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NATURE VIEW FARM
Published in Harvard Business Review
Presented by
Raguraman,S
CIT, Coimbatore
Who’s Nature View Farm
• Established in Cabot, Vermont in 1989
• Manufacturer of Refrigerated flavoured yogurt
• Value preposition: Natural ingredients and no artificial flavours
• Favoured Market: Organic sector
• Increase in product lines
• 12 Yogurt flavors and multipack yogurts
• Distribution channels: Retail natiure stort
• Revenue growth skyrocketed: $100k to $ 13M
• New Variants, flavoured yogurts
• Product size variants: 6oz, 8oz, an 32 oz
1989
1999
1999
Reasons for Growth
Nature
View
Farm
Natural
Ingredients
Quality and
Taste
Guerrilla
Marketing
Strong
Leadership
Natural
Ingredients
Cow milk
untreated
with rGBH
Large Shelf
life
No artificial
agents
Issues
Cashing out of its Venture Capital investments
Find alternate investment partners or grow revenue by 50% before 2001
Alternate Channelling and
Distribution Strategy:
Supermarket channel
Increase product lines to
increase revenue: New multi
packed products
Factors deciding the purchase
of Yogurt
YOGURT
Organic/
Inorganic
PackagingPrice
Variants and
Flavors
Shelf Life
Taste
Problem
Super market
accounts for 95%
of market
volume
Retail
Distribution
accounted 70%
of the past
revenue for
the company
No prior Supermarket distribution Experience
Distribution of Supermarket might alienate the existing
Retail market
Supermarket accounts for 96% of yogurt market
Change in packaging and other logistics for Supermarket
channels
High investment slotting fees for Supermarket channel
Future prospects may affect if the supermarket channel is
not utilise now
Critical Questions
To increase sales to 20 million$
Increase
product
lines
`qualities
Increase
distribution
line
Increase
manufacturing
Cost
cutting
?
?
? ?
Product Price Placement Promotion
All Retailers
are sold at
the same
price
- 8 Oz
12 flavors
- 32 Oz
4 flavors
- Children
Multipacks
1.Natural
Food
channel
2.Wholesale
club
3.Retailer
channels
4.Drug Store
5.Convenient
Store
1.Print
2.Television
3.Radio
4.Outdoor
4Ps of Nature View Farm
Product Sales by dollar value of Nature view farm
8 Oz
32 Oz
Product Sales by dollar value of Super market channel
8 Oz and Smaller
32 Oz
Children Multipacks
Others
PRODUCT LINE ANALYSIS
The Product 8 Oz market share of Nature View Farm > Overall 8 Oz market
The Product 32 Oz market share of Nature View farm <<< Overall market share
Product Children multipack has not reached well for Nature View farm
Market
expansion of 32
Oz and Multipack
can increase the
revenue
If no of Flavours
in the 32 Oz and
multipack
increased the
revenue might
increase
Nature View Farm pricing
strategy
Price Analysis
PRODUCT PROFIT Margin in Natural
Food Channel(%)
PROFIT Margin in
Supermarket(%)
8 Oz 64 58
32 Oz 68 64
Children Multipack 65 59
Price Analysis (Contd)
Super Market Channel
Natural Food Channel
Manufacturer
Distributor(15% Margin)
Retailer (27% Margin)
Consumer
Manufacturer
Wholesaler (margin 7%)
Natural Food
Distributor( margin 9%)
Retailer (Margin 35%)
Consumer
Price is quite
competitive in
both the
segment
Since the market
share of Super
market is high,
the distribution
in this channel is
highly profitable
YOGURT sales
Distribution
Channel
Major
Minor
Super Market
Natural Food Retail
Warehouse
Clubs
Drug Stores
Mass Merchandiser
Yogurt Channels
Distribution channel by Sales of
Yogurt
Distribution channel by Sales Value
Super Market
Natural Food
Store
Others
Organic products Channel
Distribution by Sales
Natural Food
Market
Small health Foo
Store
Supermarket
Organic Product channels
Yogurt Market Share by Brand
Yogurt Market Share by Region
Placement Analysis
The Natural farm
view presence is
totally zero when
the rival company’s
market presence is
quite formiable in
Supermarket
Organic products
prospects has
high placement
in Supermarket
Marketing efforts
can be solely
concentrated either
on Supermarket or
All the other
channels put
together
Radio
Television
Newspaper
Price Discounts
BillBoard
Print
Promotions and Advertising of
Nature Farm View
Nature View Income Statement
For Supermarkets,
Promotional
activities for each
SKUs is high
