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Natureview farm

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Presentation on Analysis of Harvard Case: Natureview Farm
This was created by Pearl Gupta, PEC University of Technology during the course of a marketing internship under Prof. Sameer Mathur

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Natureview farm

  1. 1. Natureview Farm Case Analysis
  2. 2. Contents • Natureview Farm: Overview • Goal • Market Facts & Trends • Challenges • Option 1 • Option 2 • Option 3 • Recommendation
  3. 3. Natureview Farm 1989 • Founded and manufactured in Cabot, Vermont • First entered market 8-oz and 32-oz with plain and vanilla flavor • Used natural ingredient with longer average shelf-life of 50 days 1999 • Company revenue growth from $ 100,000 to $13 million • Fruit on the bottom yogurt 2000 • Expanded to 12 yogurt flavors & multipack yogurt (for children)
  4. 4. Goal To increase its revenue by over 50% within 23 months to attain highest possible valuation of the company
  5. 5. Market Facts & Trends • Organic foods market predicted to grow from $6.5 billion to $13.3 over 4 years. • Generally organic products customers tend to be more educated, earn higher incomes, be older and live in the northeast and west. • 67% of households consider price as a barrier to purchase of organic products. • 44% of consumers would like a wider selection of organic products in supermarkets. • Supermarkets are moving toward attracting new customers by offering more organic products. • Concentrated – 4 competitors control over 50% share. • Supermarkets = 97% of total sales (3% annual growth). • Natural food stores = 3% total sales (20% annual growth) • Factors in purchasing decisions: – Package type/Size, flavor, price, freshness, ingredients, organic.
  6. 6. Three Options
  7. 7. Option 1 PROS CONS • 8-oz cups represent largest dollar and unit share of market • Supermarkets fear losing market share to natural food competitors • Other natural food brands have successfully expanded to supermarkets • High potential to increase revenue • First mover as organic yogurt brand to enter supermarket channel • Highest level of competitive trade promotion and marketing spend • Possible channel conflict between supermarkets and natural food stores • Promotion and lower price at supermarkets may hurt the brand • Advertising plan would cost $1.2 million per region per year • SG&A expenses increase by $320,000 annually • Need to pay one time slotting fee Expand 6 SKU’s of the 8-oz product line into one or two selected supermarket channel region.
  8. 8. Financials Sale Price $0.78 Retail Margin $0.21 Price to retail $0.57 Distributor margin $0.09 Price to distributor $0.48 Mfc cost $0.31 Gross profit NV $0.17
  9. 9. Option 2 PROS CONS • Fewer competitive offerings in this size • 32-oz cups generate an above- average gross profit margin (43.6% vs 36% for 8-oz line) • Strong competitive advantage due to long shelf life of product • Lower promotional expenses than option 1 • National distribution will be challenging within 12 month • Higher slotting fees due to national distribution • No guarantee that customer awareness of the brand would grow • Promotion and lower price at supermarkets may hurt the brand Expand 4 SKU’s of the 32-oz product line nationally.
  10. 10. Financials Sale Price $2.83 Retail Margin $0.76 Price to retail $2.07 Distributor margin $0.31 Price to distributor $1.76 Mfc cost $0.99 Gross profit NV $0.77
  11. 11. Option 3 PROS CONS • High margins- 37.6% • Natureview already has strong relationships with leading natural foods channel retailers • More time to prepare the company for moving into supermarkets • Financially-attractive • Miss opportunity to enter supermarkets before competitors • Fast growth of natural foods channel will lead to demands equal to those of supermarkets Expand 2 SKU’s of a children’s multi-pack into naturals food channel
  12. 12. Financials Sale Price $3. 35 Retail Margin $1,17 Price to retail $2.18 Distributor margin $0.20 Price to distributor $1.98 Mfc cost $1.15 Gross profit NV $0.69
  13. 13. Recommendations GO FOR OPTION 1 • Reach beyond the target objective of 20 million revenue by end of 2001 with projected of $31 060 000 • 8 –oz yogurt is the highest demand • In supermarket, can expose to more range of customers • Will have the first mover advantages of natural product to enter supermarket • A bit risky but in a long term will generate revenues of 200% (as looking at two other competitors) REQUIRED ADJUSTMENTS • Channel partner Arrangements: – Lower MSRP for natural food retailers to better compete with supermarkets – Work with retailer, distributer, and wholesaler to reduce costs and maintain margins – Ex: case-breaking, shelf stocking, paperwork • Brand: will remain premium through joint promotions with other premium products such as granola or organic fresh fruit • Marketing mix: 8-oz, $0.78, located in-store with other major yogurt manufactures, in- store promotions • Sales: utilize more sophisticated technology to monitor sales trends
  14. 14. NET MARKETING CONTRIBUTION 2001 2002 2003 2004 2005 2006 Average Option 1 $3,599.65 $4,817.58 $6,279.09 $8,032.91 $10,137 $12,662.9 $7,585.28 Option 2 $3,699.08 $4,301.04 $5,027.80 $5,863.57 $6,824.70 $7,930.01 $5,602,70 Option 3 $997.07 $1,308.84 $1,698.55 $2,185.68 $2,794.61 $3,550.76 $2,090.08 Net marketing Contribution = (Sales Revenue * % Gross ) – Marketing Expenses

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