This document provides background information on Natureview Farm, a yogurt company that grew from $100,000 in revenue in 1989 to $13 million in 1999 by selling natural yogurt through natural food stores. In 2000, Natureview sought to grow further by exploring new distribution channels and products. Three options were proposed: 1) Expand 8-oz cups to supermarkets, 2) Expand 32-oz cups nationally, or 3) Launch a children's multi-pack in natural food stores. Each option was analyzed in terms of benefits, risks, margins and projected financials. Ultimately, expanding the multi-pack line to select supermarket regions in the Northeast and West was recommended as a way to reach the $20 million revenue goal while minimizing risks

1. CASE STUDY
OF
NATUREVIEW
FARM

2. WHAT WAS
NATUREVIEW
FARM?
WHAT WAS THE
PROBLEM?

3. background
1989
• First enter market 8-oz and 32-oz with plain
and vanilla flavor
• Use natural ingredient with longer average
shelf-life of 50 days
1999
• Company revenue growth from $ 100,000 to
$13 million
• Strong Brand image in Natural Yogurt Market
2000
• Expand to 12 flavor in 8-oz cups(86%
revenues), 4 in 32-oz cups(14% revenues)
• Exploring 4-oz children’s cup and 2-oz yogurt
tube

4. Important Names
• CHRISTINE WALKER - Vice President, Mar
• JIM WAGNER - Chief Finance Officer
• WALTER BELLINI - Vice President, Sales
• Jack Gottlieb - Vice President, Oper

5. WHAT IS THE
GOAL?

6. To grow
Revenues from $13
MILLION to
$20 MILLION

7. ISSUES
Natureview to arrange for an equity
infusion from a Venture Capital(VC)
to Fund Strategic Investments
Natureview has to find new
investors, or position itself for
acquisition and grow its revenues
What distribution channel should be
preferred without denting its image?

8. THE 3P’sPRODUCT
• Natural
yogurt
(organic)
• 8 –oz. size
with 12
flavors
• 32-oz. size
with 4 flavors
PLACE
• Natural food
channel
• Wholesale
club
• National
retailer
channel
• Convenienc
e and drug
PROMOTION
• High quality
and great
taste gave
them growth
in natural
food channel
• Low-cost
guerilla
marketing

9. WHAT ARE OUR
OBJECTIVES?

10. OBJECTIVE
1
ANALYZE YOGURT
MARKET
AND DIFFERENT
DISTRIBUTION

11. Objective
WHICH
DISTRIBUTION CHA
2

12. Manufactu
rer
Distribut
or
Retailer
Custome
r
Manufactu
rer
Custome
r
Natural
Foods
Wholesale
r
Retailer
Natural
Foods
Distributor
27%
15%
35%
9%
7%
Supermarket Channel Natural Foods Channel
LENGTH OF CHAIN TO MARKET

14. revenue distribution of
natureview
86%
14%
Revenues 2000
8-oz
32-oz
Start exploring kid
multipack yogurt
product (4-oz)

15. market share channel wise
97%
3%
Distribution Channel
Supermarkets Natural food stores

16. Market Share by Packaging
Segment
74%
9%
8%
9%
8-oz. cup smaller Children's multipacks 32-oz. cups Others

17. market share by brand
Dannon
33%
Yoplait
24%
Others
23%
Private
Label
15%
Columbo
5%
Supermarket Channel
Dannon Yoplait Others Private Label Columbo
Natureview
Farm
24%
Brown Cow
15%
Horizon
Organic
19%
White Wave
7%
Others
35%
Natural Foods Channel
Natureview Farm Brown Cow Horizon Organic
White Wave Others

18. market share region wise
26%
22%
25%
27%
Northwest
Midwest
Southwest
West

20. Production Costs and Retail Prices
by Channel
Natural Food
Channel
Supermarket
Food
Channel
Manufacturin
g Cost
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

21. OPTION 1
• Expand 6 SKUs of the 8-oz.
product line into one or two
selected supermarket
channel regions
• Proposed by Walter Bellini
,VP of Sales

22. OPTION 1
BENEFITS
• Great Upside Potential
• Unit volume growth of organic yogurt at
supermarkets of 20% per year from 2001 to 2006
• Has the highest incremental demand

23. OPTION 1
RISKS
• Supporting 8-oz cup size would require quarterly trade
promotions and a meaningful marketing budget
• Advertising plan would cost $1.2 million per region per year
in addition to the promotional ads expenses
• SG&A expenses would increase by $320,000 annually
• This option creates direct competition with national yogurt
brands

24. OPTION 1
Channe
l
Selling
price
Margin Cost price
Retailer $0.74 27% $0.74 x 73% = $0.54
Distribut
or
$0.54 15% $0.54 x 85% = $0.46
Naturevi
ew
$0.46 ($0.46/$0.31)/$0.46
=33%
$0.31
Supermarket Channel Margin Analysis

