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NATUREVIEW
FARM
Early Years
● Founded in 1989, Natureview Farm
manufactured and marketed refrigerated cup
yogurt under the Natureview Farm brand name.
● Family yogurt recipe developed by the
company’s founder which used natural
ingredients, organic milk and a special process
that gave the yogurt its unique texture without
the artificial thickeners.
● In 10 years, Natureview Farm’s revenues had
grown from less than $100,000 to $13 million.
2
Current Situation
● By 2000, Natureview Farm produced twelve
refrigerated yogurt flavors in 8-oz and four
flavors in 32-oz. The company had also started
exploring multipack yogurt products
● As a major brand in the natural foods channel,
Natureview Farm had developed strong
relationships with leading natural foods
retailers.
3
4
Current Yogurt Market
● 97% of all yogurt sold through supermarkets.
3% through natural store retailers.
● Yogurt is consumed by 40% of the U.S.
population, with women comprising the
majority (over 70%) of yogurt purchases.
● Deciding Factors when purchasing yogurt -
package type/size, taste, flavor, price, freshness,
ingredients, and whether the product was
organic
5
Manufacturer
Distributor
Retailer
Customer
Manufacturer
Natural Foods
Wholesaler
Retailer
Customer
Manufacturer
Supermarket Channel Natural Foods Channel
The Problem
Finding a path to grow revenues by over 50% before
the end of 2001.
● Natureview management had to find another
investor or position itself for acquisition (due to a
VC cashing out their investment) and increasing
revenues was critical in order to attain the
highest possible valuation.
6
7
Channel Margin Selling Price
Retailer 27% $0.74
Distributor 15% $0.54 (0.74*73%)
Natureview 32.6% (0.46-0.31)/0.46 $0.46 (0.54*85%)
Cost price for 8oz cup is $0.31
Option 1.
Expand six SKUs of the 8-oz product line into one or two selected
supermarket channel regions.
Pros
1. Significant revenue potential.
2. First mover advantage.
3. Other brands have
successfully
done so.
Cons
1. High competition and spending.
2. Channel conflict.
3. No experience in marketing
to supermarkets.
Selling Price
Calculation
8
2000 2001
Units sold (estimate) 35,000,000 42,000,0000 (20% increase)
Revenue $16,100,000 $19,320,000
Cost of Goods Sold $10,850,000 $13,020,000
Gross Profits $5,250,000 $6,300,000
Advertisements $2,400,000 (1,200,000 *
2 regions)
$2,400,000
SG&A $320,000 $640,000 (increase
$320,000/year)
Slotting Fees $1,200,000
($10,000*6*20 retail
stores)
-
Net Profit $1,330,000 $3,260,000
Broker Fee added into SG&A
Revenue/Profit Table
9
Channel Margin Selling Price
Retailer 27% $2.70
Distributor 15% $1.97 (2.70*73%)
Natureview 40.7% (1.67-0.99)/1.67 $1.67 (1.97*85%)
Cost price of 32oz cup is $0.99
Option 2.
Expand four SKUs of the 32-oz. Size yogurt pack nationally.
Pros
1. Above average gross profit
margin.
2. Lesser competition.
3. Lower promotional expenses.
Cons
1. National distribution in 12
months is difficult.
2. Higher slotting fees.
3. Possibility of conflict with other
channels.
Selling Price
Calculation
10
2000 2001
Units sold (estimate) 5,500,000 5,500,000 (no data given
for sales projection)
Revenue $9,185,000 $9,185,000
Cost of Goods Sold $5,445,000 $5,445,000
Gross Profits $3,740,000 $3,740,000
Marketing $480,000 (120,000 * 4
regions)
$4,800,000
SG&A $160,000 $320,000 (increase
$160,000/year)
Slotting Fees $2,560,000
($10,000*4*64 retail
stores)
-
Net Profit $540,000 $2,940,000
Broker Fee added into SG&A
Revenue/Profit Table
11
Channel Margin Selling Price
Retailer 35% $3.35
Distributor 9% $2.18 (3.35*65%)
Natural Food
Wholesaler
7% $1.98 (2.18*91%)
Natureview 37.5% (1.84-1.15)/1.84 $1.84 (1.98*93%) Cost price of 32oz cup is $1.15
Option 3.
