Based upon Harvard case study : Natureview farm.

1. NATUREVIEW FARM
CASE STUDY

2. BACKGROUND
1989
1999
Founded with Production facility at CABOT, VERMONT.
Company first entered the market with 8-ounce (oz.) and 32-
oz. cup sizes of yogurt in two flavors—
plain and vanilla.
Natureview Farm revenue moved up from less than
$100,000 to $13 million.

3. 4PS FOR NATUREVIEW FARM
PRODUCT PRICE PLACE PROMOTION
• Natural
Organic
yogurt.
•8-oz size with
12 flavors.
•32-oz size
with 4 flavors.
•Affordable
than
competitors.
• Within reach
taking health
cautiousness
into account
•Natural food
Channel
•Supermarket
Emphasis on
natural
ingredients and
its strong
reputation for
high quality
and great
taste.
Low cost
Guerilla
Marketing.

4. KEY PEOPLE
NATUREVIEW FARM
TOP MANAGEMENT
JIM
WAGNER
(CFO)
BARRY
LANDERS
(CEO)
CHRISTINE
WALKER
(VP)

5. SITUATION
Venture capital firm need to cash out of its investment in
Natureview Farm.
Need to increase revenues to $20 millions from $13 millions
before the end of 2001.
Attain highest possible valuation in order to secure new
investors or position itself for acquisition.

6. YOGURT SALES
Supermarkets (3%
growth per year )
Natural food stores (
20% growth per year)
3%
97%

7. QUESTIONS EVOVLED
Whether Natureview should expand into supermarkets channel
in order to meet its revenue goal ?
Finding a path to grow revenues by over 50% before the end of
2001.
How to maintain a consistent level of profitability?

8. INSIGHTS FOR SALES OF YOGURT
Sales
8-oz cup (Growth 3%
per year)
32-oz ( Growth 2%
per year)
Multipacks ( Growth
12.5% per year )
Others
74%
8%
9%
9%

9. LENGTH OF CHANNELS IN MARKET
MANUFACTURER
SUPERMARKET CHANNEL NATURAL FOODS CHANNEL
RETAILER
DISTRIBUTER
DISTRIBUTER WHOLESALER
MANUFACTURER
RETAILER
CUSTOMERCUSTOMER
+15%
+27%
+7%
+9%
+35%

10. EVALUTION OF OPTIONS

11. OPTION 1
Expand 6-SKUs of 8-oz production line into one or two selected
supermarket channel region.
Pros:
- 8-oz represent largest unit share market
- First organic yogurt manufacturer to enter supermarket
Cons:
- Highest level of competitive trade promotion and marketing.
- Possible channel conflict between supermarket and Natural Food.
- extra SG&A expenses ($320000 annually ) and one time slotting fees (
$10000 per SKUs).

12. OPTION 2
Pros:
- Greater average profit margin than 8-oz cup.
- Fewer competitors
- Lower promotional expenses
Cons:
- Higher slotting fees due to national distribution
- Doubt on sales team’s ability to achieve full national distribution in
12 months.
- Possible channel conflict between supermarket and Natural Food
channel
Expand 4 SKUs of 32-oz size nationally

13. OPTION 3
Pros:
- No SG&A costs to introduce the multipack products
- Financially feasible
- Natural food channel growth will be beneficial
Cons:
- Cannot achieve target objective of Natureview farm
Introduce 2 SKUs of a children’s multipack into natural food
channel

14. VALUATION OF
EACH OPTIONS

15. OPTION 1
CHANNEL
SELLING
PRICE
MARGIN COST PRICE
RETAILER $0.74 27% $0.74*73%=$0.54
DISTRIBUTOR $0.54 15% $0.54*85%=$0.46
NATUREVIEW $0.46
($0.46-$0.31)/$0.31
= 33%
$0.31

16. 2000 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
Expenses
Advertisements $1,200,000*2=$2,400,000 $2,400,000
SG$A $320,000 $640,000
Slotting fees $10000*6*20=$1,200,000 $10000*6*2=$120,000
Broker’s Fees $16,100,000*0.04=$644,000 $19,320,000*0.04=$772,800
Net Profit $686,000 $2,367,200

17. OPTION 2
CHANNEL
SELLING
PRICE
MARGIN COST PRICE
RETAILER $2.70 27% $2.70*73%=$1.97
DISTRIBUTOR $1.97 15% $1.97*85%=$1.67
NATUREVIEW $1.67
($1.67-$0.99)/$1.67
= 41%
$0.99

18. 2000 2001
Unit sales 5,500,000 5,500,000
Revenue 5,500,000*$1.67=$9,185,000 5,500,000*$1.67=$9,185,000
Cost 5,500,000*$0.99=$5,445,000 $5,445,000
Gross Profit $3,740,000 $3,740,000
Expenses
Marketing $120,000*2=$240,000 $240,000
SG$A $160,000 $320,000
Slotting fees $10000*4*64=$2,560,000 0
Broker’s Fees $9,185,000*0.04=$367,400 $9,185,000*0.04=$367,400
Net Profit $172,600 $2,572,600

19. OPTION 3
CHANNEL
SELLING
PRICE
MARGIN COST PRICE
RETAILER $3.35 35% $3.35*65%=$2.18
DISTRIBUTOR $2.18 9% $2.18*91%=$1.98
NATURAL FOODS
WHOLESALERS
$1.98 7% $1.98*93%=$1.84
NATUREVIEW $1.84
($1.84-$1.15)/$1.84
= 38%
$1.15

20. 2000 2001
Unit sales 1,800,000 1,800,000*1.15=2,070,000
Revenue 1,800,000*$1.84=$3,312,000 2,070,000*$1.84=$3,808,000
Cost 1,800,000*$1.15=$2,070,000 2,070,000*$1.15=$2,380,500
Gross Profit $1,242,000 $1,428,300
Expenses
Marketing $250,000 $250,000
Complementary
Cases
$3,312,000*2.5%=$82,800 $3,808,000*2.5%=$95,220
Net Profit $909,200 $1,083,080

21. PROOF AND ACTION
OPTION 1 OPTION 2 OPTION 3
PROJECTED
REVENUES
$19,320,000 $9,185,000 $3,808,000
NET PROFIT $2,367,200 $2,572,600 $1,083,080

22. DECISION
Choose option 1
- Analysis showing that projected revenue can only be met by
following option 1.
- Points of parity is with Natureview , being organic
manufacturer lure large consumer.
- It will provide wide range of customers.
- 8-oz is flanker for the Yogurt Manufacturers.

23. ALTERNATIVES
- OPTION-2 and OPTION-3 should be brought as future
expansion of product line.
- OPTION-2 and OPTION-3 have much better profit to revenue
ratio.