Carlo Pichard, Marketing Manager for Carlos Famay Foods Pizzas, set at her desk contemplating the task that lay before her. She had been asked te investigate options that might be pursued to address the pizza division's sanding market share and profits and to develop a marketing strategy for the option she recommended. The Frozen Pizza Market in Chicago. The $50,000,000 Chicago frozen pizza market can be broken into three subcategories based on quality ane user. Low and medium-prioed pizzas are a simple, inexpensive crust; low quality barely spiced tomato sauce, and familiar toppings fo...cheese, pepperoni, sausage). The vast majority (75%) of low and medium priced pizzas (52 - 54) are purchased by parents for their children. Parents view pizza to be a "fun food" for kids, who usually disdain strong flavors or fancy toppings, and is an easy to prepare meal or snack. The remaining 25% of low and medium quality pizzas are sold to price-sensitive adults for their own consumption. Low and medium-priced pizzas accounted for 70% of volume sales and grew at a rate of 8% last year. Premium quality. High-priced frozen pizzas ($5+) are consumed almost exclusively by adults who are looking for a convenient alternative to restaurant pizza. These pizzas tend to have higher quality crusts and substantially more ingredients and exotic toppings Co. pesto, more vegetables, etc.) than do the low and medium-priced brands. High-priced pizzas accounted for 30% af volume sales and grow at a rate of 15% last year. In general, manufacturer's margins on frozen pizza are high, ranging between 25-45%, with higher margins being associated with the higher- priced pizzas Over two dozen firms compete in the frozen pizza market in Chicago, Four or five leading brands have traditionally battled for the number one thate position, with each firm obtaining between 10-15% market share. In recent years, The Pizza Company, a division of Kraft surged into the number one position with a 28% share. Kratt is seeking to continue its growth with a goal of achieving 31% share this year. The Pizza Company has historically emphasized moderato quality, family-sized pizzas under the Tombstone brand name. The product line is delivered to grocers via an expensive store-door delivery nystern (le, the manufacturer delivers directly to the store instead of through a wholetalet). A clever TV ad campaign has created strong brand recognition by spoofing the Tombstone rame ( oanking characters in life-threatening situations, such as in front of a firing squad, "What do you want on your Tombstone?). To capitalize on the growth in the premium, gourmet pizza segment. The Pizza Company introduced DiGorno Pizza several years ago. DIGorno has a crust that rises for the first time when the pizza is baked in the home, thereby providing the same fresh-baked tante as carry-out pizza. Although the technology required to produce this new type of crust is not proprietary. It is quite expensive and patenta do protect the special packaging developed to preserve the freshness of the uncooked dough while it is in the freezer Schwar's Red Barron line of pizzas and Pulsbury's Tortinos and Jonot lines also offer branded medium priced pizzan and have 10% and 7% share respectively. In addition to the leading brands, there are several commodity producers of low priced pizzas, which have extremely limited share and distribution Carlos Family Foods Pizza, Carlos Family Foods, a medium-sized Chicago-based company that tells a variety of food products to large grocery chains, producen a line of frozen pizzas that are distributed reglonally in the Midwest. Carlow pizzas are of moderato quality, wallable in the standard varieties to call cheese, chonne and pepperoni, and choose and saunago), and tuizon (eg, 5 inch snack pizza, a 10 inch family nice pizza, and a 14 inch deluxe pizza). Prices for Cartow plzzas fall in about the middle of the mid-priood category and their contribution margin is approximately 30%. Although the company opondo $250,000 on newspaper and point-of-purchase advertising, brand recognition for Carlos is substantially tow relative to that of national brands (eg. Tombstone, Ped Barron, John's), which spend heavily on television advertising, Carlos generally has had good relations with largo grocery chains because it offers better than average-margins and cost-efficient store-door delivery due to its local origin. Historically, this has resulted in broad distribution and good shell position in the major chains. However, in the last two years, Carlos share has dropped from 10% to 6% of the overall frozen plaza market. As a result, several grocery chains have threatened to discontinue the Carios pizza line it share does not improve The Challenge, Ms. Richard had identified three broad strategies that might help reverse Carlos decline in market share and profits. These are described below. 