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Expand Yogurt Cups into Supermarkets
- 2. Founded in 1989 ,Nature View Farm manufactures and markets refrigerated cup yogurt
- 3. DIFFERENTIATORS Natural Ingredients Longer shell life Great taste and high quality
- 4. Success Factors 1.Brand Name 2.lowcost guerilla marketing 3.strong relationship with distributors 4.National distribution in natural food channel
- 5. YOGURT TRENDS • Sales-1.8 billion $ • Volume sold-2.3 billion units • Sold via Supermarkets-97% Natural food stores-3% • Growth of sales via Supermarkets-3%a year Natural food stores-20% a year
- 6. YOGURT CONSUMPTION 40% 60% Yogurt consumption People who consume People who don’t
- 7. DEMOGRAPHIC DISTRIBUTION OF YOGURT 30% 70% People who consume yogurt Men Women
- 8. Consumption pattern of yogurt 0 10 20 30 40 50 60 70 80 6 &8 oz cups Multipacks 32 oz cups Chart Title growth(% per year) sales(%)
- 9. CHALLENGE: Identify the path to increase revenues by50% in the next23 months
- 10. GOAL: To securethe highest valuation to attract new investors and position itself for acquisition
- 11. It has 3 OPTIONS
- 12. EXPAND 6 SKUS OF 8 oz CUPS INTO 1 OR 2 SELECTED SUPERMARKET REGIONS
- 13. PROS
- 14. 8 ounce cups represent the largest dollar and unit share of the market
- 15. • Other Natural brands like silk soymilk have successfully expanded into the supermarket channel.
- 16. It couldgain a first mover since supermarkets would allow only oneorganic yogurt brand
- 17. RISKS
- 18. The 8 oz size received the highest level of competitive trade promotion and marketing spending
- 19. Possible Channel conflict betweenthe supermarkets and the organic food channel.
- 20. Little Experience in dealing with supermarket channels.
- 21. Difficult to strike a balance betweenshelf presence and slotting expense
- 22. PROS
- 23. To expand 4 SKUs of 32 oz size nationally
- 24. 32 oz cups generated above average gross profit margin as comparedto the 8 oz cups
- 25. There werefewer competitors in the 32 oz market and company has an advantage due to longer shelf life ofthe product
- 26. Promotional expenseswill be lower as 32 oz size is promoted only2 times a year.
- 28. Difficultto achieve full National level distribution in 12 months
- 29. It requires hiringsales personnel to establish relationship with the supermarket brokers thereby increasing the expenses
- 30. • Introduce 2 SKU’s of a children's multipack into the natural food channel.
- 32. It has strong relationship with the natural food retailers for whomyogurt was an important product.
- 33. The company has more time to prepare itself to enter the supermarket channel
- 34. The company has the perfect positioning to launch the children's multipack product into their core sales channel.
- 35. Gross profit-37.6% lowsales and marketing costs Attractive financial potential
- 36. Natural foodchannel was growing7 times faster than the supermarket chain and introducing newproducts will boost the sales of the company.
- 37. CONS
- 38. Missed opportunity to enter the supermarket channel before competitors
- 39. OPTION 1 SELLING PRICE($) MARGIN COST PRICE($) RETAILER-0.74 27% 0.54 DISTRIBUTOR-0.54 15% 0.46 MANUFACTURER- 0.46 =((0.46- 0.31)/0.46)=32.6% 0.31
- 40. PROJECTED INCOME STATEMENT YEAR 2000 YEAR 2001 UNIT SALES 35 million units 35million units1+0.2)=42 million units REVENUE GROWTH 35 million units *0.74=25.9 million $ 42 million units *0.74=31.08 million $ PROJECTED REVENUE 13 million $+25.9million $=38.9 million $ 13 million$+31.08 million $=44.08 million $ COST 35 million units *0.31=10.85 million $ 42 million $*0.31=13.02million $ GROSS PROFIT 38.9 million $-10.85 million $=28.05 million $ 44.08 million $-13.02 million $=31.06 million $ EXPENSES ADVERTISING 1.2 million$*2=2.4 million $ 2.4 million $ S,G&A 120000+200000=32,0000$ 320000*2=64,0000$ SLOTTING FEE 10,000*6*20=1.2 million $ NIL BROKER FEE 0.04*35,000,000*0.46=64400 0$ 0.04*42,000,000*0.46=77280 0$ NET PROFIT GROSS PROFIT- EXPENSES=23.49 million $ 27.25 million $
- 41. OPTION 2 SELLING PRICE($) MARGIN COST PRICE($) RETAILER-2.7 27% 1.97 DISTRIBUTOR-1.97 15% 1.67 MANUFACTURER- 1.67 =((1.67- 0.99)/1.67)=40.71% 0.99
- 42. PROJECTED INCOME STATEMENTYEAR 2000 YEAR 2001 UNIT SALES 5.5 million units 5.5 million units REVENUE GROWTH 5.5million units*2.7=14.85million $ 14.85 million $ PROJECTED REVENUE 13 million$+14.85 million $= 27.85 million $ 27.85 million $ COST 5.5 million units*0.99=5.45 million $ 5.45 million $ GROSS PROFIT 22.41 million $ 22.41 million $ EXPENSES ADVERTISING 120000*4=480000$ 480000$ S,G&A 160000$ 160000$ SLOTTING FEE 10,000*4*64=2.56 million $ NIL BROKER FEE 0.04*5500000*1.67=367,400 $ 367,400$ NET PROFIT GROSS PROFIT- EXPENSES=18.89 million $ 21.4 million $
- 43. OPTION 3 SELLING PRICE($) MARGIN COST PRICE($) RETAILER-3.35 35% 2.18 DISTRIBUTOR- 2.18 9% 1.98 WHOLESALER- 1.98 7% 1.84 MANUFACTURER -1.84 37.5% 1.15
- 44. PROJECTED INCOME STATEMENT YEAR 2000 YEAR 2001 UNIT SALES 1.8million units 1.8 million*1.15=2.07 million units REVENUE GROWTH 1.8 million units*3.35=6.03million$ 6.93 million$ PROJECTED REVENUE 13 million$+6.03million $= 19.03 million$ 19.93 million$ COST 1.8 million units*1.15=2.07 million $ 2.38 million$ GROSS PROFIT 16.96 million$ 17.55 million$ EXPENSES MARKETING EXPENSES 250,000$ 250,000$ COMPLIMENTARY CASES 0.025*6.03 million =150750$ 173,363$ NET PROFIT GROSS PROFIT- EXPENSES=16.56 million$ 17.13 million $
- 46. CONCLUSION Choose Option 1 as it generates the greatest revenue among all the three options (44 million $)
- 47. SUMMARY 1.INTRODUCTION 2.YOGURT MARKET TRENDS 3.CHALLENGES AND GOALS 4.ANALYSIS OF OPTIONS 5.CONCLUSION
- 48. DISCLAIMER Created by Vaishali Aravamuthan during an internship with Prof Sameer Mathur, IIM Lucknow