to make a quick decision of whether to launch the whole grain pizza or not.    

2) Qualitative and Quantitative Facts

2.1) Qualitative Facts

In the 1990s, it was found out that there were three very important developments in consumer trends that will change the way consumers purchase grocery items. The growth in demand for home meal replacements, refrigerated pasta, and whole grain products with good taste showed TruEarth market potential for Cucina Fresca. It was also noted that consumers perceived filled pastas, such as tortellini, to be of better quality than cut pastas. Therefore, TruEarth’s Cucina Fresca was made available in cut pastas, filled pastas and a variety of sauces as shown in Exhibit 1.

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In addition to this, filled pastas required new production lines; therefore, heavy investments were made to upgrade manufacturing facility. Investment was also made in new packaging equipment for refrigerated products. The Cucina Fresca product line was said to be broad and flexible.

Rigazzi Brands gave intense competition to TruEarth as it launched its own whole grain fresh pasta in 2007. The company targeted TruEarth’s target market and offered great discounts to supermarkets and high-value coupons to the customers. TruEarth, however, benefited significantly by being the first one to launch whole grain pasta. It was also noted that Rigazzi Brands was also working on a pizza concept while TruEarth was determining whether it should launch whole grain pizza.

Before making a final decision about launching whole grain pizza, TruEarth had to evaluate the results from market research which showed the demand for healthy pizzas. Additionally, Nestle and Kraft were offering low-cost frozen pizzas which could serve as competition for the new product.

In mid-2007, the product development team of TruEarth came up with a pizza kit to test, which comprised of crust, packets of cheese and sauce, and a separate line of pizza toppings. As heavy investments had already been made on manufacturing and distribution, only few additional investments were required for re-tooling and for marketing plan.      

2.2) Quantitative Facts

When TruEarth conducted BASES I study for Cucina Fresca, it was determined that there was currently no fresh whole grain pasta which was readily available in the market; and that out of 300 concept tests, 76% said they would definitely or probably buy the product – as mentioned in Exhibit 3.

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It was noted that there is an industry rule of thumb that 80% of those who said they would definitely buy the product would actually buy the product, and 30% of those who said they would probably buy the product would actually purchase it. The trial rate for the product was, thus, about 36% as mentioned in Exhibit 5. TruEarth’s marketing plan for Cucina Fresca was $8 million for advertising and $2 million for promotional coupons.  This was estimated to result in 800 Gross Rating Points (GRPs) and 17% of customer awareness. In addition to this, the product will be distributed in stores that represent 50% of sales in that particular area.

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The estimated price for 9 ounce pack of Cucina Fresca pasta would be sold at $5.75 and 12 ounce pack of sauce would be sold at $4.50. The gross margins for retailers would be 35%. After the launch of Cucina Fresca, its sales amounted to $18 million in 2006 and $35 million in 2007.

Pizza sales, in 2007, were about $53 billion in America; and it was determined that 77% of consumers had pizza at least once a month. Additionally, about two-thirds of the sales came from delivery, take-outs and from restaurants. Notably, the market of refrigerated pizza was 11% of the sales which totaled to be about $5.8 billion, which was much bigger than the market for refrigerated pasta in 2007. 33% of the people who go to restaurants showed interest for whole grain crust.

The gross margin requirements would be the same for the retailer that is 35%. The price for the whole grain pizza was estimated to be $8.00 for the pizza kit, and $3.50 each for individual topping packs. 300 mall intercept interviews were held in order to test the product. BASES I and BASES II studies were conducted incorporating surveys, interviews and in-home product usage test.

It was estimated that the sales need to exceed $12 million in order to meets the company’s requirements for return. TruEarth also estimated the penetration of Cucina Fresca’s market to be of 13%; although, Eckstein estimates it to be between 5% and 15%.