Natureview Farm produces organic yogurt and seeks to grow its revenues from $13 million to $20 million. It considers three options: 1) Expanding its 8oz cups into supermarkets, 2) Expanding its 32oz cups nationally, or 3) Introducing multipacks in natural food stores. Option 1 exceeds the revenue target but risks competition and high costs. Option 2 has a high margin but distribution risks. Option 3 has low risks but falls short on revenue. The recommended strategy is to expand the multipacks into select supermarket regions to minimize risks while achieving over 12% revenue growth.

1. Natureview farm
A HBR
Case
Study

2. WHAT WAS
NATUREVIEW
FARM?
WHAT WERE
PROBLEMS
ASSOCIATED?

3. NATUREVIEW FARM
Founded in 1989,Natureview Farm
manufactured and marketed refrigerated
cup yogurt under the Natureview Farm
brand name.

4. GFBMGBVNJGB
BACKGROUND
Enters market with 8oz and 32oz cup sizes in
and vanilla flavor.
Company’s revenue growth from $ 100,000 to
$13 million with strong brand image.
Expansion to 12 flavor in 8oz cups(86% revenue)
and 4 in 32oz cups(14% revenue).
1989
1999
2000

5. Some Names
• Christine Walker - Vice President,Marketing
• Jim Wagner - Chief Finance Officer
• Walter Bellini - Vice President,Sales
• Jack Gottlieb - Vice President,Operations

6. What
was the
TARGET?

7. To grow
Revenue from
$13 MILLION
TO
$20 MILLION

8. ISSUES
Nature view has to arrange for an equity infusion
a VC to fund strategic Investments.
Natureview has to find new Investors,or position itself for
acquisition and grow its revenues.
What distribution channel should be
preferred without denting its Image?

9. The 3 P’s
Natural Yogurt(organic)
in 8oz (12 flavors)and 32oz(4 flavors) cup sizes.
Natural food channel-
Wholesale club, Retailer Channel and drug stores.
High quality and great taste gave them growth in
I Natural Food Channel, Low cost-Guerilla Marketing.

11. 1 ANALYZE
YOGURT MARKET
&
DIFFERENT
DISTRIBUTION

12. 2 WHICH
DISRTIBUTION
CHANNEL?

13. LENGTH OF CHAIN TO MARKET
SUPERMARKET CHANNEL NATURAL FOODS CHANNEL
MANUFACTURER
DISTRIBUTOR
RETAILER
MANUFACTURER
NATURAL FOODS
WHOLESALER
NATURAL FOODS
DISTRIBUTOR
RETAILER
CUSTOMER
CUSTOMER

15. Revenues 2000
32oz 8oz
86%
14%
REVENUE DISTRIBUTION OF NATUREVIEW

16. MARKET SHARE CHANNEL WISE
97%
3%
Distribution Channel
Supermarkets
Natural Food Stores

17. MARKET SHARE BY PACKAGING SEGMENT
74%
9%
6%
11%
8-oz cups
Children's multipack
32-oz cups
Others

18. Dannon
33%
Yoplait
24%
Columbo
5%
Private Label
15%
Others
23%
Supermarket Channel
Dannon Yoplait Columbo Private Label Others
24%
15%
7%19%
35%
Natural Foods Channel
Natureview Farm Brown Cow White wave Horizon Organic Others
MARKET SHARE BY BRAND

19. MARKET SHARE REGION WISE
26%
22%
25%
27%
Sales
Northwest
Midwest
Southwest
West

20. 3 DISTRIBUTION
CHANNEL

21. PRODUCTION COST AND RETAIL PRICES BY
CHANNEL
NATURAL FOOD
CHANNEL
SUPERMARKET
FOOD CHANNEL
MANU-
FACTURING
COST
8 oz. cup $0.88 0.74 $0.31
32 oz. cup $3.19 $2.70 $0.99
4 oz. cup
multipacks
$3.35 $2.85 $1.15

22. OPTION 1
•Expand 6 SKUs of 8 oz. product
line into one or two selected
supermarket channel region.
•Proposed by Walter Bellini,
VP of sales.

23. OPTION 1
•Great Upside Potential.
•Unit volume growth of Organic Yogurt at
supermarkets at 20% per year from 2001 to
2006.
•It has the highest Incremental Demand.
BENEFITS

24. OPTION 1
• Supporting 8-oz cup size would require quarterly trade
promotions and a meaningful marketing budget.
• Advertising plan would cost $ 1.2 million per region per year
in additional to promotional ads expenses.
• SG&A expenses would increase by $320,000 annually.
• This option creates direct competition with national yogurt
brands.
RISKS

25. OPTION 1
Supermarket Channel Margin Analysis
CHANNEL SELLING
PRICE
MARGIN COST PRICE
Retailer $0.74 27% $0.74X73%=$
0.54
Distributor $0.54 15% $0.54X85%=$
0.46
Natureview $0.46 (0.46/0.31)/0.46
=33%
$0.31

