This Presentation on Natureview Farm (HBR CS) was created by Shomik Biswas during an Internship on Marketing Management under Prof. Sameer Mathur, Marketing Faculty, IIM Lucknow.

1. Case Study
Published By:
Harvard Business
Review
Natureview
Farm

2. Analyzed And Presented By
Shomik
Biswas
Jadavpur University

3. Brief History

4. Brief History
Founded in 1989 in Cabot,
Vermont.

5. Brief History
Founded in 1989 in Cabot,
Vermont.
Manufactures and markets
refrigerated cup yogurt.

6. Brief History
Founded in 1989 in Cabot,
Vermont
Manufactures and markets
refrigerated cup yogurt.
Carved a niche using natural
ingredients and special
processes.

7. Current
Situation 2000

8. Current
Situation 2000
In 10 years its revenues had grown from $10,000 to $13
Million.

9. Current
Situation 2000
In 10 years its revenues had grown from $10,000 to $13
Million.
Grew from 2 cup sizes and 2 flavors to 3 cup sizes,
multipacks and 12 flavors.

10. Current
Situation 2000
In 10 years its revenues had grown from $10,000 to $13
Million.
Grew from 2 cup sizes and 2 flavors to 3 cup sizes,
multipacks and 12 flavors.
Has strong relationship with the leading natural foods
retailers, including the chains Whole Foods and Wildoats.

11. HOW IS
IT
DIFFEREN
T

12. HOW IS
IT
DIFFEREN
T
Natural Ing.; special process;
give yogurt its uniqueness; no
artificial thickeners.

13. HOW IS
IT
DIFFEREN
T
Uses milk from
cows untreated
with rGBH.
Natural Ing.; special process;
give yogurt its uniqueness; no
artificial thickeners.

14. HOW IS
IT
DIFFEREN
T
Hence, has a
larger shelf life.
Uses milk from
cows untreated
with rGBH.
Natural Ing.; special process;
give yogurt its uniqueness; no
artificial thickeners.

15. HOW IS
IT
DIFFEREN
T
Hence, has a
larger shelf life.
Uses milk from
cows untreated
with rGBH.
Natural Ing.; special process;
give yogurt its uniqueness; no
artificial thickeners.
Emphasizes on Natural Ingredients.

16. HOW IS
IT
DIFFEREN
T
Hence, has a
larger shelf life.
Uses milk from
cows untreated
with rGBH.
Natural Ing.; special process;
give yogurt its uniqueness; no
artificial thickeners.
Emphasizes on Natural Ingredients.
Strong Reputation for high quality and great taste.

17. HOW IS
IT
DIFFEREN
T
Hence, has a
larger shelf life.
Uses milk from
cows untreated
with rGBH.
Natural Ing.; special process;
give yogurt its uniqueness; no
artificial thickeners.
Emphasizes on Natural Ingredients.
Strong Reputation for high quality and great taste.
The company
grew quickly to
national
distribution

18. HOW IS
IT
DIFFEREN
T
Hence, has a
larger shelf life.
Uses milk from
cows untreated
with rGBH.
Natural Ing.; special process;
give yogurt its uniqueness; no
artificial thickeners.
Emphasizes on Natural Ingredients.
Strong Reputation for high quality and great taste.
The company
grew quickly to
national
distribution
And shared
leadership

19. HOW IS
IT
DIFFEREN
T
Hence, has a
larger shelf life.
Uses milk from
cows untreated
with rGBH.
Natural Ing.; special process;
give yogurt its uniqueness; no
artificial thickeners.
Emphasizes on Natural Ingredients.
Strong Reputation for high quality and great taste.
The company
grew quickly to
national
distribution
And shared
leadership
Aided by
‘Guerilla
Marketing’

22. Strategize how to grow revenues by over 50% before the
end of 2001.

23. Strategize how to grow revenues by over 50% before the
end of 2001.
Should Natureview Farm expand into the Supermarket
Channel in order to meet its revenue goal.

