IIM Lucknow Marketing Management

1. NATUREVIEW
FARM
CASE STUDY
BY-NAMAN GOYAL
IIT GUWAHATI

2. Background
 1989
 Founded and manufactured in Cabot, Vermont
 Enter market with 8oz and 32oz with plain and vanilla flavor
 Use natural ingredient and shelf-life of 50 days
 1999
 Company revenue growth from $100,000 to $13 million
 Fruit on the bottom yogurt
 2000
 Expand to 12 yogurt flavor and multipack flavor

3. Issues
 Venture capitals needed to cash out of its investment
 Need to find a path to grow revenues over 50% before the end of 2001 to
attract other investors
 Which channel to choose for expansion-Supermarket or Natural Food
stores

4. The 4 Ps
 Product
 Natural yogurt with 8oz pack in 12 flavors and 32oz pack in 4 flavors
 Price
 Affordable price to its channels
 Place
 Natural food channel, wholesale club, national retailer channel, drug-store
 Promotion
 It’s natural flavor with high quality and great taste growth in national
distribution and natural food channel and low-cost guerilla marketing

5. Product
 8-oz
 32-oz
86%
14%
Revenue
8-oz 32-oz

6. SWOT Analysis
Strength
 Strong Brand
 Low Cost
 Natural Ingredients used
 Unique, smooth and creamy texture of
yogurt
 Longer shelf-life
Opportunity
 Strong relationship with leading natural food
retailers
Weakness
 No alternative finances available
 Lacks potential of taking higher risks and
costs
 Doubt on sales team’s abilities
Threat
 Accumulation of cash by Horizon from
IPO
 Being dropped out of traditional channel

7. Yogurt market share by
packaging segment
8oz cup smaller
74%
Children's multipacks
9%
32oz packs
8%
Others
9%
Sales
8oz cup smaller
Children's multipacks
32oz packs
Others

8. Yogurt market share by region
North-West
26%
Mid-West
22%
South-West
25%
West
27%
SALES
North-West Mid-West South-West West

9. Yogurt distribution channels
Sales
Supermarkets Natural Food stores

10. Length of channel to market-
Supermarket
Manufacturer Distributor Retailer Customer

11. Length of channel to market-
Natural food store
Manufacturer
Natural Food
Wholesaler
Natural foods
distributor
Retailer Customer

12. Yogurt market share by brand
33%
24%
15%
5%
23%
SALES
Dannon Yoplait Private Label
Columbo Others
24%
15%
19%
7%
35%
SALES
Natural View Farm Brown Cow Horizon Organic
White Wave Others

13. Yogurt Production Costs and
Retail Prices by Channel
Natural food
Channel
Supermarket Food
Channel
Manufacturing Cost
8-oz cup
$ 0.88 $0.74
$ 0.31
32-oz cup
$3.19 $2.70 $ 0.99
4-oz cup multipack
$3.35 $2.85 $ 1.15

14. Options and Dilemma
Option 1 Option 2 Option 3
• Expand in
Northeast and
West supermarket
region
• Bring in the 6
SKUs of the 8oz
size
• Expand in
supermarket
nationally
• Bring in the 4
SKUs of the 32-oz
size
• Stay in natural
food channel
• Introduce 2
children’s pack

15. Option 1:
Expand 6 SKUs of the 8-oz
Pros Cons
 Largest dollar and unit share
 2 competitors already got succeeded
 To have significant first mover
advantage
 Highly risky
 Direct competitions with market leader
 Need High initial capital due to large
number of SKUs

16. Financial Analysis
Beneficiary Cost($) Margin(%) Price($)
Natureview 0.31 63.44 0.51
Distributor 0.51 15 0.56
Retailer 0.58 27 0.74

17. Financial Analysis
Description Year 2000 Year 2001
No. of Increment 35,000,000 42,000,000
Revenue 17,850,000 21,420,000
Cost of Production 10,850,000 1,302,000
Gross Profit 7,000,000 8,400,000
Other Expenses
Slotting Fees 1,200,000 0
SG&A 200,000 200,000
Marketing 120,000 120,000
Advertising 2.400,000 2,400,000
Broker’s Fees 714,000 856,800
Net Income 2,366,000 5,680,000

18. Option 2:
Expand 4 SKUs of the 32-oz
Pros Cons
 Largest Gross Profit margin
 Less competition due to larger shelf life
 Less promotion cost
 New costumer would readily enter new
brand
 Lowest in the shelf
 Low interaction with customers
 Slotting fee would be highr

19. Financial Analysis
Beneficiary Cost($) Margin(%) Price($)
Natureview 0.99 86 1.85
Distributor 1.85 15 2.13
Retailer 2.13 27 2.70

20. Financial Analysis
Description Year 2000 Year 2001
No. of Increment 5,500,000 5,500,000
Revenue 10,175,000 10,175,000
Cost of Production 5,445,000 5,445,000
Gross Profit 4,730,000 4,730,000
Other Expenses
Slotting Fees 2,560,000 0
SG&A 160,000 160,000
Marketing 480,000 480,000
Advertising 75,000 75,000
Broker’s Fees 407,000 407,000
Net Income 1,048,000 1,048,000

21. Option 3:
Expand 2 SKUs of the 4-oz
Pros Cons
 Supermarket channel can effect its core
channel
 Its core brand positioning would be
helpful to launch new product
effectively
 Growth rate of natural food channel is
seven times more than supermarket
channel
 Management team believed they could
manage channel conflict
 Natural food channel has less potential
to expand
 Growth rate would not be a key factor
for short term

22. Financial Analysis
Beneficiary Cost($) Margin(%) Price($)
Natureview 1.15 85 2.13
Wholesaler 2.13 7 2.28
Distributor 2.28 9 2.48
Retailer 2.48 35 3.35

23. Financial Analysis
Description Year 2000 Year 2001
No. of Increment 1,800,000 2,070,000
Revenue 3,834,000 4,409,100
Cost of Production 2,070,000 2,380,000
Gross Profit 1,764,000 2,028,000
Other Expenses
Slotting Fees 0 0
SG&A 0 0
Marketing 250,000 250,000
Complementary Cases 95,850 0
Broker’s Fees 153,360 176,364
Net Income 1,264,790 1,602,000

24. Comaprision of Options
Option No. Revenue before
expansion(1999)
Revenue before
expansion(2001)
Result(%)
1 13,000,000 34,420,000 164
2 13,000,000 23,175,000 78
3 13,000,000 16,834,000 29

25. Conclusions
 Had 3 options
 Option 1 yields the most profit
 So option 1 should be chosen

26. Thank You