Case Study Review: Harvard Business Review: Nature Farm View This is a part of the Winter internship of IIM Lucknow

1. NATURE VIEW FARM
Published in Harvard Business Review

2. Presented by
Raguraman,S
CIT, Coimbatore

3. Who’s Nature View Farm
• Established in Cabot, Vermont in 1989
• Manufacturer of Refrigerated flavoured yogurt
• Value preposition: Natural ingredients and no artificial flavours
• Favoured Market: Organic sector
• Increase in product lines
• 12 Yogurt flavors and multipack yogurts
• Distribution channels: Retail natiure stort
• Revenue growth skyrocketed: $100k to $ 13M
• New Variants, flavoured yogurts
• Product size variants: 6oz, 8oz, an 32 oz
1989
1999
1999

4. Reasons for Growth
Nature
View
Farm
Natural
Ingredients
Quality and
Taste
Guerrilla
Marketing
Strong
Leadership
Natural
Ingredients
Cow milk
untreated
with rGBH
Large Shelf
life
No artificial
agents

5. Issues
Cashing out of its Venture Capital investments
Find alternate investment partners or grow revenue by 50% before 2001
Alternate Channelling and
Distribution Strategy:
Supermarket channel
Increase product lines to
increase revenue: New multi
packed products

6. Factors deciding the purchase
of Yogurt
YOGURT
Organic/
Inorganic
PackagingPrice
Variants and
Flavors
Shelf Life
Taste

7. Problem
Super market
accounts for 95%
of market
volume
Retail
Distribution
accounted 70%
of the past
revenue for
the company

8. No prior Supermarket distribution Experience
Distribution of Supermarket might alienate the existing
Retail market
Supermarket accounts for 96% of yogurt market
Change in packaging and other logistics for Supermarket
channels
High investment slotting fees for Supermarket channel
Future prospects may affect if the supermarket channel is
not utilise now

9. Critical Questions
To increase sales to 20 million$
Increase
product
lines
`qualities
Increase
distribution
line
Increase
manufacturing
Cost
cutting
?
?
? ?

10. Product Price Placement Promotion
All Retailers
are sold at
the same
price
- 8 Oz
12 flavors
- 32 Oz
4 flavors
- Children
Multipacks
1.Natural
Food
channel
2.Wholesale
club
3.Retailer
channels
4.Drug Store
5.Convenient
Store
1.Print
2.Television
3.Radio
4.Outdoor
4Ps of Nature View Farm

12. Product Sales by dollar value of Nature view farm
8 Oz
32 Oz
Product Sales by dollar value of Super market channel
8 Oz and Smaller
32 Oz
Children Multipacks
Others

13. PRODUCT LINE ANALYSIS
The Product 8 Oz market share of Nature View Farm > Overall 8 Oz market
The Product 32 Oz market share of Nature View farm <<< Overall market share
Product Children multipack has not reached well for Nature View farm
Market
expansion of 32
Oz and Multipack
can increase the
revenue
If no of Flavours
in the 32 Oz and
multipack
increased the
revenue might
increase

15. Nature View Farm pricing
strategy

16. Price Analysis
PRODUCT PROFIT Margin in Natural
Food Channel(%)
PROFIT Margin in
Supermarket(%)
8 Oz 64 58
32 Oz 68 64
Children Multipack 65 59

17. Price Analysis (Contd)
Super Market Channel
Natural Food Channel
Manufacturer
Distributor(15% Margin)
Retailer (27% Margin)
Consumer
Manufacturer
Wholesaler (margin 7%)
Natural Food
Distributor( margin 9%)
Retailer (Margin 35%)
Consumer
Price is quite
competitive in
both the
segment
Since the market
share of Super
market is high,
the distribution
in this channel is
highly profitable

19. YOGURT sales
Distribution
Channel
Major
Minor
Super Market
Natural Food Retail
Warehouse
Clubs
Drug Stores
Mass Merchandiser
Yogurt Channels

20. Distribution channel by Sales of
Yogurt
Distribution channel by Sales Value
Super Market
Natural Food
Store
Others

21. Organic products Channel
Distribution by Sales
Natural Food
Market
Small health Foo
Store
Supermarket
Organic Product channels

22. Yogurt Market Share by Brand

23. Yogurt Market Share by Region

24. Placement Analysis
The Natural farm
view presence is
totally zero when
the rival company’s
market presence is
quite formiable in
Supermarket
Organic products
prospects has
high placement
in Supermarket
Marketing efforts
can be solely
concentrated either
on Supermarket or
All the other
channels put
together