Introduce two SKUs of a children’s multi-pack into the natural foods
channel.
Pros
1. Good relations with natural
foods channel retailers.
2. Financially attractive.
No SG&A.
1. More time to get into the
supermarket channel.
Cons
1. Natural food channels could
make similar higher demands.
2. Not moving into the
supermarket channel faster
could cost significant profits.
Selling Price
Calculation
12
2000 2001
Units sold (estimate) 1,800,000 2,070,000 (15% annual
increase)
Revenue $3,312,000 $3,808,800
Cost of Goods Sold $2,070,000 $2,380,500
Gross Profits $1,242,000 $1,428,300
Marketing $250,000 $250,000
Complimentary
cases
$82,800
($3,312,000 * 2.5%)
$95,220
($3,808,800 * 2.5%)
Net Profit $909,200 $1,083,080
Revenue/Profit Table
Conclusion
● Given 97% of all Yogurt sales takes place through the
supermarket it is too big a channel to ignore. Plus a
significant first mover advantage is at stake.
● The revenue goal of $20 million is projected to be
achieved as per given data.
● Relations with other channel partners can be
managed and shouldn’t be the deciding factor.
● Hire marketers dealing with supermarkets to tackle
the issue of having less experience in the area.
13
Go with option 1
Formulae Used
● Revenue = units sold * selling price
● Cost of Sold Goods = units sold * cost
price
● Gross Profits = revenue - CoSG
● Net profit = gross profits - other expenses
Miscellaneous calculations were shown in the table.
All data derived from the HBR Case Study.
14
Thank You.
15
HBR Case study on Natureview Farm analyzed
as part of the internship under Professor Sameer
Mathur, IIM Lucknow.
Neel Kapoor
IIT Madras

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Natureview HBR Case Study

  • 2. Early Years ● Founded in 1989, Natureview Farm manufactured and marketed refrigerated cup yogurt under the Natureview Farm brand name. ● Family yogurt recipe developed by the company’s founder which used natural ingredients, organic milk and a special process that gave the yogurt its unique texture without the artificial thickeners. ● In 10 years, Natureview Farm’s revenues had grown from less than $100,000 to $13 million. 2
  • 3. Current Situation ● By 2000, Natureview Farm produced twelve refrigerated yogurt flavors in 8-oz and four flavors in 32-oz. The company had also started exploring multipack yogurt products ● As a major brand in the natural foods channel, Natureview Farm had developed strong relationships with leading natural foods retailers. 3
  • 4. 4 Current Yogurt Market ● 97% of all yogurt sold through supermarkets. 3% through natural store retailers. ● Yogurt is consumed by 40% of the U.S. population, with women comprising the majority (over 70%) of yogurt purchases. ● Deciding Factors when purchasing yogurt - package type/size, taste, flavor, price, freshness, ingredients, and whether the product was organic
  • 6. The Problem Finding a path to grow revenues by over 50% before the end of 2001. ● Natureview management had to find another investor or position itself for acquisition (due to a VC cashing out their investment) and increasing revenues was critical in order to attain the highest possible valuation. 6
  • 7. 7 Channel Margin Selling Price Retailer 27% $0.74 Distributor 15% $0.54 (0.74*73%) Natureview 32.6% (0.46-0.31)/0.46 $0.46 (0.54*85%) Cost price for 8oz cup is $0.31 Option 1. Expand six SKUs of the 8-oz product line into one or two selected supermarket channel regions. Pros 1. Significant revenue potential. 2. First mover advantage. 3. Other brands have successfully done so. Cons 1. High competition and spending. 2. Channel conflict. 3. No experience in marketing to supermarkets. Selling Price Calculation
