Natureview Farm manufactures and markets refrigerated cup yogurt and is considering three options to grow its revenues from $13 million in 1999 to $20 million by 2001: 1) Expand its 8oz cup yogurt line into supermarket channels, 2) Expand its 32oz cup yogurt line nationally, or 3) Expand its children's multipack into the natural food channel. After analyzing the pros and cons, the document recommends pursuing Option 1 of expanding into supermarket channels for the 8oz cups to reach more customers, generate more revenue, and have a first-mover advantage as a natural product.

1. NATUREVIEW
FARM
CASE STUDY
By – Akash Yewale, IIT Patna

2. What is Natureview
Farm and who is
Decision Maker ?

3. Background
Founded in 1989,
Natureview Farm
manufactured and
marketed
refrigerated cup
yogurt.
01
Sells 8-oz.(86%
revenue) and 32-
oz.(14% revenue)
cup sizes of yogurt.
02
Leadership in
natural food
channel.
03
Revenue of
$13million in 1999.
04

4. Key Players
Christine Walker, vice
president of marketing
Jim Wagner, chief
financial officer (CFO)
Barry Landers, Chief
Executive Officer (CEO)

5. Why Natureview
Farm Yogurt?

6. Advantages
of
Natureview
farm Yogurt
average shelf life is 50 days as
compared to competitors’ products
which has shelf life of 30 days.
Natural ingredients
strong reputation for high quality
great taste

7. Goal

8. To grow Natureview’s revenues to
$20 million before the end of 2001
large jump from the $13 million the
company reported in 1999.

9. Current Market
Situation

10. Yogurt market share by packaging
segments
74%
8%
9%
9%
<= 8 oz. cup 32 oz. cup Children's multipack others

11. Yogurt Distribution Channel
97%
3%
Supermarket Natural Store

12. Yogurt Production Costs and Retail
Prices by Channel
Natural Food Channel Average Retail Price
8-ounce (oz.) cup $ 0.88
32-oz. cup $ 3.19
4- oz. cup multipack $ 3.35
Supermarket Channel Average Retail Price
8-ounce (oz.) cup $ 0.74
32-oz. cup $ 2.70
4- oz. cup multipack $ 2.85
Natureview’s manufacturing costs for the three product lines—the 8-oz. cup, the 32-oz.
cup, and the children’s multipack—were $0.31, $0.99, and $1.15 respectively.

13. YOGURT MARKET SHARE BY
REGION
26%
22%
25%
27%
Northwest
Midwest
Southwest
West

14. Length of Channels to Market
• Supermarket Channel • Natural Food Channel
Manufacturer
Distributor
Retailer
Customer
Manufacturer
Wholesaler
Distributor
Retailer
Cutomer

15. The Senior
Management Team’s
Three Options

16. Option(1) - Expand 6 SKUs of the 8oz product line into one or two
selected supermarket channel regions.
Pros
• 8oz cups represent largest dollar and
unit share of market.
• Supermarkets fear losing market
share to natural food competitors.
• Other natural food brands have
successfully expanded to
supermarkets.
Cons
• Highest level of competitive trade
promotion and marketing spend.
• Possible channel conflict between
supermarkets and natural food stores.
• Little experience in dealing with
supermarket chains.

17. Channel Margin Cost Price Selling Price
(%) ($) ($)
Naturview ($0.46-$.31)/$.46 = 33 0.31 0.46
Distibutor 15 .54*.85=0.46 0.54
Retailer 27 .74*.73=0.54 0.74
Year 2000 Year 2001
Unit Sales 35000000 35000000*1.2=42000000
Revenue 35000000*.46 = $16100000 42000000*.46 = $19320000
Cost 35000000*.31 = $10850000 42000000*.31 = $19020000
Gross Profit $5250000 $6300000
Advertising 1200000*2 = $2400000 $2400000
SG&A $320000 $640000
Slotting Fees10000*6*20 = $1200000 -
Broker's Fee 16100000*.04 = $644000 19320000*.04 = $772800
Net Profit $686000 $2487200

18. Option(2) - Expand 4 SKUs of the 32oz product line nationally
Pros
• 32oz cups generate an above average
gross profit margin.
• Fewer competitive offering in this
size.
• Lower promotional expense than
Option 1.
Cons
• Higher slotting fees due to national
distribution.
• National distribution will be
challenging within 12 months.
• Possible channel conflict between
supermarkets and natural food stores.

19. Channel Margin Cost Price Selling Price
(%) ($) ($)
Naturview ($1.67-$.99)/$1.69 = 41 0.99 1.67
Distibutor 15 1.97*.85 = 1.67 1.97
Retailer 27 2.7*.73 = 1.97 2.7
Year 2000 Year 2001
Unit Sales 5500000 5500000
Revenue 5500000*1.67 = $9185000 $9185000
Cost 5500000*0.99 = $5445000 $5445000
Gross Profit $3740000 $3740000
Advertising 1200000*4 = $4800000 $4800000
SG&A $160000 $320000
Slotting Fees10000*4*64 = $2560000 -
Broker's Fee 9185000*0.04 = $367400 $367400
Net Profit $172600 $2572600

20. Option(3) - Expand 2 SKUs of the children’s multi pack into the
natural food channel
Pros
• Natureview has strong relationship
with leading natural food channel
retailers.
• Financially attractive.
• More time to prepare the company for
moving into supermarket channel.
Cons
• Fast growth of natural food channel
will lead to demands equal to those of
supermarkets.
• Misses opportunity to enter
supermarket channel before
competitors.

21. Channel Margin Cost Price Selling Price
(%) ($) ($)
Naturview ($1.84-$1.15)/$1.84 = 38 1.15 1.84
Wholesaler 7 1.98*.93 = 1.84 1.98
Distributor 9 2.18*0.91 = 1.98 2.18
Retailer 335 3.35*.73 = 2.18 3.35
Year 2000 Year 2001
Unit Sales 1800000 1800000*1.15 = 2070000
Revenue 1800000*1.84 = $3312000 2070000*1.84 = $3808800
Cost 1800000*1.15 = $2070000 2070000*1.15 = $2380500
Gross Profit $1242000 $1428300
Marketing $250000 $250000
Comp. Case 3312000*0.025 = $82800 3808800*0.025 = $95220
Net Profit $909200 $1083080

22. Recommendations

23. Pursue Option 1
• Reach well beyond the target objective of 20 million revenue by end
of 2001
• 8 –oz yogurt has highest demand
• In supermarket, can expose to more range of customers
• Will have the first mover’s advantage of natural product to enter
supermarket
• A bit risky but in a long term will generate revenues