26. OPTION 1 : Income Projection
2000 2001
Unit Sales 35 000 000 35 000 000 X (1+20%)=42 000 000
Revenue Growth $35 000 000 X $0.74=$25 900 000 42 000 000 X )0.74= $ 31 080 000
Projected Revenue $13 000 000+$25 900 000= $ 38 900
000
$ 13 000 000 + $31 080 000 = $44
080 000
Cost 35 000 000 X $0.31= $10 850 000 42 000 000 X 0.31 = $ 13 020 000
Gross Profit $ 28 050 000 $ 31 060 000
Expenses
Advertisement $ 1 200 000 X 2 region=$2 400 000 $2 400 000
SG&A $320 000 $ 640 000
Slotting Fee 6 X $ 10 000X 20 retails=$1 200 000
Broker’s Fee $16 100 000x 0.04=$6 400 000 $ 19 320 000x0.04=$ 772 800
Net Profit $ 23 486 000 $ 24 247 200

27. OPTION 11
•Expand 4 SKUs of 32-oz. size
nationally.
•Proposed by Jack Gottlieb,VP of
Operations.

28. OPTION 11
•Potentially gives higher average gross
profit margin than 8-oz size.
•Lower promotion expenses.
•It also has stronger competitive
advantage like longer shelf life and low
Marketing expenses.
BENEFITS

29. OPTION 11
• Doubts on claim of new users would readily
“enter the brand” via a multi-use size.
• Doubt on sales' team ability to achieve full
national distribution in 12 months.
• Need to hire sale personnel and establish
relationship with supermarket brokers.
• The 32oz expansion would increase SG&A.
RISKS

30. OPTION 11
Supermarket Channel Margin Analysis
CHANNEL SELLING
PRICE
MARGIN COST PRICE
Retailer $2.70 27% $2.70X73%
=$1.97
Distributor $1.97 15% $1.97X85%
=$1.67
Natureview $1.67 41% $0.99

31. OPTION 11 : Income Projection
2000 2001
Unit Sales 5,500,000 5,500,000
Revenue Growth $5,500,000 X 2.70=$14 850 000 $14 850 000
Projected Revenue $14 850 000+$13 000 000= $27 850
000
$27 850 000
Cost $5,500,000x0.99=$5,445,000 $5,445,000
Gross Profit $9,405,000 $ 22,405,000
Expenses
Slotting Fee 4x 10000x64=2,560,000 0
SG&A 160,000 160,000
Marketing 120,000x4=480,000 480,000
Broker’s Fee 367,400 367,400
Net Profit $ 18 837 600 $ 21,397,000

32. OPTION 111
•Introduce 2 SKUs of Children’s
multipack into the Natural Foods
Channel.
•Proposed by Kelley Riley, the
Assistant Marketing Director.

33. OPTION 111
•Established leader in this Channel.
•Perfect positioning for new multipack
product.
•Long term financial potential very
attaractive.
BENEFITS

34. OPTION 111
Supermarket Channel Margin Analysis
CHANNEL SELLING
PRICE
MARGIN COST PRICE
Retailer $3.35 35% $3.35X65%
=$2.18
Distributor $2.18 9% $2.18X91%
=$1.98
Nature Foods
wholesaler
$1.98 7% $1.98X93%
=$1.84
Natureview $1.84 38% $1.15

35. OPTION 111 : Income Projection
2000 2001
Unit Sales 1,800,000 2,070,000
Revenue Growth $1,800,000 X 3.35=$6,030,000 $6,934,500
Projected Revenue $6,030,000+$13 000 000= $19,030,
000
$19,934,500
Cost $1,800,000x1.15=$2,070,000 $2,380,500
Gross Profit $16,960,000 $ 17,554,000
Expenses
Marketing 250,000 250,000
Complementary cases 6,030,000x2.5%=150,750 173,363
Net Profit $ 16,559,250 $ 17,130,637

36. So ,What is the
SOLUTION?

37. Projection Comparison Matrix
Option 1 Option 11 Option 111
Gross Margin 33% 41% 38%
Unit Sales 42,000,000 5,500,000 2,070,000
Revenue Projection 44,080,000 27,850,000 19,934,500
Cost 13,020000 54,445,000 23,805,000
Gross Profit 31,060,000 22,405,000 17,554,000
Expense:
SG&A 640,000 160,000 0
Marketing 2,400,000 480,000 250,000
Broker’s fees(4%
revenues)
772,800 36,7400 0
Complementary
cases
0 0 173363
Net Profit $27,247,200 $21,397,600 $17,130,637

38. Decision Matrix
Decision parameter Option 1 Option 11 Option 111
Revenue Objective Exceeds Exceeds Falls Short
Channel Partners Highly Alienating Alienating Enhancing
Competitive
Response
Very Risky Risky Low
Cost to Induce Trial High Very High Low
Brand Equity
Dilution
Possible Possible No
Organization
Capabilities
Low Low High

40. POSSIBLE STRATEGY
• If we really press hard to
answer the $20 million
question, then its fairly
simple answer.
Go with Option 1.
• We recommend Natureview
to expand the multi pack
into supermarket channel in
Northeast and West

41. Benefits of the strategy
• High growth(more than 12%) from last year.
• Minimized channels conflicts : Through this
expansion ,Nature view can make it’s revenue
expansion by 2001.
• No cannibalization or alienation.
• New target customers : Supermarket will be selling
these multipacks relatively cheap.

42. THANK
YOU
-Prashant Kumar Ojha
Summer Intern,
IIM Lucknow