Supermarket also
involves an
additional spent for
Slotting fee for every
year and for every
1000$
Sales and Marketing
accounts for 15% for
Retail sales for
Nature Farm view
Promotional Cost Analysis
Factors to be considered
Increase Revenue from
$13M to $20M
Through Supermarket or
new Product line
Advertising spent must be
compensated with
additional sales
Supermarkets must generate
minimum $2.58M profit in 2
years
Fixed costs remain the
same for all the channels
PROPOSAL
1.Expand Product line : Expand 6 SKUs of 8Oz products
2.Expand Channel : Concentrate on Supermarket
3.Area : Focus on two regions
PROS
8 Oz successfully penetrated in Natural Food Retails
The pioneer of Organic yogurt supplier in Supermarket influence market supremacy
Supermarket allows only one supplier of organic Yogurt product
CONS
High Advertising and Marketing cost
No prior experience in Supermarkets distribution
Total advertising cost is $2.4M for 2 years
Slotting Fees: $60000 for 6 SKUS for an year
New packaging and logistics strategy
PROPOSAL
1.Expand Product line :Expand 4 SKUs of 32Oz products
2.Expand Channel :Concentrate on Supermarket
3.Area :Nationally expand everywhere
PROS
32 Oz market potential is still at nasal stage
The profit margin is comparatively higher than other packages
Less competition and increased Shelf life
CONS
SG&A Expense: $320,000 in Supermarkets
No prior experience in Supermarket distribution
New sales and promotions of personnals
Slotting Fees: $40000 for 4 SKUS for an year
New packaging and logistics strategy
PROPOSAL
1.Increase Product line: Introduce 2 SKUs of Children’s Multipack
2.Channel : Concentrate on Natural Food Retail
3.Area : Existing areas
PROS
Less cost and less risk
No new strategies or no new labor force
High profit margin
CONS
Overlooking Super market may cost long term loss
The promotion of new product may not yield sufficient profit within deadline
Market penetration of new products might be less welcoming than other variants
Retail players might see cost benefits over buying from Supermakets, therby
eliminating the stocking of new products
Sales efficiency cannot be predicted accurately
Sales by Volume Projection
Option 1 Inference
1.Expected sales: 35M
2.Total Sales value: $25.9M
3.Slotting fees: $12K
4.Advertising: $2.4M
5.SG&A: $0.64M
6.Adminiatrative: $4.4M
7.R&D: $6.8K
8. Miscellaneous: $6M
Net Profit: $12.24M
Net Revenue: $7M+
OPTION 1
• Though the initial promotion and other costs
are high, not utilising the Super market channel
will have a long term impacts
• Through the Cost analysis, the target of
getting $20M by 2001 is under reach
• Since the projected sales volume is high, the
retailer can be sold with less price and still the
target can be reached
Option 2 Inference
1.Expected sales: 5.5M
2.Total Sales value: $14.85M
3.Slotting fees: $8K
4.Advertising: $2.4M
5.SG&A: $0.68M
6. Miscellaneous: $3M
Net Profit: 8.69M
Net Revenue: $7M+
OPTION 1
• The market penetration of 32Oz is only 24% in
natural food stores
• Through the Cost analysis, the target of
getting $20M by 2001 is under reach
• The success of this strategy depends upon new
marketing, sales and operational strategies
Option 3 Inference
1.Expected sales: 1.8M
2.Total Sales value: $6.03M
3.SG&A: $0.68M
4.Administrative: $3M
Net Profit: $2.35M
Net Revenue = <<$7M
OPTION 1
• Leaving the Supermarket channel will have long
term adverse effects
• Through the Cost analysis, the target of
getting $20M by 2001 is not possible
• The success of this strategy depends
completely on sales team and their strategies
Recommendation
Expand to Super market of 8 Oz package
Increase the market share of 32 Oz in Retail sector
Increase additional promotional activities of 32 Oz
in Retail
Optimise the cost of 32Oz for Retail market to be
less than the cost of four 8 Oz products
Summary
Who’s Nature View Farm
Reasons for Growth
Issues
Challenges Ahead
Critical Questions
4Ps of Nature View Farm
Product and Analysis
Price and Analysis
Placement and Analysis
Promotion and Analysis
Factors to be considere
Expert Analysis
Inference
Recommendation
Summary
DISCLAIMER
CREATED BY RAGURAMAN,S From Coimbatore Institute of Technology,
