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Natureview farm
Natureview Farms seeks to increase revenue from $13 million to $20 million by 2001 to satisfy venture capital backers looking to cash out. The management must evaluate options to maximize revenue and valuation for a new investor. Option 3 is recommended: introduce 2 new children's yogurt multipack SKUs in the natural foods channel. This option achieves the target revenue, minimizes risk, and allows Natureview to remain true to its brand without damaging current partnerships. It also requires the least additional costs while still earning substantial revenues and profitability.
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Natureview farm
- 1. Natureview Farm: HBS CaseAnalysis Submitted by Vivek Jacob Mathai
- 2. Natureview Farms • Smallscale Yogurt manufacturer • Annual Revenue: $13 MILLION • Completely Natural Ingredients (USP)
- 4. Barry Landers: CEO ChristineWalker: VP, Marketing Kelly Riley, Asst. Marketing Director Jack Gottlieb VP,Operations Walter Bellini:VP, Sales
- 6. • Natureview seeksto increase their revenue from $13 Million(as of 1999) to $20 Million, by the end of 2001 • Their VC backers now needed to cash out of its investment in Natureview. • The Natureview Management is faced with the task of MAXIMISING REVENUE, so as to attain the highest possible evaluation, when FINDING a NEW INVESTOR
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- 8. • Success Factors: StrongBrand Low Cost Good relationship with distributor Nation-wide distribution channels
- 9. Unique Selling Points(USPs) •Only Natural Ingredients • Long Shelf Life • Reputation for High Quality and Great Taste
- 10. TIME FOR SOMENUMBER CRUNCHING ABOUT THE YOGURT INDUSTRY!
- 11. Market Share Market Shareby Packaging <= 8-oz. Kids' Multipack 32-oz. cups Other Market Share by Region Northeast Midwest Southeast West
- 12. Competitor Market Share SupermarketChannel Dannon Yoplait Others Private Label Columbo Natural Foods Channel Natureview Brown Cow Horizon Organic White Wave Others
- 13. HOW DO WEACHIEVE THIS INCREASE IN REVENUE? WILL MOVING INTO THE SUPERMARKET CHANNELS HELP US?
- 14. SWOT ANALYSIS • Strengths• Weaknesses • Long product shelf life • Reputation of high quality, taste and natural ingredients • Strong relationship with nature store retailers • Small manufacture, low funds and revenue • Relies on brokers that may not be adequate for supermarket channel • Current marketing strategy based only on natural foods channel • Opportunities • Threats • Organic food market expected to grow to $13.3 • billion in 2003 • Nature store channel sales up 20% • 12.5% growth in 4oz multipack • Increase in consumer interest in organic foods • Accumulation of funds by Horizon, from their IPO • Losing sales via their traditional channels • Souring of relationship with natural foods distributors/retailers
- 15. Channel Pathways Natureview Sales Brokers Retailers Consumers NatureviewWholesalers Distributors Retailers Consumers Natural Foods Channel Supermarket Distribution Channel
- 16. Pricing Comparison byChannel Product Manufacturing Costs Supermarket Retail price Natural Foods Retail Price 8 oz cup $0.31 $0.74 $0.88 32 oz cup $0.99 $2.70 $3.19 4 oz cup multipack $1.15 $2.85 $3.35
- 17. So, What areour Options?
- 18. OPTION 1 Expand into the Northeast andWest markets Introduce 6 SKUs of 80z yogurt OPTION 2 Expand NATIONALLY Intoduce 4 SKUs of 32 oz Yogurt OPTION 3 Stay in Natural Foods Channel Introduce 2 SKUs of Children’s multipack
- 19. Option 1: Expandinginto the Supermarket Channel via 6 8oz SKUs Positives • Feasible, 8-oz is the best selling cup size • Open to MUCH LARGER MARKET • Revenue Increase is Certain • First Mover advantages Negatives • High risk, high costs • Huge marketing expense • Quarterly promotions needed • Broker relationship in new channel may not sufficient • Growth might be to quick, to be sustainable • Highly noticeable by competition
- 20. Option 2: Introduce4 SKUs of 32oz. Nationally Positives • Above avg Gross Profit Margin(43.6%) • Less competition • Long shelf life =advantage • Fewer promotions • Less noticed by competition Negatives • Still needs sizable marketing budget • National distribution setup is difficult in 1 year • Hiring employees,SG&A costs • Possible competition with Dannon
- 21. Option 3:2 SKUsof Multi-pack into Natural Foods channel Positives • No negative effect on relationship with Natural foods retailers • Distribution is DEFINITELY achievable • Leverage ALL-Natural ingredients as a USP(healthy food for kids) • Decent gross profit margin:37.6% • Low sales and marketing costs • Remains true to brand Negatives • R&D, Operations must develop the product
- 22. So which optionis it going to be?
- 23. Revenue and COGSAnalysis
- 24. Cost Analysis of3 Options
- 25. I WOULD RECOMMENDOPTION 3 Why, You ask? Target Achieved! (Approximately) Minimum risk No detrimental effect on current partners Strong foothold in the market, which can be leveraged later As the CEO wanted, we remain TRUE to our BRAND, and what it represents.
- 26. What other factorsinfluenced this recommendation? • Natureview does not have the necessary resources or skill-set to sell effectively to and through supermarkets. • Involves least extra costs and earns substantial revenues with a gross profitability of 37.6%. • Sales team and distribution channels are quite confident about this channel.
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