25. Despite its growth since 1989,
the company struggled to
maintain a consistent level of
profitability.

26. Despite its growth since 1989,
the company struggled to
maintain a consistent level of
profitability.
Jim Wagner (CFO) had
developed financial
controls to bring steady
profitability.

27. Despite its growth since 1989,
the company struggled to
maintain a consistent level of
profitability.
Jim Wagner (CFO) had
developed financial
controls to bring steady
profitability.
In ‘97, an equity
infusion with a VC
firm was arranged

28. Despite its growth since 1989,
the company struggled to
maintain a consistent level of
profitability.
Jim Wagner (CFO) had
developed financial
controls to bring steady
profitability.
In ‘97, an equity
infusion with a VC
firm was arranged
VC Firm cashed out

29. Despite its growth since 1989,
the company struggled to
maintain a consistent level of
profitability.
Jim Wagner (CFO) had
developed financial
controls to bring steady
profitability.
In ‘97, an equity
infusion with a VC
firm was arranged
VC Firm cashed out
Now, the
management had
to find another
investor

30. Despite its growth since 1989,
the company struggled to
maintain a consistent level of
profitability.
Jim Wagner (CFO) had
developed financial
controls to bring steady
profitability.
In ‘97, an equity
infusion with a VC
firm was arranged
VC Firm cashed out
Now, the
management had
to find another
investor
Or position itself for
acquisition

31. Hence, increasing revenues was critical in order to attain
the highest possible valuation

32. Hence, increasing revenues was critical in order to attain
the highest possible valuation
So, Jim proposed the
management that the
revenue needed to grow

33. Hence, increasing revenues was critical in order to attain
the highest possible valuation
So, Jim proposed the
management that the
revenue needed to grow
From $13 Million to $20
Million by 2002

34. Hence, increasing revenues was critical in order to attain
the highest possible valuation
So, Jim proposed the
management that the
revenue needed to grow
From $13 Million to $20
Million by 2002

35. Barry Landers (CEO) made the management aware that this
immediate pressure would eventually help Natureview Farm

36. Barry Landers (CEO) made the management aware that this
immediate pressure would eventually help Natureview Farm
To get to the size that it aspires to reach

37. Barry Landers (CEO) made the management aware that this
immediate pressure would eventually help Natureview Farm
To get to the size that it aspires to reach
The unconventional route taken thus far was the key to their
future growth

38. Barry Landers (CEO) made the management aware that this
immediate pressure would eventually help Natureview Farm
To get to the size that it aspires to reach
The unconventional route taken thus far was the key to their
future growth
As this strategy resonated with the customers, suppliers and
the distribution partners

39. The refrigerated
yogurt category

40. The refrigerated
yogurt category
And The Yogurt
market

41. Yogurt Sales Distribution Channels
Dominant Channels Other channels

42. Yogurt Sales Distribution Channels
Dominant Channels Other channels
97
3
%Sales
Superma
rkets
Natural
Food
Stores

43. Yogurt Sales Distribution Channels
Dominant Channels Other channels
97
3
%Sales
Superma
rkets
Natural
Food
Stores
Warehouse Clubs
Drug Stores
Mass
Merchandisers
Convenience
Stores

44. Natureview Farm didn’t enter these channels as they offered
limited revenue generation potential

45. Natureview Farm didn’t enter these channels as they offered
limited revenue generation potential
Its products were not a strong fit

46. Natureview Farm didn’t enter these channels as they offered
limited revenue generation potential
Its products were not a strong fit
For the narrow product offering afforded to consumers through
these channels

47. Natureview Farm didn’t enter these channels as they offered
limited revenue generation potential
Its products were not a strong fit
For the narrow product offering afforded to consumers through
these channels
Volume requirements were prohibitive in certain channels

48. 46
25 29
0
5
10
15
20
25
30
35
40
45
50
Organic Food Consumers
Bought From
Organic
Food
Consumers
Bought
From
74
29
0
10
20
30
40
50
60
70
80
Heavy
Organic
Food
Buyers
Light
Organic
Food
Buyers
Organic Dairy Products
Bought By
Organic
Dairy
Products
Bought By