during Winter Marketing Internship by Prof. Sameer Mathur, IIM Lucknow

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Natureview farm case study

  • 1. NATURE VIEW FARM Published in Harvard Business Review
  • 3. Who’s Nature View Farm • Established in Cabot, Vermont in 1989 • Manufacturer of Refrigerated flavoured yogurt • Value preposition: Natural ingredients and no artificial flavours • Favoured Market: Organic sector • Increase in product lines • 12 Yogurt flavors and multipack yogurts • Distribution channels: Retail natiure stort • Revenue growth skyrocketed: $100k to $ 13M • New Variants, flavoured yogurts • Product size variants: 6oz, 8oz, an 32 oz 1989 1999 1999
  • 4. Reasons for Growth Nature View Farm Natural Ingredients Quality and Taste Guerrilla Marketing Strong Leadership Natural Ingredients Cow milk untreated with rGBH Large Shelf life No artificial agents
  • 5. Issues Cashing out of its Venture Capital investments Find alternate investment partners or grow revenue by 50% before 2001 Alternate Channelling and Distribution Strategy: Supermarket channel Increase product lines to increase revenue: New multi packed products
  • 6. Factors deciding the purchase of Yogurt YOGURT Organic/ Inorganic PackagingPrice Variants and Flavors Shelf Life Taste
  • 7. Problem Super market accounts for 95% of market volume Retail Distribution accounted 70% of the past revenue for the company
  • 8. No prior Supermarket distribution Experience Distribution of Supermarket might alienate the existing Retail market Supermarket accounts for 96% of yogurt market Change in packaging and other logistics for Supermarket channels High investment slotting fees for Supermarket channel Future prospects may affect if the supermarket channel is not utilise now
  • 9. Critical Questions To increase sales to 20 million$ Increase product lines `qualities Increase distribution line Increase manufacturing Cost cutting ? ? ? ?
  • 10. Product Price Placement Promotion All Retailers are sold at the same price - 8 Oz 12 flavors - 32 Oz 4 flavors - Children Multipacks 1.Natural Food channel 2.Wholesale club 3.Retailer channels 4.Drug Store 5.Convenient Store 1.Print 2.Television 3.Radio 4.Outdoor 4Ps of Nature View Farm
  • 11.
  • 12. Product Sales by dollar value of Nature view farm 8 Oz 32 Oz Product Sales by dollar value of Super market channel 8 Oz and Smaller 32 Oz Children Multipacks Others
  • 13. PRODUCT LINE ANALYSIS The Product 8 Oz market share of Nature View Farm > Overall 8 Oz market The Product 32 Oz market share of Nature View farm <<< Overall market share Product Children multipack has not reached well for Nature View farm Market expansion of 32 Oz and Multipack can increase the revenue If no of Flavours in the 32 Oz and multipack increased the revenue might increase
  • 14.
  • 15. Nature View Farm pricing strategy
  • 16. Price Analysis PRODUCT PROFIT Margin in Natural Food Channel(%) PROFIT Margin in Supermarket(%) 8 Oz 64 58 32 Oz 68 64 Children Multipack 65 59
  • 17. Price Analysis (Contd) Super Market Channel Natural Food Channel Manufacturer Distributor(15% Margin) Retailer (27% Margin) Consumer Manufacturer Wholesaler (margin 7%) Natural Food Distributor( margin 9%) Retailer (Margin 35%) Consumer Price is quite competitive in both the segment Since the market share of Super market is high, the distribution in this channel is highly profitable
  • 18.
  • 19. YOGURT sales Distribution Channel Major Minor Super Market Natural Food Retail Warehouse Clubs Drug Stores Mass Merchandiser Yogurt Channels
  • 20. Distribution channel by Sales of Yogurt Distribution channel by Sales Value Super Market Natural Food Store Others
  • 21. Organic products Channel Distribution by Sales Natural Food Market Small health Foo Store Supermarket Organic Product channels
  • 23. Yogurt Market Share by Region
  • 24. Placement Analysis The Natural farm view presence is totally zero when the rival company’s market presence is quite formiable in Supermarket Organic products prospects has high placement in Supermarket Marketing efforts can be solely concentrated either on Supermarket or All the other channels put together
  • 25.
