Natureview Farm produces refrigerated yogurt cups and wants to increase annual revenue from $13 million to $20 million. The company's board proposed three options: 1) Expand the 8oz product line into supermarket channels, 2) Expand the 32oz product line nationally, or 3) Introduce children's multi-packs into natural food channels. Option 2 of expanding the 32oz line nationally was recommended as it would generate the highest profits of $2.57 million while allowing the company to build relationships with supermarket chains and leverage its point of difference of long shelf life.

1. Natureview Farm
- Harvard Case Study

2. BACKGROUND
• Founded in 1989 Natureview manufactured refrigerated yogurt cups.
• It produced in its production facility at Vermont(Cabot).
• The key to Natureview Farm yogurt's flavor and texture was a family
recipe developed by the founder.
• Within 10 years the revenue of Natureview grew from less than $10,000
to $13 million.

3. Product Line
The company
first entered
the market.
Later in it
started
introducing
By 2000,the
company
8 oz. Cups
4 flavors
32 oz. Cups
4 flavors
"Fruit on
the
bottom"
32 oz. Cups
12 flavors4oz. Cups
For children
8 oz. Cups
12 flavors

4. Objectives
The company's board
has decided to formulate
and develop plans to
increase the revenues of
the company by 50% by
the end of 2001.
This meant a jump from
a total of $13 million to $20
million by the end of 2001.
$20 million

5. Market
Requirements
 Size of Package
 Taste
 Flavor
 Price
 Freshness
 Organic Nature
 Ingredients

6. Points of Difference
The recipe of the
yogurt is very
organic and also
natural .
1
It has very high
shelf life which is in
of the most
desirable factor.
2
It did not use any
kind of artificial
thickeners to get
the smooth
texture.
3
It was completely
natural also many
of its flavored
yogurts were also
natural.
4
Also the cost was
very much
affordable.
5

7. What
More?
Natureview has a
weak supermarket
supply channel
.The statistics show
that supermarkets
are good channels
of sales .
The firm has to look out for
strong financial support and
also concentrate on its sales
team's capability.
It has to build the
ability to take risks
and enter newer
markets and
expand
productlines.

8. The Length of
Channels to
market

9. Supermarket Channel vs.
Natural Food Channels
Supermarket Channel Natural Food Channel
They had lower prices due to their vast
distribution channel .
They charged higher prices than super
markets.
It involved three parties for distribution . It involved four parties of distribution.
They did not allow shops to order lesser
stock.
They would "break cases" to deliver to
shops with lesser shelf capacity.
They charged a slotting fee for every
entry of the product.
They had one-time allotment of a free case
of every SKU for one year.
The prices:
8 oz. = $ 0.74
32oz. = $ 2.70
4 oz. Multi pack = $ 2.85
The prices :
8 oz. = $ 0.88
32oz. = $ 3.19
4oz. Multi pack = $ 3.35

10. Options by the
SMT

11. Option 1
The vice president proposed to expand the six
SKUs of the 8oz product line into one or two
selected supermarket channel regions .

12. Advantages
• 8 oz. Had the largest market share in terms of both quantity and
revenue.
• The super market channel of distribution was very desirable due to
low selling price and also many natural food brands had entered it.
• Many of the company's competitors were planning to shift to the
supermarket channel which could authorize only one brand.
• The firm would make a marginal profit of 33%.

13. Disadvantages and Risks
• The plan required regular and planned advertising and
promotion which in turn required more money.
• Also the company had to depend on its brokers for its
expansion into the supermarket channel.
• The company must also consider the "slotting fee". For the super
markets which had to be paid for every entry of a good.
• Also inefficient sales and marketing team was a point of
concern.

14. Analysis

15. Selling Price of the product = $0.74/cup
Margin(Distributor) = 15%
Margin(retailer) = 27%
Selling Price for the firm = $0.46/cup
Predicted Sales = 42 million
Revenue = 42 million*(0.46)
= $19.32 million
Expenses
Cost($0.31/cup) = $ 13,020,000
Advertising = $2.4 million
SG&A = $6.4 million
Broker fees(4%) = $772,800
Total Profits : $2,487,200

16. Option 2
The vice president of operations had proposed to
expand the four SKUs, of 32 oz. nationally.

17. Advantages
The 32 oz. Cups generated an above-average gross profit margin for
Natureview.(43.6%).
The company did not have any major competitors in this segment. It
was because the products' longer shelf life. This is one of the major
advantage for the company .
Also the slotting fees for the products though had to be paid , the
promotion for the 32 oz. was done only twice a year.
The marketing expenses were almost 10% lower than what was
projected for the 8 oz.

18. Disadvantages and Risks
▪ The firm had to look at various risks in associated with this
decision which include the capability of the sales and
marketing team .
▪ This decision would require more of branding and advertising
which would incur more costs for SG & A and increase the
overall cost by $160,000.
▪ Also the firm must also consider ways to communicate and
establish relationships with supermarket chains.
▪ Supermarkets were themselves launching 32oz. Cups which
created more competition

19. Analysis

20. Selling Price of the product = $2.70/cup
Margin(Distributor) = 15%
Margin(retailer) = 27%
Selling Price for the firm = $1.67/cup
Predicted Sales = 5.5 million
Revenue = 5.5 million*(1.67)
= $9,185,000
Expenses
Cost($0.99/cup) = $ 5,445,000
Marketing = $480,000
SG&A = $160,000 million
Broker fees(4%) = $367,400
Total Profits : $2,572,600

21. Option 3
Assistant marketing director
proposed the idea of introducing
two SKUS of children's multi-pack
into natural foods channel.

22. Advantages
▪ Company's strong relationships with the leading natural foods
channel.
▪ The company's natural ingredients provided a desirable factor to
expand in the children's segment with regard to the growing health
concern.
▪ The sales team felt it was capable of reaching to the expectations.
▪ There was a potential for risk free profit with a margin of 37.6%. This
was highest of all the options.
▪ The natural food channel was growing at a very fast pace.

23. Disadvantages and Risks
▪ There was no point to consider the channels' conflict.
▪ The company must expand to all the channels for reaching out
to a large customer base.
▪ Entering the super market channel sector also involved large
amounts expenditure.
▪ The firm will have to involve in large amount of research and
development which is cost effective.

24. Analysis

25. Selling Price of the product = $3.35/cup
Margin(Distributor) = 35%
Margin(retailer) = 9%
Natural food Wholesalers = 7%
Selling Price for the firm = $1.84/cup
Predicted Sales = 2.07 million
Revenue = 2.07 million*(1.84)
= $3,808,800
Expenses
Cost($1.15/cup) = $ 2,380,500
Marketing = $250,000
Complementary cases(2.5%) = $ 95,220
Total Profits : $1,083,080

26. Some statistics

27. Income Statement

28. Market Share

29. Market share(%)

30. Market Share (%)

31. Which is a better option?

32. By comparing all the factors and analyzing
the statistics Option 2 would be preferable for
the company. This is because the firm will
have a chance to connect with the super
market channel and build a strong positioning
for itself. This would also help it to introduce
newer products on its name. The firm can also
make its desirable nature (i.e. long shelf life )
a point of difference for its competitors.

33. -S.Purvaj