49. 67
58
44
0
10
20
30
40
50
60
70
80
Of US
households
indicated that
income is a
barrier for
buyinng organic
products
Expressed that
they would buy
more organic
products if it
were less
expensive
Category 3
Consumer And Household Survey
Consumer And
Household Survey

50. Factors
which affect
yogurt
purchase

51. Factors
which affect
yogurt
purchaseIngredients
Price
Flavor
Taste
Package Type/Size
Organic or Not
Freshness

52. 74
9
8
9
Distribution According
To Cup Size
8 oz. or
Smaller
Kid
Multipack
32 oz.
4th Qtr
26
2225
27
Market Share By Region
Northeast
Midwest
Southeast
West

53. Consumer Distribution
6, 8 oz. Pack Kid Pack 32 oz. Pack

54. Consumer Distribution
6, 8 oz. Pack Kid Pack 32 oz. Pack
Targeted at
Women
All flavors is
favorable

55. Consumer Distribution
6, 8 oz. Pack Kid Pack 32 oz. Pack
Targeted at
Women
All flavors is
favorable
Targeted Kids
and Moms
Contains 6-4oz.,
8-2 oz. cups
All flavors is
favorable

56. Consumer Distribution
6, 8 oz. Pack Kid Pack 32 oz. Pack
Targeted at
Women
All flavors is
favorable
Targeted Kids
and Moms
Contains 6-4oz.,
8-2 oz. cups
All flavors is
favorable
For Heavy
Consumer
Used for various
dish preparations
Plain and Vanilla
favorable

57. The sales and
Distribution process

58. The sales and
Distribution process
Supermarket channel
V. Natural Food store

60. If Natureview chose to expand into the supermarket channel, it would
depend on its Broker’s knowledge of promotional and merchandising
requirements.

61. If Natureview chose to expand into the supermarket channel, it would
depend on its Broker’s knowledge of promotional and merchandising
requirements.
These influential brokers, representing several brands of consumer
products used their relationships to arrange discussions b/w retail
chains, wholesalers and manufacturers.

62. The channel monitors sales trends especially of new items by region,
area and store using sophisticated scanner technology.

63. Relatively streamlined distribution systems allows to maintain
lower prices.
The channel monitors sales trends especially of new items by region,
area and store using sophisticated scanner technology.

64. Relatively streamlined distribution systems allows to maintain
lower prices.
The channel monitors sales trends especially of new items by region,
area and store using sophisticated scanner technology.
Markup on each product by intermediaries. Typical Distribution
Margin – 15% and Retailer Margin – 27%.

65. Additional
Costs

66. Additional
Costs
Refrigerated yogurt, slotting fee averaged - $10,000 per SKU per
retail chain. For 8 diff. flavors in 8 oz. packs - $80,000/retail chain.
NE, MW and SE of the US, ads - $7500. In the West, same ads -
$15,000 per ad per retailer.
Nationally, they cost $8000 on average.

67. 33
24
23
5 15
Market Share By Brand
(Supermarket)
Dannon
Yoplait
Others
Columbo
Private Label

69. Typically charge higher retail prices for the same products in
Supermarkets.

70. Typically charge higher retail prices for the same products in
Supermarkets.
Distributors deliver product to individual stores, sometimes stock the
shelves and track paperwork.

71. Typically charge higher retail prices for the same products in
Supermarkets.
Distributors deliver product to individual stores, sometimes stock the
shelves and track paperwork.
Intermediaries ‘Break Cases’. Typical natural foods Wholesaler
Margin – 7%, Distributor Margin – 9%, Retailer Margin – 35%.

72. Additional
Costs

73. Additional
Costs
No slotting fees charged by natural food stores.
Require a 1-time allotment of 1 Free Case of product for every new
SKU authorized for distribution in its 1st year.
Minimal ad fee (all region).

