This case study analyzes options for a yogurt manufacturing company to increase revenues to $20 million by 2021. The company currently generates $13 million annually and distributes primarily through natural food stores. Three options are presented: 1) Expand into northeast/west supermarkets with 6 SKUs, 2) Expand nationally in supermarkets with 4 SKUs, or 3) Introduce 2 children's multipacks in natural stores. Option 1 has high costs but large potential. Option 2 risks not achieving full distribution and requires hiring sales staff. Option 3 has low risk but high competition. The analysis recommends Option 3 to first focus on brand building before large-scale expansion.

1. A Harvard Business School Case Study
Analysis
Made By: Keval Varotaraia (CSPIT)

2. Yogurt Manufacturing Company
Founded in 1989
Uses only Natural Ingredients
Yogurt’s average shelf life: 50 days
Grew from $100,000 to $13 Million in 10 years

3. Chief Executive Officer Barry Lenders
Chief Financial Officer Jim Wagner
Vice President Christine Walker
Vice President Sales Walter Bellini
Vice President Operations Jack Gottlieb
Assistant Managing Director Kelly Riley

5. • VC Firm wants to cash out its investment
• Company wants to increase the revenue to $20
Million by 2021
• The team needs to find and report different
options available
• In a total 3 options are offered by the team
• Company needs to keep in mind the customers,
suppliers, and distribution partners to make the
right strategic choices regarding the revenue
growth

7. Revenues in 2000 By Natureview's Product
(Weight)
8 Oz
32 Oz
14%
86%

8. Yogurt's Market Share
8 Oz Pack
Others
Children's Pack
32 Oz Pack
74%
8%
9%
9%

9. Yogurt Distribution
Channel
Supermarkets
Natural Food Stores
97%
3%

10. Distributor gets 15%
Retailer gets 27%
7%
9%
35%

11. Manufacturing
Cost
Natural Food
Channel
Supermarket
Food Channel
8 Oz $0.31 $0.88 $0.74
32 Oz $0.99 $3.19 $2.70
4 Oz $1.15 $3.35 $2.85

12. Packaging
Taste
Flavour
Prize
Freshness
Ingredient
Organic/Not

13. The management team needs to choose an
option from the available 3 options which will
reach the target of $20 million revenue.
Also Company needs to keep in mind the
customers, suppliers, and distribution partners to
make the right strategic choices regarding the
revenue growth.

15. Expand in Northeast and West region
Use Supermarket Channel
Bring in 6 SKUs of the 8-oz. size
Pros Cons
High potential to increase
revenue and can be the first
mover as organic yogurt
brand to enter supermarket
channel
Promotional, Advertising
and SG&A costs are very
high compared to other
options,

16. Expand in supermarket nationally
Pay for 4SKUs of the 32-oz. size
Pros Cons
Generate higher profit margin than
8-oz size and lower promotional
costs
Doubt on sales team’s ability to
achieve full national distribution in
12 months and Needs to hire sales
personnel and establish
relationships with supermarket
brokers

17. Stay in natural food channel
Introduce 2 children’s multipack
Pros Cons
The financial potential was very
attractive and the sales team was
confident that they could achieve
distribution for the two SKUs.
High Risk of not achieving the
target to reach the revenue of $20
million by 2001

18. Note: Cost Price is calculated as SP * ( 100 – Margin ) / 100 and Margin of manufacturer
as ( SP – CP )/ CP * 100
OPTION 1
Channel Selling Price($) Margin(%) Cost Price($)
Retail 0.74 27 0.54
Distributor 0.54 15 0.46
Manufacturer 0.46 33 0.31
OPTION 2
Channel Selling Price($) Margin(%) Cost Price($)
Retail 2.7 27 1.97
Distributor 1.97 15 1.67
Manufacturer 1.67 41 0.99
OPTION 3
Channel Selling Price($) Margin(%) Cost Price($)
Retail 3.35 35 2.18
Distributor 2.18 9 1.98
Wholeseller 1.98 7 1.84
Manufacturer 1.84 38 1.15

20. High risk and costs
Will face stiff
competition from well
formed competitors
Very high promotional,
advertising and SG&A
costs
Stiff competition can
lower the revenue and
still the company has
no good brand name in
supermarket
Option 1

21. Risk of using the
multi-use size
Increased SG&A
expenses
Sales Team at present
will not be able to
achieve the target of
national distribution
The company needs
to hire sales
professional which will
again incur additional
costs
Option 2

22. Demands from
logistical point of
view
Increased demand
from retailers
Need to soon
implement real
marketing plan as
the product becomes
successful
Need to change the
market strategies in
future
Option 3

23. SG&A Advertising Costs SKU Costs
Option 1 $320,000/year $1.2 million/region/year yes
Option 2 $160,000/year almost half of option 1 yes
Option 3 0 $250,000 no

24. I Think that Option 3 should be
chosen due to the following reasons
It will be a low risk
option and company
can always look for
better marketing plan
in near future but at
this point of time it is
better to first create a
brand name
There is no risk of
loosing the retailers
and distributors from
the supply chain, which
is the case in option 1
and option 2
I don’t think that the
company has the sales
capability to achieve
the sales target
mentioned in option 1
and 2 and thus for now
they need to focus in
creating a good brand
name rather there
expanding the business
explosively

25. Created by Keval Varotaria, CSPIT, during a
marketing management internship by
Prof. Sameer Mathur, IIM Lucknow.