The document discusses Natureview Farm, a yogurt manufacturer founded in 1989 in Cabot, Vermont. It started with annual revenue of less than $100,000 and grew to $13 million by 1999 by adding flavors and new product lines. The document analyzes 3 options to increase revenue to $20 million by 2001: 1) Expanding product lines in supermarkets, 2) Launching a 32oz size nationally, or 3) Introducing a children's multipack in natural food stores. Option 1 has low risk but also low profit potential. Option 2 has risk due to distribution challenges. Option 3 has the strongest profit potential due to fast growth in natural food stores and achievable distribution, though some uncertainties remain.

1. Ankita Biswas
Jadavpur University
Harvard Business School Case

2. What is Natureview Farm?

3. It is a

4. Founded in in Cabot,Vermont
Manufactured and marketed refrigerated cup yogurt
under the brand name: .
First entered the market with
of yogurt in two flavors— .
Use natural ingredients with longer shelf-life of 50
days.
Revenue generated: less than $100,000
1989

5. Company revenue growth from $100,000 to
$13 million.
Added flavors to the products.
Developed “ ” yogurt product
in .
1999

6. Introduce in
cup and in
yogurt cup.
Expand to products (children’s
4-oz cups)
2000

7. Strong brand
creative, low-cost “guerilla marketing”
national distribution in the natural foods channel
Strong relationships with distributors
KEY SUCCESS FACTORS

9. • Yogurt is consumed by 40% of the
population
• Among these people 70 % are women
• 46% of organic food buyers bought food at a
supermarket
• 29% at natural foods supermarket
• 25 % at a small health store.
• Yogurt sales through supermarkets had
grown an average of 3% per year
• Sales through natural food stores had grown
20% per year

12. Natural Ingredients.
Unique smooth texture.
No artificial additives.
Shelf life : 50 days
Used milk from cows untreated with
artificial growth hormones.

13. NATURAL
FOODS
CHANNEL
MANUFACTURING
COST
AVERAGE
RETAIL PRICE
TOTAL COST
8-oz CUP $ 0.31 $ 0.88 $ 1.19
32-oz CUP $ 0.99 $ 3.19 $ 4.18
4-oz CUP
MULTIPACK
$ 1.15 $ 3.35 $ 4.50
SUPERMARKET
CHANNEL
MANUFACTURING
COST
AVERAGE
RETAIL PRICE
TOTAL COST
8-oz CUP $ 0.31 $ 0.74 $ 1.05
32-oz Cup $ 0.99 $ 2.70 $ 3.69
4-oz CUP
MULTIPACK
$ 1.15 $ 2.85 $ 4.00

14. SUPERMARKET
CHANNEL
MARGIN
MAUFACTURER -
DISTRIBUTOR 15%
RETAILER 27%
CONSUMER -
NATURAL FOODS
CHANNEL
MARGIN
MANUFACTURER -
NATURAL FOODS
WHOLESALER
7%
NATURAL FOODS
DISTRIBUTOR
9%
RETAILER 35%
CUSTOMER -

15. • Creative, low - cost guerrilla marketing.
• Depends on broker knowledge of promotional &
merchandising requirement.
• Developed “fruit at the bottom” Yogurt product.
• Introduced 12 refrigerated yogurt flavors.

17. TO EMPLOY MEASURES TO INCREASE
THE REVENUE FROM $13 MILLION
TO $20 MILLION BY THE END OF THE
YEAR 2001

19. OPTIONS

20. OPTION 1
To expand 6 SKUs of the 8-oz. product
line in Northeast and West supermarket
regions

21. PROS




22. CONS






23. OPTION 2
To expand 4 SKUs of the 32-oz. size
product line nationally in supermarkets

24. PROS
Generate higher profit margin than 8-oz size
Strong competitive advantage: longer shelf life
Lower promotion expenses

