NatureView Farm Case Study

1. NATUREVIEW
FARM
Case Study

2. Nature View Inc. is
a small yogurt
manufacturing
company that was
started in 1989
What is NATUREVIEW?

3. Company Background:
1989
• Founded in Vermont
• Entered market with 8-oz and 32-oz with plain and vanilla flavor
• Used natural ingredient with longer average shelf life of 50 days
1999
• Company revenue growth from $100,000 to $13million
• Fruit on the bottom yogurt
• Low-cost “guerilla marketing” tactics
2000
• Expand to multipack yogurts (for children)
• Expand to 12 flavors for 8-oz packaging
• Strong relations with Natural food retailer chains

4. Issues ?

5. Goal:
2000 2001
$13 Million
$20 Million

6. Should
NatureView
expand into
Supermarket
channel?
The Big Question:

7. NV Income Statement,1999

8. Yogurt Market Share by Packaging Segment,
1999
74%
9%
8%
9%
8-oz. cup and smaller
Children's Multipack
32-oz. cups
Other

9. Yogurt Distribution Channel, 1999
97%
3%
Distribution Channel
Supermarkets
Natural Food stores

10. Yogurt Market Share by Region, 1999
26%
22%
25%
27%
Northeast
Midwest
Southeast
West

11. Yogurt Production Costs and Retail Prices
by Channel:
Category
Natural
Food Channel
Supermarket
Food Channel
Manufacturing
Cost
8-oz. cup $ 0.88 $ 0.74 $ 0.31
32-oz. cup $ 3.19 $ 2.70 $ 0.99
4-oz. cup multipack $ 3.35 $ 2.85 $ 1.15

12. Length of Channels to Markets:

13. Yogurt Market Share by Brand:
Dannon
33%
Yoplait
24%
Others
23%
Private Label
15%
Columbo
5%
SUPERMARKET CHANNEL
NatureView
Farm
24%
Brown Cow
15%
Horizon
Organic
19%
White Wave
7%
Others
35%
NATURAL FOODS CHANNEL

15. Sales Projection for Natureview’s Strategic Options:

16. Option 1:Walter Bellini
• Expand in Northeast and
West Supermarket Region
• Bring in top 6 SKUs of the
8-oz. product line

17. Option 1:Walter Bellini
PROS
8-oz have highest incremental demand
Significantly high potential to increase
revenue
First organic yogurt brand to enter
supermarket will have a added
advantage
CONS
High Risk and High marketing cost
Require quarterly trade promotions
Advertising plan would cost $1.2 Mn
per region per year
SG&A expenses increase by $320,000
annually
Need to pay one time slotting fee

18. 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)/$0.46=33% $0.31
Option 1
Supermarket Channel Margin Analysis:

19. 2000 2001
Unit Sales 35000000 35000000x(1+20%)=42000000
Revenue Growth 35000000x$ 0.74= $ 25900000 42000000x$0.74=$31080000
Projected Revenue $13000000+ $25900000= $ 38900000
$13000000+ $31080000= $
44080000
Cost 35000000x$0.31 =$ 10850000 42000000x$0.31= $13020000
Gross Profit $28,050,000 $31,060,000
Expenses
Advertisement $ 1200000x2 regions= $ 2400000 $2,400,000
SG&A $320,000 $640,000
Slotting Fee 6x$10000x20 retailers= $1200000
Broker's Fee $16100000x0.04= $644000 $ 19320000x0.04=$772800
Net Profit $23,486,000 $27,247,200
Option 1
Financial Analysis:

20. Option 2:Jack Gottleib
• Expand in Supermarket
nationally
• Bring in the 4SKUs of the
32-oz. size

21. Option 2:Jack Gottleib
PROS
Generate higher profit margins than 8-oz.
size
Stronger competitive advantage due to
longer Shelf life
Lower Promotion Expenses: promoted only
twice a year
CONS
Doubt if new user will accept the brand via
multi size use
Doubt on sales team’s capability to achieve
full national distribution in 12 months
Need to hire sales personnel and establish
relationships with supermarket brokers
The 32-oz. expansion would increase SG&A
expenses by $160,000

22. Channel Selling Price Margin Cost Price
Retailer $2.70 27% $2.70*73%=$1.97
Distributor $1.97 15% $0.54*85%=$1.67
NatureView $1.67 ($1.67-$0.99)/$1.67=41% $0.99
Option 2
Supermarket Channel Margin Analysis:

23. 2000 2001
Unit Sales 5500000 5500000
Revenue Growth 5500000x$2.70= $14850000 $14850000
Projected Revenue $13000000+ $14850000= $27850000 $27850000
Cost 5500000x$0.99 =$ 5445000 $5445000
Gross Profit $9405000 $22405000
Expenses
SG&A $160,000 $160,000
Slotting Fee 4x$10000x64=$2560000 0
Marketing $120000x4=$480000 $480000
Broker's Fee (4%
revenue) $367400 $367400
Net Profit $18837600 $21397600
Option 2
Financial Analysis:

24. Option 3:Kelly Riley
• Stay in natural Food
Channel
• Introduce 2 SKUs of a
children’s multi-pack

25. Option 3:Kelly Riley
PROS
Confidence of sales team that they could
achieve distribution for the two SKUs
Attractive financial potential: Gross Profit
37.6%
Lower marketing expenses and no
additional SG&A costs to introduce the
product
Natural Food channel was growing almost
seven times faster than the supermarket
Perfect positioning into their core sales
channel
CONS
There were many potential conflicts and
other uncertain factors that the manager
could not determine

26. Option 3
Supermarket Channel Margin Analysis:
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 Food Wholesalers $1.98 7% $1.98*93%=$1.84
NatureView $1.84 ($1.84-$1.15)/$1.84=38% $1.15

27. 2000 2001
Unit Sales 1800000 1800000x1.15= 2070000
Revenue Growth 1800000x$3.35= $ 6030000 2070000x$3.36= $ 6934500
Projected Revenue $13000000+ $6030000= $19030000 $13000000+$6934500=$19934500
Cost 1800000x$1.15=$2070000 2070000x$1.15=2380500
Gross Profit $16960000 $17554000
Expenses
Marketing $250000 $250000
Complimentary Cases $6030000x2.5%=150750 $6934500x2.5%=173363
Net Profit $16559250 $17130637
Option 3
Financial Analysis:

28. Final Decision:
OPTION 1!!
• Target objective of $20 Million Revenue can be
reached
• Demand for 8-oz. yogurt is highest
• First organic yogurt brand to enter supermarket
will have a first mover advantage
• Beneficial for long term

29. Decision Matrix:

31. Sameer Mathur
Marketing Professor 2009 – 2013
Ph.D. and M.S. (Marketing) 2003 – 2009
Indian Institute of Management, Lucknow
Marketing Professor 2013 –
Pooja Preeti
Indian Institute of Technology, Roorkee