Case study on " Natureview farm" as a project in the internship under Prof. Sameer Mathur

1. CASE ANALYSIS
NATUREVIEW FARM

2. INTRODUCTION

4. Natureview
Farm Inc. is a
small yogurt
manufacturer
It
manufactures
refrigerated
cup yogurt
Founded
in 1989
The yogurt is
manufactured
at its farm
production
facility in
Cabot,
Vermont
Natureview
Farm’s
revenues has
grown from
around
$100,000 to
$13 million
Jim Wagner,
hired in
1996 as
chief
financial
officer (CFO)

5. Yogurt Market Share by Brand (1999)
Supermarket Channel
Dannon
33%
Yoplait
24%
Private
Label 15%
Columbo
5%
Others
23%

6. Yogurt Market Share by Brand (1999)
Natural Foods Channel
Natureview
Farm 24%
White
Wave
7%
Others 35%
Horizon
Organic
19%
Brown Cow
15%

8. The Beginning
The company first
entered the market with
8-ounce (oz.) and 32-oz.
cup sizes of yogurt in two
flavours— plain and
vanilla.
Generated
revenues of
$13,000,000
in the year
1999
Grew quickly
to national
distribution
on a shared
leadership in
the natural
foods chain

9. The early 21st
By 2000,Natureview Farm
produced twelve refrigerated
yogurt flavors in 8-oz. cups
(86% revenues) and four
flavors in 32-oz. cups (14%
revenues).
The company
had also started
exploring
multipack yogurt
products
(children’s 4-oz.
cups and yogurt
packaged in
tubes).
Grew quickly to
national
distribution on a
shared
leadership in the
natural foods
chain

10. Currently…
VC firm is thinking to cash out of its
investments.
The company has
to find a way to
increase its
revenues to $ 20
million by the end
of 2001
The company
faces a dilemna to
whether to enter
supermarket
channel and face
the risk to upset
traditional channel
retailers and
suppliers

11. Natureview Farm Income Statement
(1999)
• Cost of goods sold-$8,190,000(63%)
• Gross profit- $4,810,000(37%)
Revenues
$13,000,000(100%)
• Administration/Freight - $2,210,000(17%)
• Sales - $1,560,000(12%)
• Marketing - $390,000(3%)
• Research & Development - $390,000(3%)
Expenses
•Net Income - $260,000(2%)INCOME

12. STRENGT
H
• A very strong
organic healthy
brand
• Longer shelf life
• Usage of natural
THREAT
S
• Being dropped out
of traditional
channel on
entering
supermarket
• Competitors
claiming higher
percentages of
sales with their
new organic
brands
WEAKNESSES
• Sales teams ability on
doubt to increase the
reach to supermarkets.
• Has low potential to
take higher risks as
finances involved are
lower in figures.

13. NEED OF THE HOUR : To
increase revenues generated
by the company to
$20,000,000 by 2001 end.

14. SOLUTIONS
Increase the
product
sales
exponentiall
y
Improve
product life
and
efficiency
Cut down
total
transaction
costs
Reach a
wider
range of
potential
customers

15. YOGURTING…..!

16. SALES GROWTH CATALYST
• Increase product manufacturing and the items in a typical case
• Increase the variety and quantity of products supplied to its retailers.
• Enter the supermarket channel to explore a wider range of potential
customers.
• Brand extension to more flavours and other dairy products.

17. Organic products sales distribution channels
Supermarket
46%
Small health foods store
25%
Natural foods supermarket
29%
Supermarket Small health foods store Natural foods supermarket

18. Deciding
Factors to
select
yogurt
products
Size of
package
Flavour
price
Ingredient
s
Taste of
product

19. Yogurt Production Costs and Retail Prices by
Channel
8-ounce cup
($0.88)
32-oz. cup
($3.19)
4- ounce
cup
multipack
($3.35)
Natural foods channel(average retail
price)
Super market channel(average retail price)
8-ounce cup
($0.74)
32-oz. cup
($2.70)
4- ounce cup
multipack
($2.85)

20. Yogurt Market Share by Packaging
Segment(1999)
0
10
20
30
40
50
60
70
80
8 ounce cups and
smaller
Children’s multipacks 32-oz. cups Other
(Supermarket channel, in % U.S. dollars)
Dollar Share Dollar Share change vs prior year(increment %)
0
5
10
15
20
25
30
35
Northeast Midwest Southeast West
No. of retailers in the region Dollar share (in %)
(Supermarket channel, in % U.S. dollars)

