Harvard Case on Natureview Farm - Marketing Internship

1. Natureview Farm

2. Company
• Founded in 1989 in Cobat, Vermont
• Manufacturer and Marketer of refrigerated cup yogurt
Company Founders
• Barry Lander (CEO)
• Christine Walker (Vice - President of Marketing)
• Walter Bellini (Vice - President Sales)
• Jim Wagner (CFO)
• Kelly Riley ( Assistant Marketing Director)

3. SWOT Analysis
Strength
Natural
Ingredients
& long shelf life
Reputation of high
quality and great
taste
No Artificial
thickeners used
Weakness
Lacks risk taking
abilities
No alternative
Financial
available
Opportunity
Effective low cost
marketing
National
Distributors in
Naturals food
channel
Strong relationship
with distributors
Threat
Being dropped out
from traditional
Channel

4. Natureview Farm current situation
Strategic Marketing decision to grow from $ 13 millions to $ 20 millions before the end of 2001 year
74% 9%
8%
9%
Yogurt Market Share by Packaging
Segment
8 oz cup and smaller Children's Multipack
32 oz cups Other
26%
22%
25%
27%
Yogurt Market Share by Region
Northeast Midwest Southeast West

5. Manufacturer
Customer
Retailer
27 % margin
Distributor
15% margin
Manufacturer
Retailer
35% margin
Naturals Food
Distributor
9% margin
Naturals Food
Wholesaler
7% margin
Customer
Natural FoodMarketSupermarket Channel
Length
of
Channel
to
Market

6. 33%
24%
23%
15%
5%
Yogurt Market Share by Brand
Dannon Yoplait Others Private Label Columbo
26%
22%
25%
27%
Naturals Food Channel
Northeast Midwest Southeast West

7. • Horizon Organic:
It flushes with cash from recent IPO. It produces full range of organic diary. It is also known as National Brand
• BrownCow:
Strong regional presence on the west coast
• Weakness:
Brown Cow Yogurt were natural but not organic. Horizon’s was organic it had shorter life shell than Natureview’s products

8. Top ManagementTeam 3
Options

9. Option 1
To expand 6 SKUs of the 8-oz product line into one or two selected
supermarket channels
- Walter Bellini VP sales
• 8-oz cup represent largest dollar and unit share of the market
• Great upside potential, for market adding these products would attract higher
income-less price sensitive customer.
• First mover advantage
• Unit volume of organic yogurt supermarket of 20% per year from 2001 to 2006

10. • Highest level of competitive trade promotion and marketing spend
• Advertising plan would cost $1.2 million per region per year in addition to
promotional ad expenses
• SG&A expenses would increase by $320000 annually
• Little experience in dealing with supermarket chains
• Balance between shelf presence and slotting presence
• Promotion and lower price may hurt the brand

11. Channel Margin Cost Price Selling Price
Natureview ($ 0.46 - $ 0.31)/$ 0.46 = 33% $ 0.31 $ 0.46
Distributor 15% $0.54*85% = $0.46 $ 0.54
Retailer 27% $0.74*73% = $0.54 $ 0.74
Year 2000 Year 2001
Unit Sales 35000000 units =35000000*(1+20%)=42000000
Revenue 35000000*0.46= $16100000 42000000*0.46 = $ 19320000
Cost 35000000*0.31= $10850000 42000000*0.31 = $ 13020000
Gross Profit $5250000 $ 6300000
Advertisement 1200000*2 Region = $2400000 $2400000
SG&A $320000 $640000
Slotting Fees 10000*6*20 retails = $1200000 -
Broker Fee 16100000*4%= $644000 19320000*4%= $772,800
Net Profit $686,000 $ 2487200

12. Option2
To expand 4 SKUs of 32-oz, nationally – Jack Gottlieb Vice President
Operations
• Potential have high average gross profit margin than 8-oz size
• Has longer shelf life and lower marketing expense
• Fewer competitive offering in this size

13. • Higher slotting fees due to national distribution
• National distribution will be challenging within 12 months
• Need to hire sales personnel and establish relationship with supermarket brokers
• Possible channel conflict between supermarket and natural food stores
• Promotion and lower price may hurt the brand

14. Channel Margin Cost Price Selling Price
Natureview ($ 1.67 - $ 0.99)/$ 1.67 = 41% $ 0.99 $ 1.67
Distributor 15% $1.97*85% = $1.67 $ 1.97
Retailer 27% $2.7*73% = $1.97 $ 2.70
Year 2000 Year 2001
Unit Sales 5500000 units 5500000
Revenue 5500000*$1.67 = $9185000 $9185000
Cost 5500000*$0.99 = $5445000 $5445000
Gross Profit $ 3740000 $ 3740000
Advertisement 1200000*4 Region = $480000 $480000
SG&A $160000 $320000
Slotting Fees 10000*4*64 retails = $2560000 -
Broker Fee 9185000*4%=$367400 $367400
Net Profit $172,600 $2572600

15. Option 3
To introduce two SKUs of a children’s multipack into the naturals food
channels – Kelly Reily, Assistant Marketing Director
• Establish leader in this channel
• Natureview product positioning is ideal for children’s multi
pack product launch
• Financially attractive
• Higher margins – 37.6%
• Low sales and marketing expense

16. • Fast growth of natural food channel will lead to demands equal to those of
super markets
• Miss opportunity to enter supermarkets before competitors
• Long term financial potential are attractive

17. Channel Margin Cost Price Selling Price
Natureview ($ 1.84 - $ 1.15)/$ 1.84 = 38% $ 1.15 $ 1.84
Natural Food Wholesalers 7% $ 1.98*93%= $1.84 $ 1.98
Distributor 9% $2.18*91% = $1.98 $ 2.18
Retailer 35% $3.35*73% = $2.18 $ 3.35
Year 2000 Year 2001
Unit Sales 1800000 units 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*2%=$82800 3808800*2.5%=$95220
Slotting Fees $ 909200 $1083080

18. Select Option 1
In order to reach $ 20 million milestone option 1 give following advantage
• Market penetration
• Higher revenue
• Minimal Channel conflicts
• Higher slotting fee but more visibility of product

19. Necessary precautions thatcan be taken:
• Utilize more sophisticated technology to monitor sales trend
• Brand will remain premium through joint promotion with other
premium products such as organic fresh fruit
• Lower MSRP for natural food retailers to better compete with
supermarkets
• Work with retailer, distributor and wholesaler to reduce cost and
maintain margin

20. Summary
• About the Company
• Swot Analysis
• Current situation
• Competitve advantage
• Top management 3 decision their benefits, risk and calculation
• Best Option alongwith slight modification to their course of action

21. Disclaimer
Created by Ajit Maurya, IMI Bhubaneswar during Marketing Internship with by
Prof Sameer Mathur, IIM Lucknow.