25. CONS
 Doubt on claim of new users would readily “enter
the brand” via a multi-use size
 Doubt on sales team’s ability to achieve full
national distribution in 12 months
 Needs to hire sales personnel and establish
relationships with supermarket brokers
 The 32-oz. expansion option would increase SG&A
expense by $160,000

26. OPTION 3
To introduce 2 SKUs of a children’s
multi-pack into the natural foods channel

27. PROS
It would yield the strongest profit contribution of all
the strategies under consideration.
The natural foods channel was growing almost
seven times faster than the supermarket.
The financial potential was very attractive.
The sales team was confident that they could
achieve distribution for the two SKUs

28. CONS
 There were many potential conflicts and
other uncertain factors that the manager
could not determine.

30. Target Revenue Generation =$20 Million
Current Revenue Generation =$13 Million
Target Revenue (in 1 year) =$ 7 Million
Supermarket Channel Analysis
Channel Margin Cost Price Selling Price
Natureview
($0.46-$0.31)/$0.46
= 33%
$0.31 $0.46
Distributor 15% $0.54*85% = $0.46 $0.54
Retailer 27% $0.74*73% = $0.54 $0.74

31. Parameters Year 2000 Year 2001
Unit Sales 35,000,000 35,000,000 * 1.2 = 42,000,000
Revenue 35,000,000 * $0.46 = $16,100,000 42,000,000 * $0.46 = $19,320,000
Cost 35,000,000 * $0.31 = $10,850,000 42,000,000 * $0.31 = $13,020,000
Gross Profit $5,250,000 $6,300,000
Expense
Advertisement 1,200,000 * 2 = 2,400,000 2,400,000
SG&A 320,000 640,000
Slotting Fee 6 * 10,000 * 20 = 1,200,000
Broker’s Fee $16,100,000 * 4% = $644,000 $19,320,000 * 4% = $772,800
Net Profit $686,000 $2,487,200

32. Supermarket Channel Analysis
Channel Margin Cost Price Selling Price
Natureview
($1.67-
$0.99)/$1.67 = 41%
$0.99 $1.67
Distributor 15% $1.97*85% = $1.67 $1.97
Retailer 27% $2.70*73% = $1.97 $2.70
Target Revenue Generation =$20 Million
Current Revenue Generation =$13 Million
Target Revenue (in 1 year) =$ 7 Million

33. Parameters Year 2000 Year 2001
Unit Sales 5,500,000 5,500,000
Revenue $9,185,000 $9,185,000
Cost $5,445,000 $5,445,000
Gross Profit $3,740,000 $3,740,000
Expense
Advertisement $480,000 $480,000
SG&A $160,000 $320,000
Slotting Fee $2,560,000
Broker’s Fee $367,400 $367,400
Net Profit $172,600 $2,572,600

34. Target Revenue Generation =$20 Million
Current Revenue Generation =$13 Million
Target Revenue (in 1 year) =$ 7 Million
Supermarket Channel Analysis
Channel Margin Cost Price Selling Price
Natureview
($1.84-$1.15)/$1.84 =
38%
$1.15 $1.84
Natural Foods
Wholesalers
7% %1.84 $1.98
Distributor 9% $1.98 $2.18
Retailer 35% $2.18 $3.35

35. Year 2000 Year 2001
Unit Sales 1,800,000 2,070,000
Revenue $3,312,000 $3,808,800
Cost $2,070,000 $2,380,500
Gross Profit $1,242,000 $1,428,300
Expense
Marketing $250,000 $250,000
Comp. Case $82,800 $95,220
Net Profit $909,200 $1,083,080

37. Option 1
Decision Parameter Option 1 Option 2 Option 3
Revenue Objective
Exceeds Exceeds Falls Short
Short Term Profits
No No Yes
Long Term Profits
High High Low
Competitive
Response
Very Risky Risky Low
Organizational
capabilities
Low Low High

39. These slides were created by Ankita Biswas (Jadavpur University),during an internship under the able
guidance of Prof. Sameer Mathur.