26. Radio
Television
Newspaper
Price Discounts
BillBoard
Print
Promotions and Advertising of
Nature Farm View

27. Nature View Income Statement

28. For Supermarkets,
Promotional
activities for each
SKUs is high
Supermarket also
involves an
additional spent for
Slotting fee for every
year and for every
1000$
Sales and Marketing
accounts for 15% for
Retail sales for
Nature Farm view
Promotional Cost Analysis

29. Factors to be considered
Increase Revenue from
$13M to $20M
Through Supermarket or
new Product line
Advertising spent must be
compensated with
additional sales
Supermarkets must generate
minimum $2.58M profit in 2
years
Fixed costs remain the
same for all the channels

32. PROPOSAL
1.Expand Product line : Expand 6 SKUs of 8Oz products
2.Expand Channel : Concentrate on Supermarket
3.Area : Focus on two regions

33. PROS
8 Oz successfully penetrated in Natural Food Retails
The pioneer of Organic yogurt supplier in Supermarket influence market supremacy
Supermarket allows only one supplier of organic Yogurt product

34. CONS
High Advertising and Marketing cost
No prior experience in Supermarkets distribution
Total advertising cost is $2.4M for 2 years
Slotting Fees: $60000 for 6 SKUS for an year
New packaging and logistics strategy

36. PROPOSAL
1.Expand Product line :Expand 4 SKUs of 32Oz products
2.Expand Channel :Concentrate on Supermarket
3.Area :Nationally expand everywhere

37. PROS
32 Oz market potential is still at nasal stage
The profit margin is comparatively higher than other packages
Less competition and increased Shelf life

38. CONS
SG&A Expense: $320,000 in Supermarkets
No prior experience in Supermarket distribution
New sales and promotions of personnals
Slotting Fees: $40000 for 4 SKUS for an year
New packaging and logistics strategy

40. PROPOSAL
1.Increase Product line: Introduce 2 SKUs of Children’s Multipack
2.Channel : Concentrate on Natural Food Retail
3.Area : Existing areas

41. PROS
Less cost and less risk
No new strategies or no new labor force
High profit margin

42. CONS
Overlooking Super market may cost long term loss
The promotion of new product may not yield sufficient profit within deadline
Market penetration of new products might be less welcoming than other variants
Retail players might see cost benefits over buying from Supermakets, therby
eliminating the stocking of new products
Sales efficiency cannot be predicted accurately

44. Sales by Volume Projection

45. Option 1 Inference
1.Expected sales: 35M
2.Total Sales value: $25.9M
3.Slotting fees: $12K
4.Advertising: $2.4M
5.SG&A: $0.64M
6.Adminiatrative: $4.4M
7.R&D: $6.8K
8. Miscellaneous: $6M
Net Profit: $12.24M
Net Revenue: $7M+
OPTION 1
• Though the initial promotion and other costs
are high, not utilising the Super market channel
will have a long term impacts
• Through the Cost analysis, the target of
getting $20M by 2001 is under reach
• Since the projected sales volume is high, the
retailer can be sold with less price and still the
target can be reached

46. Option 2 Inference
1.Expected sales: 5.5M
2.Total Sales value: $14.85M
3.Slotting fees: $8K
4.Advertising: $2.4M
5.SG&A: $0.68M
6. Miscellaneous: $3M
Net Profit: 8.69M
Net Revenue: $7M+
OPTION 1
• The market penetration of 32Oz is only 24% in
natural food stores
• Through the Cost analysis, the target of
getting $20M by 2001 is under reach
• The success of this strategy depends upon new
marketing, sales and operational strategies

47. Option 3 Inference
1.Expected sales: 1.8M
2.Total Sales value: $6.03M
3.SG&A: $0.68M
4.Administrative: $3M
Net Profit: $2.35M
Net Revenue = <<$7M
OPTION 1
• Leaving the Supermarket channel will have long
term adverse effects
• Through the Cost analysis, the target of
getting $20M by 2001 is not possible
• The success of this strategy depends
completely on sales team and their strategies

48. Recommendation
Expand to Super market of 8 Oz package
Increase the market share of 32 Oz in Retail sector
Increase additional promotional activities of 32 Oz
in Retail
Optimise the cost of 32Oz for Retail market to be
less than the cost of four 8 Oz products

49. Summary
Who’s Nature View Farm
Reasons for Growth
Issues
Challenges Ahead
Critical Questions
4Ps of Nature View Farm
Product and Analysis
Price and Analysis
Placement and Analysis
Promotion and Analysis
Factors to be considere
Expert Analysis
Inference
Recommendation
Summary

50. DISCLAIMER
CREATED BY RAGURAMAN,S From Coimbatore Institute of Technology,
during Winter Marketing Internship by Prof. Sameer Mathur, IIM Lucknow