Natureview farm - Case Study

1. NATUREVIEW
FARM - CASE
STUDY

2. What is Natureview farm?
Who are the major players?

3. Natureview Farm, Inc., a small yogurt
manufacturing company started in 1989 and
based out of Vermont.
• Chief Executive Officer (CEO) - Barry Landers
• Chief Financial Officer (CFO) - Jim Wagner
• Vice President of Marketing - Christine Walker
• Vice President of Sales - Walter Bellini
• Vice President of Operations – Jack Gottlieb
• Assistant Marketing Director - Kelly Riley

4. EARLY YEARS
TO
CURRENT SITUATION

5. • Organic yogurt was manufactured in Cabot, Vermont.
• Uses natural ingredients and a special process
• Unique smooth, creamy texture w/o the artificial
thickeners
• Uses milk from cows untreated with rGBH, an
artificial growth hormone
• Shelf life – 50 days

6. • 4 variants
• 12 flavors in 8-oz. cups
• 4 flavors in 32-oz. cups
• 4-oz. cups
• Tube packs
• Creative, low-cost “guerilla marketing”
• Revenue - $13 million in 1999

7. Revenue in 1999

8. OBJECTIVE OF THE CASE
STUDY

9. • To increase revenue to $20 million before the
end of 2001 from $13 million in 1999
• Whether to expand into the supermarket
channel

10. STEPS TO DO

11. •Study the refrigrated yogurt market in US
•Supermarket Channel vs. Natural Foods
Stores
•Evalaute Senior Management Team’s
Three Options

12. The refrigrated yogurt market
in US

13. The refrigrated yogurt market in US
• Total U.S. retail sales reached $1.8 billion and sales volume
was 2.3 billion units in 1999
• Top 4 competitors—Dannon, Yoplait, Breyers, and Columbo
• Supermarkets sold 97% of all yogurt, and natural food stores
the rest
• 6- and 8-oz. yogurt cups the most popular sizes

14. Factors considered when deciding which yogurt to purchase
• package type/size
• Taste
• Flavor
• Price
• Freshness
• Ingredients
• whether the product was organic

16. Supermarket Channel
vs.
Natural Foods Stores

17. Supermarket Channel
• Large consumer products manufacturers, such as Procter &
Gamble and Coca Cola, has dedicated sales forces
• Smaller manufacturers like Natureview Farms use sales brokers
• If smaller manufacturers chose to expand into the supermarket
channel, it depends on its broker’s knowledge
• streamlined distribution systems

18. • Required to pay a one-time “slotting fee” for each
SKU only in the first year of introduction
• Participate in regular trade promotions
• If the SKU is not profitable for the supermarket
within the year, the supermarket discontinues the
product
• $10,000 per SKU per retail chain

19. Natural Foods Channel
• Charges higher retail prices for the same products than
supermarkets
• Lower price sensitivity
• Longer distribution system
• Requires a one-time allotment of one free case of product for
every new SKU in its first year

22. Senior Management Team’s
Three Options

23. Option 1
• Expand 6 SKUs of the 8-oz. product line into
one or two selected supermarket channel
• 8-oz cups represented the largest dollar and unit share
• First brand to enter the channel could therefore have a
significant first-mover advantage

24. • Holds great potential but also higher risks and costs
• 8-oz. size has the highest competition trade promotion and
marketing spending
• Would cost $1.2 million per region per year
• Could achieve a 1.5% share of supermarket yogurt sales after
one year
• Incremental annual sales volume of just over 35 million
units

25. Option 2
•Expand 4 SKUs of the 32-oz. size
nationally
• They generate an above-average gross profit margin for
Natureview
• Fewer competitive offerings in this size
• Competitive advantage because of longer shelf life
• Marketing expense - $120,000 per region per year

26. • Concerns about sales team’s ability to achieve full
national distribution in just 12 months
• Less-noticeable
• Need to hire experience sales personnel

27. Option 3
• Introduce two SKUs of a children’s multi-pack
into the natural foods channel
• Had strong relationships with the leading natural foods
channel
• Easy expansion
• Provides the perfect positioning

28. • Concerns about necessary resources or skill-set to sell
effectively to and through supermarkets
• Marketing expenses estimated at $250,000
• Would yield the strongest profit contribution among 3
options
• Additional R&D and Operations required

30. FINAL EVALUATION

31. • Highest sales projection is obtained in Option 1
• Highest profit contribution is obtained in Option 3
• Marketing expenses highest in Option 1 and least in Option 3
• Option 1 and 2 involves greater risk of moving into a new market but
Option 3 paddles in the safe and comfort zone
• To achieve a 50% increase in revenue i.e, $20 million in 2001 from $13
million in 1999, the most suitable option would be Option 1
“Expand 6 SKUs of the 8-oz. product line into one or
two selected supermarket channel”