Natureview Farm Brief Case Harvard Brief Case Analysis

1. Harvard business School Brief Case

2. 1989
•Founded in 1989,manufactured in Cabot,
Vermont.
•used natural ingredients without artificial
thickeners as used by other competitors
•Yogurt's shell life is 50 days compared to
30 days for others
•entered the market with 8-ounce (oz.) and
32-oz. cup sizes of yogurt in 2 flavors

3. 1999
•revenues grew from less than
$100,000 to $13 million.
•Fruit on the bottom
2000
•twelve refrigerated yogurt flavors in 8-
oz. cups and four flavors in 32-oz.
•started exploring
•multipack yogurt products (children’s
4-oz. cups and yogurt packaged in
tubes).

4. VC needs to cash out its investment
Find another investor or position itself for acquisition,
and increasing revenues was critical in order to attain
the highest possible valuation
Whether Natureview should expand into the
supermarket channel in order to meet its revenue goal

5. To grow revenues by over 50% before the
end of 2001.
To increase revenue to find another
investor or position itself for acquisition

7. STRENGTHS
•Greater shell life
•Low cost
•Smooth and unique
texture
•No artificial thickeners
used
WEAKNESS
•No alternative
financing
•Lacks potential to take
higher risk

8. OPPORTUNITY
Strong relationship with
natural food retailers
THREAT
Dropped out of
traditional channel
Accumulation of cash by
horizon

9. 74%
9%
8%
9%
Yogurt's Market Share by Packaging Segment
8-oz size or smaller
Children's multipack
32-oz cup
others

10. 26%
22%
25%
27%
Market share by region
Northwest
Mideast
SouthEast
West
24%
29%
31%
16%
Number of Retailers in
Region
Northeast
Mideast
Southeast
West

11. 86%
14%
8-oz cup
32-oz
cup
97%
3%
Distribution Channel
Supermarkets
Natural Food Stores

13. Natural Food Channels Average Retail Price
8-oz cup $0.88
32-oz cup $3.19
4-oz cup multipack $3.35
Super Market Channel Average Retail Price
8-oz cup $0.74
32-oz cup $2.70
4-oz cup multipack $2.85
Manufacturing Cost
8-oz cup $0.31
32-oz cup $0.99
4-oz cup multipack $1.15

14. Option 1.
Expand six SKUs
of the 8-oz.
product line into
supermarket
channel regions
Option 2.
Expand four SKUs
of the 32-oz. size
nationally
Option 3
Introduce two
SKUs of a
children’s multi-
pack into the
natural foods
channel

15. Expand 6 SKUs of the 8-oz. size into eastern and western
supermarket regions
Attract higher-income, less price-sensitive customers.
First Mover Advantage
8-oz has highest incremental demand
Higher risks and costs
Assumption that broker will take advantage of relationship with
supermarkets
administrative expenses (SG&A) would increase by $320,000
Additional Marketing staff
Pros
Cons

17. 2000
Revenue .74*3500000(unit sales) $25900000
Projected Revenue $1300000+25900000 $38900000
COGS .31*3500000 $10850000
Gross profit $28050000
Expenses
SG &A 320000 $ 320000
Advertising Cost 120000*2 $ 2400000
Brokers fee 1610000*.04 $ 66400
Slotting Fee 6*$ 10000 *20 $ 1200000
Net Profit $ 23,48600
By the end od 2001
Net profit will be
27,247 200

18. Expand 4 SKUs of 32 oz size nationally into super market
channel
Potentially higher gross profit margin
Stronger competitive advantage
Lower Marketing expenses
Would increase SG&A expense
Dependence on sales team to achieve full national
distribution in a year
Need to hire sales personnel and establish relationship with
Pros
Cons

19. 200
Revenue 550000*2.7 $14850,000
Projected Revenue 14850000+13000000 $2785000
COGS 550000*.99 $544500
Gross Profit $9,405000
Expenses
Slotting Fee 4*10000*64 $2,560,000
S G & A 160000 $160000
Marketing Fee 1200000*4 $4800000
Broker’s Fee(4% revenue) $367400
Net Profit $18837600
By 2001 net
Profit will be
$21397600

20. Introduce 2 children’s multipacks into natural foods
channel
Established leader in this channel
Perfect positioning for new multi-product
Long term potential is good
Lower Market Expenses
Potential conflicts
Other uncertain factors
Pros
Cons

21. 2000
Revenue 180000*3.35 $6030000
Revenue Projection 603000+13000000 $19030000
Cost 180000*1.15 $2070000
Gross Profit $16960000
Expenses
Marketing $250000
Complementary Cases 6030000*2.5% $150750
Net Profit $16559250
By 2001 Net
profit will
become
$17130637

22. Option1
Option 2
Option 3

23. Decision Parameter Option 1 Option 2 Option 3
Revenue Objective Exceeds Exceeds Falls Short
Short Term Profit Low Low High
Long Term Profit High High Low
Cost to Trial High Very High Low
Organization
Capabilities required
low low high

24. Go with option 1
I recommend NatureFarm to expand 6 SKUs of the
8-oz. size into eastern and western supermarket
regions .
8-oz is in highest demand
Long term revenues are high
High Growth (more than 12% a year)

25. Let’s RECAP:
Natureview Market yogurt-8 oz and
32 oz
History
Current Scenario(4 P’s and SWOT
analysis)
Market Share
3 Options-best 3rd option
Analysis and Decision