1. One approach would be to bolster the current product line with either advertising or with a brand line extension. There were two options under this strategy a) Advertising might be used to expand usage of the Sinch snack product by advertising on the radio and on TV in the after school hours. The message would encourage children and teens to satisfy their after school hunger with a Carlos rather than a peanut butter and jelly sandwich or some other snack. The emphasis would be on the fun and taste appeal of pizza It was estimated that to have any impact such an ad campaign would require a minimum of $500,000. b) An alternative approach would be to extend the product line by creating a version of the 10 inch pizza that used a low fat/low cholesterol cheese substitute. Because substitute cheese is less expensive than real cheese, the company would realize a cost reduction. Ms. Richard reasoned that this might allow Carlos to increase retailer margins yet allow the retail price of the pizza to be the same as for the real cheese products. The product label could highlight the health benefits (ow fat and low cholesterol, lactose-free) of the new pizza and, as necessitated by law. would clearly indicate that the product contained cheese substitute rather than real cheese. 2. A second strategy would be to launch an entirely new but related product line. The options under this strategy were: a) One possibility was to develop a line of pizzas for the rapidly growing premium priced gourmet pizza market. Such pizzas might be topped with trendy specialty items such as sun-dried tomatoes, goat cheese, pine nuts, arugula, pesto eto. Ms. Richard recognized that competition for freezer space would be intense so she tested the concept on several local grocers. They expressed guarded interest in carrying such a line on a trial bauls, provided that the new line allowed adequate retail margins. was backed by substantial television advertising, and that Carlos Was willing to pay the normal slotting foes. b) An alternative new product idea was to develop a snack item tentatively labeled a pizza pocket. This product would be small sized logs of dough with a pizza filling tomato and cheese, tomato, cheese and sausage, etc.). The pizza pockets would be microwavable and would be packaged one dozen to a box obtaining a contract with one or ore food service companies. This strate A final strategy would be to focus on increasing volume sales might be pursued in one of two ways: Ms. Richard thought that she might explore supplying the food service company that either a) Serves students in cafeterias housed in Chicago public schools, or b) Supplies one of several food service companies that run cafeterias in office buildings around the city With either option. Carlos would provide direct delivery to the individual cafeterias that the food service company operated. An appealing feature of this plan was that, because sales would be to another company, no consumer advertising would be required. Though Carlos would have to accept smaller margins than ones that could be obtained in the retail channel, the potential volume of pizzan was several times greater than the amount that they currently produced, Questions: 1. Evaluate the company (Carlos Family Foods) and the consumer and competitive environment. What are the key features of each? Who are the important collaborators? 2. Use this background to lay out your evaluation of each of the six options (two options per strategy), which are outlined in the case. List the strengths and weaknesses of each option, then make a specific recommendation and justity why you believe it is the best approach 3. What could be a positioning statement for the option that you choose and explain why you believe that the proposed positioning will be effective 4. TESTING Assume Ms. Richard chooses strategy 2b. Describe a testing strategy she can use to evaluate the likely success of the "pizza pocket" product, why it is likely to be effective, and its potential limitation. Describe the underlying rationale of a simulated test market like BASES and explain its pros and cons for the pizza pocket product. 5. Marketing Plan Questions a. Pricing - Assuming Ms. Richard chooses Strategy tb. How should she think about setting price and why? What issues must she consider? b Distribution-Assume Ms. Richard chooses Strategy 2b. What are two different distribution strategies leg. pizza section of large grocery chain frozen snack section of convenience store, etc.) she could consider and what are the advantages and disadvantages of each? c. Product - A key issue it Carlos decides to launch a premium line of Pizzas as described in Strategy 2a is how to brand such a line. Should it keep the name Carlos or use some other name? Discuss the pros and cons of each branding approach, and make a branding recommendation d. Promotion - Assume that Ms. Richard pursues the premium line discussed in Strategy 2a Describe an advertisement that you would create for this product line and why you believe it would be effective