This document analyzes three options for expanding the yogurt business of Natureview Farm: 1) Expanding six 8-oz SKUs into northeast and western supermarket regions, which could generate $6.93 million in profit but require high promotional expenses. 2) Expanding four 32-oz SKUs nationally, with lower expected profit of $1.765 million due to high slotting fees. 3) Introducing two children's multi-packs into natural foods channels, with expected profit of $1.67 million but risks affecting existing natural foods relationships. The decision is made to pursue option 1 and expand 8-oz SKUs into select supermarket regions to leverage high demand and potential first-

4. Yoghurt Market Share (Supermarket channel), 1999
74%
9%
8%
9%
Packaging Segment
8-oz. and smaller Multipacks 32-oz.cups other

5. Yoghurt Market Share (Supermarket channel), 1999
26%
22%25%
27%
Sales
Northeast Midwest Southeast west

6. Supermarket Channel
Manufacturer
Distributor(Margin-
15%)
Retailer( Margin –
27%)
Customer
 Natureview would be
required to pay a one-time
“slotting fee” for each
SKU(Stock Keeping Unit)
only in the first year
 For refrigerated yogurt, the
slotting fee averaged
$10,000 per SKU per retail
chain.

7. Natural Foods Channel
 Natural foods chains
typically charged higher
retail prices for the same
products than supermarkets
did, due to lower price
sensitivity among natural
foods customers as well as
differences in the
distribution system.
Manufacturer
Natural Foods
Wholesaler ( Margin–
7%)
Natural Foods
Distributor (Margin –
9 %)
Retailer ( Margin –
35%)
Customer

8. Yoghurt Market Share by Brand,1999
33%
24%
23%
15%
5%
Supermaket Channel
Dannon Yoplait
Others Private Label
Columbo
37%
23%
29%
11%
Natural Foods Channel
Natureview Farm
Brown Cow
Horizon Organic
White Wave
Others

9. TO EXPAND SIX SKUS OF THE 8-OZ.
PRODUCT LINE INTO TWO SELECTED
SUPERMARKET CHANNEL REGIONS
(NORTHEAST & WEST)
Option 1

10. Pros
 Eight-ounce cups represented the largest dollar and
unit share of the refrigerated yogurt market
 Other natural foods brands had successfully
expanded their distribution into the supermarket
channel.
 One of Natureview’s major natural foods competitors
would soon try to expand into the supermarket
channel. The first brand to enter the channel could
therefore have a significant first-mover advantage.

11. Cons
 The 8-oz. size received the highest level of
competitive trade promotion and marketing
spending.
 Natureview Farm’s sales broker had indicated that
supporting this cup size would require quarterly
trade promotions and a meaningful marketing
budget.

12. Cost Analysisfor a year
 Expected Revenue -
35,000,000*$0.31 = $10.85 million
 Expenses –
1. Advertising - $1.2 million * 2 = $2.4 million
2. SG & A Expenses - $0.2 million
3. Marketing staff - $0.12 million
4. Stock Keeping Unit Cost - $1.2 million
 Gross increase in profit –
$10.85 million - $ 2.92 million = $ 6.93 million

13. TO EXPAND FOUR SKUS OF
THE 32-OZ. SIZE
NATIONALLY
Option 2

14. Pros
 Although 32-oz. cups comprised a smaller unit and
dollar share of the yogurt market, they currently
generated an above-average gross profit margin for
Natureview
 There were fewer competitive offerings in this size
 Natureview Farm had a strong competitive
advantage because of the product’s longer shelf life.
 Promotional expenses would be lower

15. Cons
 Slotting expenses would be higher because national
distribution would require slotting fees across a
larger number of retailers
 the management team doubted that new users would
readily “enter the brand” via a multi-use size.

16. Cost Analysisfor a year
 Expected Revenue -
5,500,000*$0.99 = $5.445 million
 Expenses –
1. Advertising - $0.12 million * 4 = $0.48 million
2. SG & A Expenses - $0.64 million
3. Stock Keeping Unit Cost - $2.56 million
 Gross increase in profit –
$5.445 million - $ 3.68million = $ 1.765 million

17. T O I N T R O D U C E T W O S K U S O F A C H I L D R E N ’ S
M U L T I - P A C K I N T O T H E N A T U R A L F O O D S
C H A N N E L
Option 3

18. Pros
 The company already had strong relationships with
the leading natural foods channel retailers, and
expansion into the supermarket channel could
potentially affect these relationships.
 Natureview Farm’s all-natural ingredients would
provide the perfect positioning from which to launch
its own children’s multi-pack product offering into
their core sales channel.

19. Cons
 Natureview’s marketing department was unprepared
to handle the demands on resources and staffing that
entering the supermarket channel would impose.

20. Cost Analysisfor a year
 Expected Revenue -
1,800,000*$1.15 = $2.07 million
 Expenses –
1. Marketing Expenses - $0.25 million
2. Cost of Complimentary cases - $0.15075 million
 Gross increase in profit –
$2.07 million - $0.40075 million = $ 1.67million

21. DECISION
 Go for option 1
 Reach beyond the target objective of 20 million
revenue by end of 2001
 8 –oz yogurt is the highest demand
 In supermarket, can expose to more range of
customers
 Will have the first mover advantages of natural
product to enter supermarket