  • 8. 8 2000 2001 Units sold (estimate) 35,000,000 42,000,0000 (20% increase) Revenue $16,100,000 $19,320,000 Cost of Goods Sold $10,850,000 $13,020,000 Gross Profits $5,250,000 $6,300,000 Advertisements $2,400,000 (1,200,000 * 2 regions) $2,400,000 SG&A $320,000 $640,000 (increase $320,000/year) Slotting Fees $1,200,000 ($10,000*6*20 retail stores) - Net Profit $1,330,000 $3,260,000 Broker Fee added into SG&A Revenue/Profit Table
  • 9. 9 Channel Margin Selling Price Retailer 27% $2.70 Distributor 15% $1.97 (2.70*73%) Natureview 40.7% (1.67-0.99)/1.67 $1.67 (1.97*85%) Cost price of 32oz cup is $0.99 Option 2. Expand four SKUs of the 32-oz. Size yogurt pack nationally. Pros 1. Above average gross profit margin. 2. Lesser competition. 3. Lower promotional expenses. Cons 1. National distribution in 12 months is difficult. 2. Higher slotting fees. 3. Possibility of conflict with other channels. Selling Price Calculation
  • 10. 10 2000 2001 Units sold (estimate) 5,500,000 5,500,000 (no data given for sales projection) Revenue $9,185,000 $9,185,000 Cost of Goods Sold $5,445,000 $5,445,000 Gross Profits $3,740,000 $3,740,000 Marketing $480,000 (120,000 * 4 regions) $4,800,000 SG&A $160,000 $320,000 (increase $160,000/year) Slotting Fees $2,560,000 ($10,000*4*64 retail stores) - Net Profit $540,000 $2,940,000 Broker Fee added into SG&A Revenue/Profit Table
  • 11. 11 Channel Margin Selling Price Retailer 35% $3.35 Distributor 9% $2.18 (3.35*65%) Natural Food Wholesaler 7% $1.98 (2.18*91%) Natureview 37.5% (1.84-1.15)/1.84 $1.84 (1.98*93%) Cost price of 32oz cup is $1.15 Option 3. Introduce two SKUs of a children’s multi-pack into the natural foods channel. Pros 1. Good relations with natural foods channel retailers. 2. Financially attractive. No SG&A. 1. More time to get into the supermarket channel. Cons 1. Natural food channels could make similar higher demands. 2. Not moving into the supermarket channel faster could cost significant profits. Selling Price Calculation
  • 12. 12 2000 2001 Units sold (estimate) 1,800,000 2,070,000 (15% annual increase) Revenue $3,312,000 $3,808,800 Cost of Goods Sold $2,070,000 $2,380,500 Gross Profits $1,242,000 $1,428,300 Marketing $250,000 $250,000 Complimentary cases $82,800 ($3,312,000 * 2.5%) $95,220 ($3,808,800 * 2.5%) Net Profit $909,200 $1,083,080 Revenue/Profit Table
  • 13. Conclusion ● Given 97% of all Yogurt sales takes place through the supermarket it is too big a channel to ignore. Plus a significant first mover advantage is at stake. ● The revenue goal of $20 million is projected to be achieved as per given data. ● Relations with other channel partners can be managed and shouldn’t be the deciding factor. ● Hire marketers dealing with supermarkets to tackle the issue of having less experience in the area. 13 Go with option 1
  • 14. Formulae Used ● Revenue = units sold * selling price ● Cost of Sold Goods = units sold * cost price ● Gross Profits = revenue - CoSG ● Net profit = gross profits - other expenses Miscellaneous calculations were shown in the table. All data derived from the HBR Case Study. 14
  • 15. Thank You. 15 HBR Case study on Natureview Farm analyzed as part of the internship under Professor Sameer Mathur, IIM Lucknow. Neel Kapoor IIT Madras