Natureview Farm: Case Study Analysis
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Natureview Farm: Case Study Analysis
- 1. Natureview Farm Case Study Analysis Sachin Kamra 8347669938 Saransh Jha 9874539551
- 2. 2 1996 2001 Jim Wagner joined as CFO Founded • Manufactured refrigerated cup yogurt • Started with two flavors and two sizes • 8 ounce and 32 ounce • Plain and Vanilla flavor Wagner arranged for an equity infusion from a VC to fund investments Growth of $20 mn BACKGROUND 1997 20001999 Revenue reached 13mn VC firm wants out 1989 Average shelf life of the yogurt was 50 days while most competitor had a 30 day shelf life
- 3. 97% 3% Yogurt Distribution Channel Supermarket Natural Food Stores Manufacturer Distributor Retailer Customer Manufacturer Natural Foods wholesaler Natural Foods distributor Retailer Customer 15% 27% Supermarket channel Natural Food Channel 74% 9% 8% 9% Yogurt Market Share by Packaging Segment 8 oz cups and smaller Children's multipack 32 oz cups Other 7% 9% 35%
- 4. 4 VC needed to cash out of its investment Need to find a path to grow revenues around 20mn dollar before the end of 2001 The company wanted to attain highest possible valuation in case any possible acquisition
- 5. OPTION 1 • Expand in Northeast and west region supermarkets • Bring in 6 SKUs of the 8- oz size OPTION 2 OPTION 3 Senior Management Team’s Options • Expand in supermarket nationally • Bring in 4 SKUs of the 32 oz size • Stay in Natural Food channel • Introduce 2 children’s multipack
- 6. OPTION 1
- 7. PROS CONS • 8-oz has largest dollar and unit share in the yogurt market • Significant revenue potential • First mover advantage as organic yogurt brand to enter supermarket channel • Providing organic product attracts higher income and less price sensitive customers thus helping supermarkets gain their market share • High risk and high cost (marketing) • Require quarterly trade promotions • Advertising plan would cost $1.2 million per region per year • SG&A expenses would increase by $320,000 annually • Need to pay one time slotting fee • Channel Conflicts
- 8. PROS CONS • 8-oz has largest dollar and unit share in the yogurt market • Significant revenue potential • First mover advantage as organic yogurt brand to enter supermarket channel • Providing organic product attracts higher income and less price sensitive customers thus helping supermarkets gain their market share • High risk and high cost (marketing) • Require quarterly trade promotions • Advertising plan would cost $1.2 million per region per year • SG&A expenses would increase by $320,000 annually • Need to pay one time slotting fee • Channel Conflicts
- 9. TYPE OF CHANNEL CONFLICT 54 1 Horizontal • Same level 2 3 Vertical • Different level Multichannel • Between two or more channels Supermarket Natural Food Stores Goal Incompatibility Unclear roles and rights Differences in perception Intermediaries' dependence on the manufacture Causes of Channel Conflict
- 10. Margin Analysis
- 11. OPTION 2
- 12. PROS CONS • 32-oz. cups have a higher profit margin than 8-oz. cups • Fewer competitive offerings in this size • Strong competitive advantage in terms of shelf-life • Lower promotion expenses • 32-oz. expansion option would increase SG&A expense by $160,000 • Possible conflict of interests between supermarkets and natural foods stores • Doubt over new users readily entering the brand via multi-use products • Doubtful if existing sales team can achieve nation-wide distribution in 12 months
- 13. OPTION 3
- 14. PROS CONS • Existing strong relationships with leading natural food channel retailers • The sales team was experienced in this distribution channel • Financially attractive- the natural foods channel was growing 7 times faster than the supermarket channel • It would yield the strongest profit contribution of all the strategies under consideration • Missing out on the opportunity to become the first-movers in the supermarket channel • Rapid growth of natureview farms in the natural food channel might lead to bigger demand from retailers, similar to the case of supermarket channel
- 15. OPTION 1 Recommended Solution • Target achieved • First-mover advantage of organic yogurt manufacturer to the supermarket channel • Exposure to new segment i.e price sensitive • 8 oz has maximum demand • Short term risk is compensated by long term revenue increase