This case study analyzes options for expanding the organic yogurt company Natureview. It examines entering the supermarket channel through 8-oz cups (Option 1) or 32-oz cups (Option 2), or expanding in the natural foods channel through children's multipacks (Option 3). Option 1 has the highest potential revenue but also highest costs. Option 2 has lower costs but smaller size may limit growth. Option 3 has strong existing relationships and high margins in the natural foods channel. The recommendations are that Option 1 is financially attractive if distributed regionally initially to implement more easily and gain first mover advantage, despite high slotting fees.

1. CASE STUDY
© All Rights Reserved | Shivam Pal, IITK

2. Introductions
Founded in 1989
Manufacturer and Marketer of yogurt
Key Differentiations
Natural Ingredients
Long shelf life
Reputation of high qualty
Great taste

3. Natural Market Trends
Organic foods market predicted to grow from
$6.5 billion to 13.3 billion over 4 years
67% households consider price as a barrier to
purchase organic products
44% of consumers would like a wider selection
of organic products in super markets

4. Yogurt Market Trends
Concentrated - 4 competitors control over
50% share
Supermarkets - 97% of sales (3% growth)
Natural Food Stores - 3% total sales (20% growth)
Factors - Package type/size, flavour, price, freshness, ingredients

5. Identify patch to grow revenues by
over 50% within 23 months

6. ssible valuation in order to new investors or position itself

7. Expand 6 SKU’s to the 8-oz
product line
Expand 4 SKU’s of
the 32-oz product
line
Expand 2 SKU’s of a
children’s multi pack

8. Option 1
Super Market Channel
Entry Analysis

9. Advantages
8-oz cups represent largest dollar and unit share of market
Supermarkets fear losing share to natural food competitors
First mover adventage
Supermarkets may only authorise one only organic yogurt
manufacturer

10. Disadvantages
Highest level of competitive trade promotion and marketing spend
Possible channel conflict b/w supermarkets and natural food stores
Promotion and lower price as supermarkets may hurt the brand
Little experience in dealing with supermarket chains

11. Analysis Calculations
Chain Level Margin Cost Price Selling Price
Retailer 27% $0.74 x 73%= $0.54 $0.74
Distributor 15% $0.54 x 85% = $0.46 $0.54
Natureview
($0.46 - $0.31)/$0.46
= 33%
$0.31 $0.46
Super Market Analysis

12. Year 2000 Year 2001
Unit Sales 3,50,00,000
35,000,000 x (120%)
= 42,000,000
Revenue
3,50,00,000 x $0.46
= 16,100,000
42,000,000 x $0.46
= $19,320,000
Cost
3,50,00,000 x $0.31
= $10,850,000
42,000,000 x $0.31
= 13,020,000
Gross Profit 52,50,000 6,30,00,000
Expenses
Advertisement
1,200,000 x 2 regions
= 2,400,000
24,00,000
SG&A 3,20,000 3,20,000
Slotting Fee
6 x 10,000 x 20 retails
= 1,200,000
Broker’s Fees
$16,100,000 x 4%
= $644,000
$19,320,000 x 4%
= $772,000
Net Profit $686,000 $2,847,200

13. Option 2
Super Market Channel
Entry Analysis
32-oz

14. Advantages
32-oz cups generate an above average gross profit margin(43.6%)
Fewer competitive offerings in this size
Competitive advantage due to long shelf life of product
Lower promotional expenses than option 1

15. Disadvantages
Higher slotting fees for wider supermarkets
Such a larger distribution over 12 months is difficult
Possible channel conflict
Promotion and lower prices at supermarket may hurt the brand

16. Analysis Calculations
Chain Level Margin Cost Price Selling Price
Retailer 27%
$2.7 x 73%
= $1.97
$2.70
Distributor 15%
$1.97 x 85%
= $1.67
$1.97
Natureview
($1.67 - $0.99)/$1.67
= 41%
$0.99 $1.67
Super Market Analysis

17. Year 2000 Year 2001
Unit Sales $5,500,000 $5,500,000
Revenue
$5,500,000 x $1.67
= $9,185,000
$9,185,000
Cost
$5,500,000 x $0.99
= $5,445,000
$5,445,000
Gross Profit $3,740,000 $3,740,000
Expenses
Advertisement
120,000 x 4 regions
= $480,000
4,80,000
SG&A 1,60,000 3,20,000
Slotting Fee
4 x 10,000 x 64 retails
= 2,560,000
Broker’s Fees
$9,185,000 x 4%
= $367,400
$367,400
Net Profit $172,600 @2,572,600

18. Option 3
Multipack - Natural
Foods Channel

19. Advantages
Strong relationships with natural foods channel retailers
Financially attractive due to high margins 37.6%
Low sales and marketing expenses

20. Disadvantages
Fast growth of natural foods channel leading to high demands
Miss opportunity to enter supermarkets before competitors

21. Analysis Calculations
Chain Level Margin Cost Price Selling Price
Retailer 35%
$3.35 x 65%
= $2.18
$3.35
Distributor 9%
$2.18 x 91%
= $1.98
$2.18
Whole Saler 7%
$1.98 x 93%
= $1.84
$1.98
Natureview
($1.84-$1.15)/$1.84
= 38%
$1.15 $1.84
Super Market Analysis

22. Year 2000 Year 2001
Unit Sales 18,00,000
1,800,000 x 115%
= 2,070,000
Revenue
1,800,000 x $1.84
= $3,312,000
2,070,000 x $1.84
= $3,808,000
Cost
1,800,000 x $1.15
= $2,070,000
2,070,000 x $1.15
= $2,380,500
Gross Profit $1,242,000 $1,428,300
Expenses
Advertisement 2,50,000 2,50,000
Complimentary Case
3,312,000 x 2.5%
= 82,800
3,808,000 x 2,5%
= 95,220
Net Profit $909,200 $1,083,080

23. Recommendations
Option 1 is financially good
Only regional wise distribution rather than national making it to implement easily
First mover advantage and marketing tenetration
High slotting fees, but more visibility of product

25. Disclaimer
Created by
Shivam Pal, IIT Kanpur,
during a marketing internship under
Prof. Sameer Mathur, IIM Lucknow