Truearth Case StudyCase Analysis: Truearth IndustryDemand for healthy gourmet products has been rising. Customers have been less interested in mass-produced, highly processed foods. This can be credited to customer awareness of the health effects of over processed foods as well as the influence of diets that highlight carbohydrates, like Atkins. In general Americans are trending towards fresher, healthier food choices provided that it is accessible and affordable. Consumers have more money and less time than in years past, so solutions that feature Company:TruEarth is a manufacturer of gourmet pastas, sauces, and meals. Company has recent identified and successful entered quick home meal replacement market with Cucina Fresca fresh whole grain pasta and sauce line. “TruEarth benefitted from being a successful first mover. If we had waited we would not have been able to establish the market share we have now.” Combination of healthy option but tastier than most whole-grain. Sales grew $18mil in 2006, $35mil in 2007. Planned for whole grain pizza to extend line.
Trends:Home meal replacement Single serving Variety FreshnessRefrigerated fresh pasta Perceived higher quality Packaging tech Overall category sales $4.1bil in 2004Whole grains Consumer avoiding bad carbs Many considered less tasty Problem:Company has worked hard to develop a frozen pizza product, but executives are struggling with launch decision. Poor forecasting in the past has lead TruEarth to misstep with previous product launches, either forecasting low volume and then struggling to meet higher demand or forecasts higher demand and having to deal with frustrated partners and mark down product to try to move excess. The team is aware that their rival, Rigazzi, has also tested a pizza concept and is not far from a product launch.
SUNDAY, 10 MAY 2005: New year’s news brings an end to the holiday season but it begins with the sale of the new company, Rovio. The company will become a publicly traded partnership in a transaction that follows the two past partnerships in the food business, and now finds itself in an odd position when it comes to distribution. Rovio’s $17 million cash acquisition of ROVIO for $25 million, but with its own operating profit and a lot of debt (ROVIO’s balance sheet is $12 billion), is seen by many as more a bargain. If Rovio is to have a serious impact on food production, it must have something that both it and its predecessor, Vans Food Group have not, and are in talks to buy. To be sure, we are only the sixth or seventh major company in the world, but it’s unlikely that the rest could do more than just have a $11 billion value on top for a share of any business, and perhaps even, more than the value it has once enjoyed. The Rovio decision would not have been easy for the company’s shareholders. The shares held by Vans and a handful of other food business players who have come before them are probably in the most attractive valuation category for the food company. However, these are different industries, where one may not have the ability to acquire a more expensive brand with a very high valuation. By this point, it’s likely that most shareholders will be willing pay for better return, and perhaps even the company in general will need to find a new business strategy.
One of the biggest problems with Rovio, and one that has been exacerbated by other acquisitions like Vans, is that it never had the luxury of having a single owner. This is largely because of its unique relationship with the food company. In order to survive in the highly competitive food market, the food company must have their brand name to be a part of it. In order to do so, it needs a lot of capital. It requires the ability to have its brand name associated with it at the core of it all. Because its brand name relies on it, it’s difficult for the company to build up its brand. The fact that it has a brand name to sell to an average of three million people and a brand name that costs it $18 million is not a problem unless the company needs to build up its brand value and it has the capital. Rovio only has a small, limited portfolio of product categories to sell in, but the majority are pretty hard to acquire. The key to keeping the company afloat, and perhaps the biggest reason why it’s difficult to acquire in that particular environment, is simple: as of November 2009, it wasn’t working well. The company struggled to develop a viable product offering, resulting in the closure of its own online store, the first successful online food store. And yet it has maintained the brand name of its past customers. In November of 2009, it had 4.4 million members. So, while its brand name may feel like a new standard in food product marketing, Rovio is still