Natureview farm case analysis

1. Case Analysis

2. Agenda
• About Natureview Farm
• Issues and Challenges
• Market Trends
• Options
• Recommendations

3. About Natureview Farm
• Founded in 1989 in Cabot, Vermont
• Manufacturer and marketer of refrigerated cup organic
yoghurt
• Uses natural ingredients and special process

4. How is Natureview Farm different?
Natureview Farm yoghurt is different from its other
competitors:
• Uses natural ingredients
• Longer shelf life (50 days)
• Reputation of high quality and great taste

5. Natureview is successful
Because:
• Strong brand
• Effective, low-cost “Guerrilla Marketing”
• National distribution in natural foods channels
• Strong relationships with distributors

7. Issues and Challenges
Venture Capital firm needs the cash out of investment, and thus Natureview
Farm needs to increase its revenues by 50% by the end of 2001.
Its current revenue is $13 million. It needs to reach $20 million.
GOAL :
To find another investor or position itself for acquisition, and increasing
revenues.

8. Questions !
• Should Natureview expand into the supermarket channel to
increase its revenue?
• What marketing strategy should it use?

10. Market Trends
46%
25%
29%
Supermarket Small health stores Natural Foods
97
3
Channel that customers tend Yoghurt Distribution
Channel to buy
Supermarket Natural Foods

11. Market Trends
26%
22%
25%
27%
Northeast Midwest Southeast West
74%
9%
9%
8%
Yoghurt Market Share by Yoghurt Distribution
Channel Region
8 oz. cups and smaller
32 oz. cups
Children's multipacks
Others

12. Market Trends
33%
24%
23%
5%
15%
Brand
Supermarket
Dannon Yoplait Others Columbo Private label
24%
15%
7%
19%
35%
Yoghurt Market Share by Yoghurt Market Share
by Brand
Natural Foods Channel
Horizon OrganicNatureview Farm
White Wave
Brown Cow
Others

14. Manufacturer
Natural Foods Wholesaler
Natural Foods Distributor
Retailer
Customer
Manufacturer
Distributor
Retailer
Customer
Supermarket Channel Natural Foods Channel

16. Option 1
Expand 6 SKUs of the 8-oz. product line
into one or two selected supermarket
channel regions

17. Option 1
Pros
• 8-oz. cups represent largest dollar and unit share of market
• Other natural food brands have successfully expanded to
supermarkerts
• Supermarkets may authorize only one organic yoghurt
manufacturer
• Advantage in being the first organic yoghurt to move to
supermarket

18. Option 1
Cons
• Highest level of competition amongst all the product lines of yogurt
• Increase in advertising cost and SG&A expenses
• Little experience in dealing with supermarket chains
• High potential, but high risk and cost

19. Option 1
FinancialAnalysisSupermarket 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
Retailor 27% $0.74*73% = $0.54 $0.74
Customer

20. Option 1
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

21. Option 2
Expand 4 SKUs of the 32-oz. size
nationally

22. Option 2
Pros
• 32-oz. cup generates an above-average gross profit margin (43.6%
vs 36% for 8-oz. product line)
• Fewer competitive offerings in this size
• Competitive advantage due to longer shelf life
• Lower promotional expenses

23. Option 2
Cons
• Higher slotting fees due to national distribution
• National distribution will be challenging within 12 months
• Promotion and lower price at supermarkets may hurt the brand

24. Option 2
FinancialAnalysisSupermarket 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
Retailor 27% $2.70*73% = $1.97 $2.70
Customer

25. Option 2
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

26. Option 3
Introduce 2 SKUs of a children's multi-
pack into the natural foods channel

27. Option 3
Pros
• Strong relationships with leading natural foods channel retailers
• Financially lucrative
• High margins
• Low sales and marketing expenses

28. Option 3
Cons
• Have to prolong venturing into supermarkets
• May not reach the target revenue of $20 million by 2001
• Competitors have already expanded to supermarkets

29. Option 3
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
Retailor 35% $2.18 $3.35
Customer

30. Option 3
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

32. • Higher revenue generated
• Lower Slotting Fee (only 2 supermarkets)
• Transition to supermarkets
• Advantage over competitors by expanding into supermarket

33. Recommended
Adjustments
Instead of just introducing 8-oz. cups, 32-oz, cups should also be
introduced in supermarkets.
• More shelf coverage
• Better gross profit margin
• No competition for 32-oz. cups
Combining advantages of both the product lines.

34. Created by Prayag Mulay, NMIMS
Mumbai, during a marketing
management internship by Prof.
Sameer Mathur, IIM Lucknow.
Disclaimer