Carlo Pichard, Marketing Manager for Carlos Famay Foods Pizzas, set at her desk contemplating the task that lay before her. She had been asked te investigate options that might be pursued to address the pizza division's sanding market share and profits and to develop a marketing strategy for the option she recommended. The Frozen Pizza Market in Chicago. The $50,000,000 Chicago frozen pizza market can be broken into three subcategories based on quality ane user. Low and medium-prioed pizzas are a simple, inexpensive crust; low quality barely spiced tomato sauce, and familiar toppings fo...cheese, pepperoni, sausage). The vast majority (75%) of low and medium priced pizzas (52 - 54) are purchased by parents for their children. Parents view pizza to be a "fun food" for kids, who usually disdain strong flavors or fancy toppings, and is an easy to prepare meal or snack. The remaining 25% of low and medium quality pizzas are sold to price-sensitive adults for their own consumption. Low and medium-priced pizzas accounted for 70% of volume sales and grew at a rate of 8% last year. Premium quality. High-priced frozen pizzas ($5+) are consumed almost exclusively by adults who are looking for a convenient alternative to restaurant pizza. These pizzas tend to have higher quality crusts and substantially more ingredients and exotic toppings Co. pesto, more vegetables, etc.) than do the low and medium-priced brands. High-priced pizzas accounted for 30% af volume sales and grow at a rate of 15% last year. In general, manufacturer's margins on frozen pizza are high, ranging between 25-45%, with higher margins being associated with the higher- priced pizzas Over two dozen firms compete in the frozen pizza market in Chicago, Four or five leading brands have traditionally battled for the number one thate position, with each firm obtaining between 10-15% market share. In recent years, The Pizza Company, a division of Kraft surged into the number one position with a 28% share. Kratt is seeking to continue its growth with a goal of achieving 31% share this year. The Pizza Company has historically emphasized moderato quality, family-sized pizzas under the Tombstone brand name. The product line is delivered to grocers via an expensive store-door delivery nystern (le, the manufacturer delivers directly to the store instead of through a wholetalet). A clever TV ad campaign has created strong brand recognition by spoofing the Tombstone rame ( oanking characters in life-threatening situations, such as in front of a firing squad, "What do you want on your Tombstone?). To capitalize on the growth in the premium, gourmet pizza segment. The Pizza Company introduced DiGorno Pizza several years ago. DIGorno has a crust that rises for the first time when the pizza is baked in the home, thereby providing the same fresh-baked tante as carry-out pizza. Although the technology required to produce this new type of crust is not proprietary. It is quite expensive and patenta do protect the special packaging developed to preserve the freshness of the uncooked dough while it is in the freezer Schwar's Red Barron line of pizzas and Pulsbury's Tortinos and Jonot lines also offer branded medium priced pizzan and have 10% and 7% share respectively. In addition to the leading brands, there are several commodity producers of low priced pizzas, which have extremely limited share and distribution Carlos Family Foods Pizza, Carlos Family Foods, a medium-sized Chicago-based company that tells a variety of food products to large grocery chains, producen a line of frozen pizzas that are distributed reglonally in the Midwest. Carlow pizzas are of moderato quality, wallable in the standard varieties to call cheese, chonne and pepperoni, and choose and saunago), and tuizon (eg, 5 inch snack pizza, a 10 inch family nice pizza, and a 14 inch deluxe pizza). Prices for Cartow plzzas fall in about the middle of the mid-priood category and their contribution margin is approximately 30%. Although the company opondo $250,000 on newspaper and point-of-purchase advertising, brand recognition for Carlos is substantially tow relative to that of national brands (eg. Tombstone, Ped Barron, John's), which spend heavily on television advertising, Carlos generally has had good relations with largo grocery chains because it offers better than average-margins and cost-efficient store-door delivery due to its local origin. Historically, this has resulted in broad distribution and good shell position in the major chains. However, in the last two years, Carlos share has dropped from 10% to 6% of the overall frozen plaza market. As a result, several grocery chains have threatened to discontinue the Carios pizza line it share does not improve The Challenge, Ms. Richard had identified three broad strategies that might help reverse Carlos decline in market share and profits. These are described below. 