25. OPTION 1: Income projection
2000 2001
Unit Sales 35 000 000 35 000 000 x (1+20%) = 42 000
000
Revenue Growth $ 35 000 000 x $ 0.74 = $ 25 900 000 42 000 000 x 0.74 = $ 31 080 000
Projected
Revenue
$ 13 000 000 + 25 900 000 = $ 38, 900
000
$ 13 000 000 + 31 080 000 = $ 44,
080 000
Cost 35 000 000 x $ 0.31 = $ 10 850 000 42 000 000 x 0.31 = $ 13 020 000
Gross Profit $ 28, 050 000 $ 31, 060 000
Expenses
Advertisement $ 1 200 000 x 2 region = $ 2,400
000
$ 2,400 000
SG&A $ 320 000 $ 640 000
Slotting Fee 6 x $ 10 000 x 20 retails = 1200 000
Broker’s Fee $ 16 100 000 x 0.04 = $ 644 000 $ 19 320 000 x 0.04 = $ 772 800
Net Profit $ 23, 486 000 $ 27, 247 200

26. OPTION 2
• Expand 4 SKUs of the 32-oz.
size nationally
• Proposed by Jack Gottlieb, VP
of Operations

27. OPTION 2
Benefits
• Potentially give higher average gross profit margin than
8-oz size
• Lower promotion expenses
• It also has stronger competitive advantage like longer
shelf life and lower marketing expenses

28. OPTION 2
Risks
• 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
• Needs to hire sales personnel and establish relationships
with supermarket brokers
• The 32-oz. expansion option would increase SG&A

29. OPTION 2
Channel Selling
price
Margin Cost price
Retailer $2.70 27% $2.70 x 73% = $0.1.97
Distribu
tor
$1.97 15% $0.54 x 85% = $1.67
Naturev
iew
$1.67 ($1.67/$0..99)/$1.67
=41%
$0.99
Supermarket Channel Margin Analysis

30. OPTION 2: Income Projection
2000 2001
Unit sales 5,500,000 5,500,000
Revenues growth 550000 x 2.70 = 14,850,000 14,850,000
Projected revenue 14850000 + 13000000 =
27,850,000
27,850,000
Cost 5500000 x 0.99 = 5445000 5445000
Gross profit 9,405,000 22,405,000
Expense:
Slotting fee 4 x 10000 x 64 = 2,560,000 0
SG & A 160,000 160,000
Marketing 120000 x 4 = 480000 480,000
Broker's fee (4%
revenues)
367,400 367,400
Net profit 18,837,600 21,397,600

31. OPTION 3
• Introduce 2 SKUs of a Children’s
Multi-Pack into the Natural Foods
Channel
• Proposed by Kelly Riley, the
Assistant Marketing Director

32. OPTION 3
Benefits
• Established leader in this channel
• Perfect positioning for new multi-pack product
• Long term the financial potential very attractive

33. OPTION 3
Risks
• Established leader in this channel
• Perfect positioning for new multi-pack product
• Very attractive long term the financial potential

34. OPTION 3
Channel Selling
Price
Margin Cost Price
Retailer $3.35 35% $3.35 x 65% = $2.18
Distributor $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
Natural foods Channel Margin Analysis

35. OPTION 3: Income projections
2000 2001
Unit sales 1,800,000 1,800,000 x 1.15 =
2,070,000
Revenue growth 1,800,000 x 3.35 = 6,030,000 2,070,000 x 3.35 =
6,934,500
Revenue
projection
6,030,000 + 13,000,000 =
19,030,000
6,934,500 + 13,000,000 =
19,934,500
Cost 1,800,000 x 1.15 = 2,070,000 2,070,000 x 1.15 =
2,380,500
Gross profit 16,960,000 17,554,000
Expense:
Marketing 250,000 250,000
Complementary
cases
6,030,000 x 2.5% = 150,750 6,934,500 x 2.5% = 173,363
Net profit 16,559,250 17,130,637

36. But what is the
solution?

38. projection Comparison matrix
Option 1 Option 2 Option 3
Gross Margin 33% 41% 38%
Unit sales 42, 000 000 5,500,000 2,070,000
Revenue
projection
44, 080 000 27,850,000 19,934,500
Cost $ 13 020 000 $ 5 445 000 $ 2,380,500
Gross profit $ 31, 060 000 22,405,000 17,554,000
Expense:
SG & A $ 640, 000 160,000 0
Marketing $ 2, 400, 000 480,000 250,000
Broker's fee (4%
revenues)
$ 772, 800 367,400 0
Complementary
cases
0 0 173,363
Net profit $ 27, 247, 200 $ 21,397,600 $ 17,130,637

39. decision matrix
Decision Parameter Option 1 Option 2 Option 3
Revenue Objective Exceeds Exceeds Falls Short
Channel Partners Highly
Alienating
Alienating Enhancing
Competitive
Response
Very Risky Risky Low
Cost to Induce Trial High Very High Low
Brand Equity
Dilution
Possible Possible No
Organization
Capabilities
Low Low High

41. • If we really hard press to answer
the $20 million question, then
it’s fairly simple answer. Go
with option 1.
• We recommend Nature view
to expand the multi pack into
supermarket channel in
Northeast and West
Possible strategy

42. • High growth (more than 12% from last year)
• Minimized channel conflicts : Through this
expansion, Nature view can make it’s revenue
goal by 2001
• No cannibalization or alienation
• New target customers : Supermarket will be
selling these multi packs relatively cheap
Benefits of the strategy

43. THANK
YOU

44. DISCLAIMER