This document describes Natureview Farm, a small yogurt manufacturer founded in 1989 in Vermont. It discusses Natureview's executives, finances, product lines, distribution channels, and competitors. The company is considering three options to grow revenues by 50%: 1) Expanding 6 SKUs into supermarkets, 2) Expanding 4 large-size SKUs nationally in supermarkets, or 3) Adding 2 children's multipack SKUs in natural food stores. The third option is deemed most viable as it requires the least investment and can generate $20 million while allowing Natureview to stay within its capabilities and keep its current consumers and distribution channels happy.

1. HARVARD BUSINESS SCHOOL CASE

2.  Founded in 1989,Natureview Farm is a small
yogurt manufacturer in Vermont.
 It used natural ways to make yogurt which
increased the product’s shelf life to 50 days.

3.  CHRISTINE WALKER, vice president of
marketing
 JIM WAGNER,chief financial officer
 BARRY LANDERS,chief executive officer
 WALTER BELLINI,vice president of sales
 JACK GOTTLIEB ,vice president of operations
 KELLY RIELEY ,assistant marketing director

4.  To grow revenues by over 50% before the end
of 2001.
 Central focus: should company expand into
the supermarket channel.
 VC company now needed to cash out its
investment in Natureview.

5. Revenues $13,000,000 100% Revenues
Cost of Goods Sold $8,190,000 63%
Gross Profit $4,810,000 37%
Expenses
-Administration $2,210,000 17%
-Sales $1,560,000 12%
-Marketing $390,000 3%
-R&D $390,000 3%
Net Income $260,000 2%

6.  It produced 12 yogurt flavors in 8-oz. cups and 4
flavors in 32-oz. cups.
 Started exploring multipack yogurt products
(children’s 4-oz. cups and yogurt packaged in
tubes).
 86% of its revenue came from 8-oz. cups and 14%
from 32-oz. cups.
 Had strong relationships with leading natural food
retailers.

7.  In 1999,total US retail sales for yogurt
reached $1.8b and sales volume was just over
2.3b units.
 2 dominant distribution channels-
supermarkets and natural food stores.
 Supermarkets accounted for 97% of all yogurt
sales and natural food store sold the balance.

8. DOLLAR SHARE DOLLAR SALES
CHANGE vs PRIOR
YEAR
8-oz.cup and smaller 74% +3%
Children’s multipacks 9% +12.5%
32-oz. cups 8% +2%
other 9% NC
100%

9. Dollar Share No. of Retailers in the
region
Northeast 26% 25
Midwest 22% 30
Southeast 25% 33
West 27% 17
100%

10.  Yogurt section in natural food store was 4’
wide by 6’high.
 In a supermarket it was 8’ wide by 6’ high.
 6-oz. and 8-oz. cups are placed on the upper
two shelves.
 Multipacks on the next level and 32-oz. cups
on the last level.

11. SUPERMARKET CHANNEL vs. NATURAL FOOD
STORES

12.  Natureview Farms used sales brokers to sell
their yogurt to both natural foods and
supermarket chains
 For yogurt,the broker’s fee was 4%of
manufacturer’s sales.
 To sell yogurt in supermarket,Natureview
would be required to pay ‘slotting fee’ for
each SKU in the first year.

13.  For refrigerated yogurt, the slotting fee
averaged $10,000 per SKU per retail chain.
 Manufacturer has to participate in regular
trade promotions every 3 months.
 Advertising costs are $8000 on average.

14. Supermarket Channel Average Retail Price
8-oz. cup $0.74
32-oz. cup $2.70
4-oz. cup multipack $2.85

15. MANUFACTURER DISTRIBUTOR RETAILER
CONSUMER

16.  These typically charged higher retail prices.
 They did not charge manufacturers monetary
slotting fees,but did require one free case of
product for each new SKU.
 No extra expenditure on trade promotions.

17. NATURAL FOOD CHANNEL AVERAGE RETAIL PRICE
8-oz.cup $0.88
32-oz. cup $3.19
4-oz.cup multipack $3.35

18. MANUFACTURER
NATURAL FOODS
WHOLESALER
NATURAL FOODS
DISTRIBUTOR
RETAILERCONSUMER

19.  Would the company be able to thrive in
supermarket world?
 Reaction of long term partners?
 Would price concessions follow?
 Would the stores in Natureview’s traditional
channel drop the brand and replace it with its
competitors?

21.  TO EXPAND 6 SKUs OF THE 8-
OZ. PRODUCT LINE INTO ONE
OR TWO SELECTED
SUPERMARKET CHANNEL
REGIONS.

22.  Eight oz.cups represented the largest dollar
and unit share of the refrigerated yogurt
market.
 Wanted to be the first organic brand to enter
supermarket channel.
 It required high level of trade promotion and
marketing.
 Comprehensive advertising plan would cost
the company $1.2 million.

23.  SG&A would increase by $320,000 annually.
 Natureview could achieve incremental annual
sales volume of just over 35M units.

24.  TO EXPAND 4 SKUs OF THE
32-OZ. SIZE NATONALLY –
INTO 64 SUPERMARRKET
RETAIL CHAINS.

25.  32-oz. cups generated an above average
profit margin(43.6%)
 There were fewer competitive offerings in this
size.
 Slotting expenses will be more.
 Marketing expenses will increase by
$120,000.
 5.5M incremental units were expected.

26.  Management team doubted if consumers will
readily enter the brand via a multi use size.
 They had to achieve full national distribution
in 12 months.
 SG&A would increase by $160,000.
 This offering would be observed less by the
competition.

27. 2 SKUs OF A
CHILDREN’S
MULTIPACK INTO
NATURAL FOOD
CHANNELS.

28.  Existing strong relations with natural food
retailers.
 Incremental unit volume of 1.8M.
 Marketing expenses were estimated at
$250,000.
 These channels were growing 7 times faster
than supermarket channels.

29.  No additional SG&A costs.
 It was within the capabilities of current
functional resources.
 No SKU costs.

31.  Of all the 3 solutions last one is most
economically viable as it involves least
investment and would be able to generate
$20M revenue.
 Also, Natureview’s team is ready to execute
this plan.
 Its current consumers will be happy with this
new investment.
 Company will also be able to stick to its
unconventional route.