  • 27. Nature View Income Statement
  • 28. For Supermarkets, Promotional activities for each SKUs is high Supermarket also involves an additional spent for Slotting fee for every year and for every 1000$ Sales and Marketing accounts for 15% for Retail sales for Nature Farm view Promotional Cost Analysis
  • 29. Factors to be considered Increase Revenue from $13M to $20M Through Supermarket or new Product line Advertising spent must be compensated with additional sales Supermarkets must generate minimum $2.58M profit in 2 years Fixed costs remain the same for all the channels
  • 30.
  • 31.
  • 32. PROPOSAL 1.Expand Product line : Expand 6 SKUs of 8Oz products 2.Expand Channel : Concentrate on Supermarket 3.Area : Focus on two regions
  • 33. PROS 8 Oz successfully penetrated in Natural Food Retails The pioneer of Organic yogurt supplier in Supermarket influence market supremacy Supermarket allows only one supplier of organic Yogurt product
  • 34. CONS High Advertising and Marketing cost No prior experience in Supermarkets distribution Total advertising cost is $2.4M for 2 years Slotting Fees: $60000 for 6 SKUS for an year New packaging and logistics strategy
  • 35.
  • 36. PROPOSAL 1.Expand Product line :Expand 4 SKUs of 32Oz products 2.Expand Channel :Concentrate on Supermarket 3.Area :Nationally expand everywhere
  • 37. PROS 32 Oz market potential is still at nasal stage The profit margin is comparatively higher than other packages Less competition and increased Shelf life
  • 38. CONS SG&A Expense: $320,000 in Supermarkets No prior experience in Supermarket distribution New sales and promotions of personnals Slotting Fees: $40000 for 4 SKUS for an year New packaging and logistics strategy
  • 39.
  • 40. PROPOSAL 1.Increase Product line: Introduce 2 SKUs of Children’s Multipack 2.Channel : Concentrate on Natural Food Retail 3.Area : Existing areas
  • 41. PROS Less cost and less risk No new strategies or no new labor force High profit margin
  • 42. CONS Overlooking Super market may cost long term loss The promotion of new product may not yield sufficient profit within deadline Market penetration of new products might be less welcoming than other variants Retail players might see cost benefits over buying from Supermakets, therby eliminating the stocking of new products Sales efficiency cannot be predicted accurately
  • 43.
  • 44. Sales by Volume Projection
  • 45. Option 1 Inference 1.Expected sales: 35M 2.Total Sales value: $25.9M 3.Slotting fees: $12K 4.Advertising: $2.4M 5.SG&A: $0.64M 6.Adminiatrative: $4.4M 7.R&D: $6.8K 8. Miscellaneous: $6M Net Profit: $12.24M Net Revenue: $7M+ OPTION 1 • Though the initial promotion and other costs are high, not utilising the Super market channel will have a long term impacts • Through the Cost analysis, the target of getting $20M by 2001 is under reach • Since the projected sales volume is high, the retailer can be sold with less price and still the target can be reached
  • 46. Option 2 Inference 1.Expected sales: 5.5M 2.Total Sales value: $14.85M 3.Slotting fees: $8K 4.Advertising: $2.4M 5.SG&A: $0.68M 6. Miscellaneous: $3M Net Profit: 8.69M Net Revenue: $7M+ OPTION 1 • The market penetration of 32Oz is only 24% in natural food stores • Through the Cost analysis, the target of getting $20M by 2001 is under reach • The success of this strategy depends upon new marketing, sales and operational strategies
  • 47. Option 3 Inference 1.Expected sales: 1.8M 2.Total Sales value: $6.03M 3.SG&A: $0.68M 4.Administrative: $3M Net Profit: $2.35M Net Revenue = <<$7M OPTION 1 • Leaving the Supermarket channel will have long term adverse effects • Through the Cost analysis, the target of getting $20M by 2001 is not possible • The success of this strategy depends completely on sales team and their strategies
  • 48. Recommendation Expand to Super market of 8 Oz package Increase the market share of 32 Oz in Retail sector Increase additional promotional activities of 32 Oz in Retail Optimise the cost of 32Oz for Retail market to be less than the cost of four 8 Oz products
  • 49. Summary Who’s Nature View Farm Reasons for Growth Issues Challenges Ahead Critical Questions 4Ps of Nature View Farm Product and Analysis Price and Analysis Placement and Analysis Promotion and Analysis Factors to be considere Expert Analysis Inference Recommendation Summary
  • 50. DISCLAIMER CREATED BY RAGURAMAN,S From Coimbatore Institute of Technology, during Winter Marketing Internship by Prof. Sameer Mathur, IIM Lucknow