1. One approach would be to bolster the current product line with either advertising or with a brand line extension. There were two options under this strategy a) Advertising might be used to expand usage of the Sinch snack product by advertising on the radio and on TV in the after school hours. The message would encourage children and teens to satisfy their after school hunger with a Carlos rather than a peanut butter and jelly sandwich or some other snack. The emphasis would be on the fun and taste appeal of pizza It was estimated that to have any impact such an ad campaign would require a minimum of $500,000. b) An alternative approach would be to extend the product line by creating a version of the 10 inch pizza that used a low fat/low cholesterol cheese substitute. Because substitute cheese is less expensive than real cheese, the company would realize a cost reduction. Ms. Richard reasoned that this might allow Carlos to increase retailer margins yet allow the retail price of the pizza to be the same as for the real cheese products. The product label could highlight the health benefits (ow fat and low cholesterol, lactose-free) of the new pizza and, as necessitated by law. would clearly indicate that the product contained cheese substitute rather than real cheese. 2. A second strategy would be to launch an entirely new but related product line. The options under this strategy were: a) One possibility was to develop a line of pizzas for the rapidly growing premium priced gourmet pizza market. Such pizzas might be topped with trendy specialty items such as sun-dried tomatoes, goat cheese, pine nuts, arugula, pesto eto. Ms. Richard recognized that competition for freezer space would be intense so she tested the concept on several local grocers. They expressed guarded interest in carrying such a line on a trial bauls, provided that the new line allowed adequate retail margins. was backed by substantial television advertising, and that Carlos Was willing to pay the normal slotting foes. b) An alternative new product idea was to develop a snack item tentatively labeled a pizza pocket. This product would be small sized logs of dough with a pizza filling tomato and cheese, tomato, cheese and sausage, etc.). The pizza pockets would be microwavable and would be packaged one dozen to a box obtaining a contract with one or ore food service companies. This strate A final strategy would be to focus on increasing volume sales might be pursued in one of two ways: Ms. Richard thought that she might explore supplying the food service company that either a) Serves students in cafeterias housed in Chicago public schools, or b) Supplies one of several food service companies that run cafeterias in office buildings around the city With either option. Carlos would provide direct delivery to the individual cafeterias that the food service company operated. An appealing feature of this plan was that, because sales would be to another company, no consumer advertising would be required. Though Carlos would have to accept smaller margins than ones that could be obtained in the retail channel, the potential volume of pizzan was several times greater than the amount that they currently produced, Questions: 1. Evaluate the company (Carlos Family Foods) and the consumer and competitive environment. What are the key features of each? Who are the important collaborators? 2. Use this background to lay out your evaluation of each of the six options (two options per strategy), which are outlined in the case. List the strengths and weaknesses of each option, then make a specific recommendation and justity why you believe it is the best approach 3. What could be a positioning statement for the option that you choose and explain why you believe that the proposed positioning will be effective 4. TESTING Assume Ms. Richard chooses strategy 2b. Describe a testing strategy she can use to evaluate the likely success of the "pizza pocket" product, why it is likely to be effective, and its potential limitation. Describe the underlying rationale of a simulated test market like BASES and explain its pros and cons for the pizza pocket product. 5. Marketing Plan Questions a. Pricing - Assuming Ms. Richard chooses Strategy tb. How should she think about setting price and why? What issues must she consider? b Distribution-Assume Ms. Richard chooses Strategy 2b. What are two different distribution strategies leg. pizza section of large grocery chain frozen snack section of convenience store, etc.) she could consider and what are the advantages and disadvantages of each? c. Product - A key issue it Carlos decides to launch a premium line of Pizzas as described in Strategy 2a is how to brand such a line. Should it keep the name Carlos or use some other name? Discuss the pros and cons of each branding approach, and make a branding recommendation d. Promotion - Assume that Ms. Richard pursues the premium line discussed in Strategy 2a Describe an advertisement that you would create for this product line and why you believe it would be effective