Natureview Farm produces yogurt and is considering expansion options. Option 1 is to expand its 8 oz cups into 2 supermarket regions, which could significantly increase revenue but also costs. Option 2 is to launch its 32 oz cups nationally for high margins but distribution risks. Option 3 is a children's multipack in natural food stores, which is the most profitable but may not meet Natureview's goals. The best option is to pursue Option 1 to reach its revenue growth target.

1. Natureview farm
-Case study

2. Background
• Founded Cabot, Vermont
• First entered the narket with 8-oz and 32-oz, plain and
vanilla flavor
• Use natural ingredient
• Longer average shelf life of 50 days
• Revenue growth from $ 1 mn to $13 million
• Expanded to 12 yogurt flavors and multipack yogurt for
children

3. Factors considered during yogurt purchase
Packaging
type/size
Taste Flavour
Price Freshness Ingridient
Organic or not

4. 74%
9%
8%
9%
Yogurt market share by packaging segment
8-oz. cups and smaller Children’s multipacks 32-oz. cups Other

5. 26%
22%
25%
27%
Yogurt Market Share by Region
Northeast Midwest Southeast West

6. Distributor
Manufacturer
Retailer
Customer
Manufacturer
Retailer
Customer
Natural food
wholesaler
Natural Food
Distributor
Length of channel to market

7. 24%
15%
19%
7%
35%
Natural Foods Channel
Natureview Farm Brown Cow Horizon Organic White Wave Others
Yogurt market share by brand

8. Supermarket Channel
Dannon Yoplait Others Private Label Columbo
Yogurt market share by brand

9. Natural food
channel
Supermarket
food channel
Manufacturing
costs
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
Yogurt production cost and reatail prices by channel

10. Options and dilemma
1. to expand six SKUs of the 8-oz.
two selected supermarket
channel regions.
2. to expand four SKUs of the 32-oz.
size nationally
3. introduce two SKUs of a
children’s multi-pack into the
natural foods channel

11. Option 1:
expand six SKUs of the 8-oz. two selected supermarket
channel regions.
Pros
 8oz have highest incremental
demand
 High potential to increase
revenue
 First mover as organic
yogurt brand to enter the
supermarket channel
Cons
 High rish and high marketing cost.
 Require quarterly trade promotions
 SG&A expenses increase by $320,000
annually
 Need to pay one time slotting
 Natural food chain retailer may decrease or
cease to sell their products

12. Channel Cost Price Margin Selling Price
Retailer $0.74 27% 0.74 x 73%=$0.54
Distributor $0.54 15% 0.54 x 85%=0.46
Natureview $0.46 ($0.46-$0.31)/0.46
=33%
$0.31
Super market channel margin analysis

13. Projection income statement
2000 2001
Unit sales 35000000 5000000 x (1 + 20%) = 42000000
Revenue growth $35000000 x $0.74 = $259000000 42000000 x 0.74 = $31080000
Projected revenue $13000000 + 259000000 =
$389000000
$13000000 + 31080000 =
$4408000
Cost 35000000 x $0.31 = $10850000 42000000 x 0.31 = $ 13020000
Gross profit $28050000 $31060000
Expanses:
Advertisement $1200000 x 2 region = $2400000 $2400000
SG&A $320000 $640000
Slotting fee 6 x $10000 x 20 retails = 1200000
Broker's fee $161000000 x 0.04 = $644000 $19320000 x 0.04 = $772800
Net profit $23486000 $27247200

14. Option 2:
Expand four SKUs of the 32-oz. size nationally
Cons
Doubt on claim of new users would
readily “enter the brand” via a multi-
use size
Doubt on sales team’s ability to
achieve full national distribution in 12
months
The 32-oz expansion would increase
SG&A expenses by $160,000
Pros
Generate high profit margin
than 8-oc size
Strong competitive
advantage: longer shelf life
Lower promotion expenses

15. Channel Cost Price Margin Selling Price
Retailer $2.70 27% 02.70 x 73%=$1.97
Distributor $1.97 15% 0.54 x 85%=1.67
Natureview $1.67 ($1.67-
$0.99)/%1.67
=41%
$0.99
Super market channel margin analysis

16. Projection income statement
2000 2001
Unit sales 5500000 5500000
Revenue growth 550000 x 2.70 = 14850000 14850000
Projected revenue 14850000 + 13000000 =
27850000
27850000
Cost 5500000 x 0.99 = 5445000 5445000
Gross profit 9405000 22405000
Expanses:
Slotting fee 4 x 10000 x 64 = 2560000 0
SG&A 160000 160000
Marketing 120000 x 4 = 480000 480000
Broker's fee(4% revenues) 3674000 367400
Net profit 18837600 21397600

17. Option 3
introduce two SKUs of a children’s multi-pack into the natural foods channel
Pros
 The sales was confident that they could achieve
distribution for two SKU’s.
 The financial potential; was very attractive
 It would yield the strongest profit contribution
of all the strategies under consideration.
 The natural foods channel was growing seven
times faster
Cons
 There were many potential
conflicts.
 Can not achieve the target
objective of Natureview
farm.

18. Channel Selling price Margin Cost price
Retailer $3.35 35% $3.35 x65% = $.18
Dristributer $2.18 9% $2.18 x 91% = $1.98
Nature foods
wholesalers
$1.98 7% $1.98 x 93% = $1.84
Natureview $1.84 ($1.84 - $1.15)/$1.84 =
38%
$1.15
Super market channel margin analysis

19. 2001 2001
Unit sales 1800000 1800000 x 1.15 = 2070000
Revenue growth 1800000 x 3.35 = 6030000 2070000 x 3.35 = 6934500
Revenue projection 6030000 + 13000000 =
19030000
69345000 + 13000000 =
19934500
Cost 1800000 x 1.15 = 2070000 2070000 x 1.15 =
23805000
Gross profit 16960000 17554000
Expense:
Marketing 250000 250000
Complementry cases 6030000 x 2.5% = 150750 6934500 x 2.5% = 173363
Net profit 16559250 17130637
Projection income statement

20. Solution
Go for option 1
Only through this way Natureview farm will reach its objective
of increasing the revenue by 50% by the end of 2001.

21. Disclaimer
Created by Ritika Sharma JIIT Noida, during a Marketing
Internship with Prof. Sameer Mathur, IIM Lucknow.