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Natureview Farm
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- 2. WHAT WAS NATUREVIEW FARM? WHAT WASTHE PROBLEM?
- 3. background 1989 • First entermarket 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 • CHRISTINEWALKER - Vice President, Mar • JIM WAGNER - Chief Finance Officer • WALTER BELLINI - Vice President, Sales • Jack Gottlieb - Vice President, Oper
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- 6. To grow Revenues from$13 MILLION to $20 MILLION
- 7. ISSUES Natureview to arrangefor 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
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- 14. revenue distribution of natureview 86% 14% Revenues2000 8-oz 32-oz Start exploring kid multipack yogurt product (4-oz)
- 15. market share channelwise 97% 3% Distribution Channel Supermarkets Natural food stores
- 16. Market Share byPackaging Segment 74% 9% 8% 9% 8-oz. cup smaller Children's multipacks 32-oz. cups Others
- 17. market share bybrand 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 regionwise 26% 22% 25% 27% Northwest Midwest Southwest West
- 20. Production Costs andRetail 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 • Expand6 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 • GreatUpside 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 • Supporting8-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 Costprice 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: Incomeprojection 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 • Expand4 SKUs of the 32-oz. size nationally • Proposed by Jack Gottlieb, VP of Operations
- 27. OPTION 2 Benefits • Potentiallygive 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 • Doubton 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 MarginCost 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: IncomeProjection 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 • Introduce2 SKUs of a Children’s Multi-Pack into the Natural Foods Channel • Proposed by Kelly Riley, the Assistant Marketing Director
- 32. OPTION 3 Benefits • Establishedleader in this channel • Perfect positioning for new multi-pack product • Long term the financial potential very attractive
- 33. OPTION 3 Risks • Establishedleader in this channel • Perfect positioning for new multi-pack product • Very attractive long term the financial potential
- 34. OPTION 3 Channel Selling Price MarginCost 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: Incomeprojections 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 isthe solution?
- 38. projection Comparison matrix Option1 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 ParameterOption 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 wereally 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
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