74. 24
15
19
7
35
Market Share By Brand (Natural
Food Store)
Natureview Farm
Brown Cow
Horizzon Organic
White Wave
Others

76. Analysis of the senior
management team’s

77. Analysis of the senior
management team’s
3 options

78. By Walter Bellini (VP of Sales)

79. Expand 6 SKUs of the 8 oz. product
line into one or two selected
supermarket channel regions.

81. 8 oz. cups represent largest dollar and unit share of market. Other
natural food brands have successfully expanded to supermarkets.
Supermarkets may authorize only one organic yogurt manufacturer.
Advantage in being the first organic yogurt to move to supermarket.

83. Highest level of competition amongst all the product lines of yogurt.
Increase in ad cost and SG&A expenses. Little experience in dealing
with supermarket chains.
High potential, but high risk and cost.

84. By Jack Gottlieb (VP of Operations)

85. Expand 4 SKUs of the 32 oz. size
nationally.

87. 32 oz. cup generates an above average gross profit margin (43.6%
Vs. 36% for 8 oz. product line).
Fewer competitive offerings in this size. Competitive advantage due to
longer shelf size.
Lower promotional expenses.

89. Higher slotting fees due to national distribution.
National distribution will be challenging within 12 months.
Promotion and lower price at supermarkets may hurt the brand.

90. By Kelly Riley (Assistant Marketing Dir.)

91. Introduce 2 SKUs of a children’s
multipack into the natural foods
channel.

93. 8 oz. cups represent largest dollar and unit share of market. Other
natural food brands have successfully expanded to supermarkets.
Supermarkets may authorize only one organic yogurt manufacturer.
Advantage in being the first organic yogurt to move to supermarket.

95. Have to prolong venturing into supermarkets.
May not reach the target revenue of $20 Million by the end 2001.
Competitors have already expanded to supermarkets.

97. Total Fixed Cost is the same for all the 3 Options.

98. Total Fixed Cost is the same for all the 3 Options.
Total Cost = Total Fixed Cost + Ad Cost + Promotion Costs + SKU.

99. Differences
Option - 1 Option - 2 Option - 3

100. Differences
Option - 1 Option - 2 Option - 3
SG&A expenses
increases by
$320,000/yr.
$1.2 Mil/region/yr ad
costs. 35 incremental
sales unit.
SKU costs.

101. Differences
Option - 1 Option - 2 Option - 3
SG&A expenses
increases by
$320,000/yr.
$1.2 Mil/region/yr ad
costs. 35 incremental
sales unit.
SG&A expenses
increases by
$160,000/yr.
SKU costs.
Substantially less ad budget
(32 oz. promoted only 2
times/yr).
5.5 Mil. incremental
units. SKU costs.

102. Differences
Option - 1 Option - 2 Option - 3
SG&A expenses
increases by
$320,000/yr.
$1.2 Mil/region/yr ad
costs. 35 incremental
sales unit.
SG&A expenses
increases by
$160,000/yr.
SG&A expenses
increase - $0.
Marketing expenses
were estimated at
$250,000
SKU costs.
Substantially less ad budget
(32 oz. promoted only 2
times/yr).
1.8 Mil. Incremental
costs. No SKU
costs.
5.5 Mil. incremental
units. SKU costs.

103. Best Strategical Option

104. Best Strategical Option
Option - 1

105. Best Strategical Option
Option - 1
Higher revenue generated
Lower slotting fee (only 2 supermarkets)
Transition to supermarkets
Advantage over competitors by expanding
into supermarkets.

106. Personal recommendations

107. Personal recommendations
Instead of just introducing 8 oz. cups, 32 oz. cups should also be
introduced in supermarkets as we’ll get :-

108. Personal recommendations
Instead of just introducing 8 oz. cups, 32 oz. cups should also be
introduced in supermarkets as we’ll get :-
More shelf coverage
Better gross profit
margin
No competition for 32
oz. cups

109. Personal recommendations
Instead of just introducing 8 oz. cups, 32 oz. cups should also be
introduced in supermarkets as we’ll get :-
More shelf coverage
Better gross profit
margin
No competition for 32
oz. cups
Which ends up combining advantages of both the product lines.

110. Thank
You

111. This Presentation was created by Shomik Biswas
During an Internship on Marketing Management Under
Prof. Sameer Mathur, IIM Lucknow