21. NATURALFOODCHANNEL
Manufacturer
Natural foods
wholesaler • Margin(7%)
Natural foods
distributor • Margin(9%)
Retailer
Consumer
• Margin(35%
)

22. Supermarket
channel
Manufacturer
Distributor • Margin(15%)
Retailer
Consumer
• Margin(27%
)

23. Strategies Proposed
by
senior marketing
team

24. OPPORTUNITIES
PROPOSAL# 1
Expansion in
North-east and
western markets
regions
Bringing in the
8SKUs of 8 ounce
size
PROPOSAL #2
Expansion in
national
supermarkets all
over the continent
Bringing in 4 SKUs
of 32 ounce size
PROPOSAL #3
Continue to sell
products through
natural food
channel
Introduce two
children multi-pack

25. PROPOSAL #1
-By Walter Bellini
(vice president,sales)

26. STRENGTHS
8 ounce
have highest
potential to
grow
Highest
potential to
increase
revenue
Will become
the first
seller of
organic
products in
supermarket

27. THREATS
Will require
quarterly
trade
promotions
Traditional
retailers and
distributors
will get upset
by the move
Advertising
will cost
$1.2 million
per region
every year

28. PROPOSAL #2
-By JACK GOTTLEIB
(VICE PRESIDENT,OPERATIONS)

29. STRENGTHS
32-oz size will
generate
higher profit
margins than
8-oz. size.
Will incur
lesser
promotional
expenses
Longer
shelf life of
32-oz size
product

30. THREATS
The supermarket
expansion will
increase the
SG&A expense
by $160,000.
Have to hire sales
personnel and
develop relations
with supermarket
brokers.
Doubts on sales
team capability
to achieve
nation-wide
distribution in
just 12 months.

31. PROPOSAL #3
-By KELLY RILEY,
(ASSISTANT MARKETING DIRECTOR)

32. STRENGTHS
The natural foods
channel was growing
almost seven times
faster than the
supermarket channel.
Sales team could
confidently
achieve
distribution for
two SKUs.
It would yield
the strongest
profit
contribution
among all the
proposal under
consideration.

33. THREATS
A proper analysis
of potential threat
could not be
carried out which
was the biggest
threat
Potential
conflicts
could play
foulplay.
Targets
certained by
the company
was difficult
to achieve to
the fullest

35. Sales projections on the proposals
PROPOSAL #1
• Expand 6
SKUs of 8 oz.
size into
eastern and
western
supermarket
regions
• Expected
incremental
retail unit sale
- 35,000,000
PROPOSAL #2
• Expand 4
SKUs of 32
oz. size
nationally into
supermarket
channel.
• Expected
incremental
retail unit sale
- 5,500,000
PROPOSAL #3
• Introduce two
children’s
multipack in
natural foods
channel
• Expected
incremental
retail unit sale
- 1,800,000

36. Judgement criteria
• The total expenditure incurred for marketing proposal
execution is takes as one of the foremost criteria for
selecting the proposal
• Total cost = Total Fixed cost + Advertising cost +
Promotion Cost + SKU cost
• Total Fixed cost for all the three options remains same.

37. Proposals depth analysis
PROPOSAL #1
• SG&A expenses
increase by
$320,000 a year
• $1.2 million
advertisement
cost per region
every year
• 35 million
incremental sales
units
• SKUs costs of
setting is incurred
PROPOSAL #2
• SG&A expenses
increase by
$160,000 a year
• Comparatively
lesser
advertisement
budget as 32
ounce product is
advertised only
twice a year
• 5.5 million
incremental sales
units
• SKUs costs of
setting is incurred
PROPOSAL #3
• SG&A expenses
increase by $0 a
year
• Marketing
expenses increase
@ $250,000 a
year
• 1.8 million
incremental sales
units
• No SKUs costs of
setting is incurred

38. Inferences

39. I.
• As per cost analysis , option 3 seems to be the best
option.
II.
• Taking other factors into consideration like
distributor , retailer etc, option 3 has no risk of loss.
III.
• However, sales team capabilities remain a big
question In this option.
IV.
• Still the overall risk factors are minimum in this
case.

41. •WhatisNatureView?
•Brief company Backgroundand keypersonnel
•Early daysand progress of company
•Major issuesaddressed in thecase
•Howtoincrease sales andrevenue
•Survey exhibits &factors affecting yogurtchoice
•SupermarketChannelsvs.NaturalChannels
•Analysisof 3 proposed options
•Difference between options
•Inference

42. DISCLAIMER
Created by SAURABH BOSE,VNIT Nagpur
during a marketing internship by
Prof. Sameer Mathur, IIM Lucknow