Natureview Farm manufactures and markets refrigerated yogurt cups. It started in 1989 and currently generates $13 million in annual revenue. To increase revenue to $20 million by 2001, three options were proposed: 1) Expand into supermarkets, 2) Expand distribution of larger 32oz cups to more supermarkets, or 3) Introduce new multipack children's yogurt products to natural food stores. Analyzing sales projections and costs, option 3 to expand in natural food stores was determined to have the lowest risks and best chance of achieving the revenue goal, while continuing to leverage Natureview's strong relationships in that channel.

1. Natureview
farm
HARVARD BUSSINESS SCHOOL CASE

2. Natureview

3. What does Natureview Farm do
Natureview
manufactures and markets
refrigerated cup
YOGURT

4. Little History
Started in 1989, it manufactured cup Yogurt in its
production facility in Cabot, Vermont.
Income in the beginning – below $100,000
Current Income (2000) - $13 million

5. Natureview’s TEAM
BARRY LANDERS
CEO
Jack Gottlieb
VP (operations)
Walter Bellini
VP (sales)
Christine Walker
VP (marketing)
JIM WAGNER
CFO
Kelly Riley
Ass. Marketing director

6. Special secret recipe
The key to
Natureview yogurt’s unique
smooth, creamy texture
is the
family yogurt recipe
developed by its
Founder

7. Other special factors
Cows untreated with
rGBH
Average shelf life
50 days
Other company’s shelf life
30 days

8. Current situation of Natureview
Channel : Natural foods stores
Yogurt Market Share, 1999
Natural foods channel
Natureview Farm 24%
Brown Cow 15%
Horizon Organic 19%
White Wave 7%
Others 35%

9. Current situation of Natureview
Natureview Products : Different sizes & their revenue
SIZE
Number of
flavours
Revenue
generated
In a case
8-oz 12 86% 12 cups
32-oz 4 14% 6 cups

10. Current situation of Natureview
Income statement : Natureview, 1999
Revenues $13,000,000
Cost of Goods sold $8,190,000
Expenses
Administration $2,210,000
Sales $1,560,000
Marketing $390,000
R&D $390,000
Net income $260,000

11. Current situation of Natureview
Difficulties : Investor (VC firm) cashed out
What
Get a new
investor
How
Attain max.
possible valuation
So
Increase
Revenues

12. $20million
revenue by
2001
GOAL

13. yogurt

14. Yogurt and its customers
Yogurt
is a dairy product
It is a good source
of Calcium
and improves
digestion

15. Yogurt and its customers
In 1999
US retail sales
$1.8 billion
2.3 billion units
CHANNEL SALES
AVG SALES GROWTH
PER YEAR
Super markets 97% 3%
Natural food stores less than 3% 20%
Others minute -

16. Yogurt and its customers
Organic food customers
Supermarkets
46%
Natural food
stores
29%
Health
stores
25%
Organic dairy products
74% of
Heavy organic
food buyers
29% of
Light organic
food buyers

17. Yogurt and its customers
Yogurt
was purchased by
40% of US
population in
which over 70%
are women

18. Yogurt and its customers
Yogurt market share : 1999, Supermarket channel
Package (size)
Dollar
share (USD)
Dollar sales
change vs prior
year
8-oz cups & smaller 74% +3%
Children's multipacks 9% +12.5%
32-oz cups 8% +2%
Other 9% No change

19. channels

20. Sales and distribution process
Yogurt
is largely distributed
through
2channels

21. 1
Natural foods store
People’s favorite

22. 2
Supermarket
Obviously more powerful

23. Cost of yogurt
SIZE
AVERAGE RETAIL PRICE
NATUREVIEW'S
MANUFACTURING
COSTS
NATURAL
FOODS
CHANNEL
SUPER
MARKET
CHANNEL
8-oz cup $0.88 $0.74 $0.31
32-oz cup $3.19 $2.70 $0.99
4-oz cup multipack $3.35 $2.85 $1.15
Yogurt Production costs & retail prices

24. Sales and distribution process
Natureview’s
expenses while passing
through these
2channels

26. Supermarket expenses - 1
Retailer
27%
Distributor
15%
Customer
Broker
4%
Manufacturer

27. Supermarket expenses - 2
Introduction of products : Into Supermarket channel
$10,000 per
SKU (Stock Keeping Unit)
per retail chain
$80,000 to introduce 8 flavors of 8-oz cup for each supermarket

28. Supermarket expenses - 3
Promotion : Every 3 months
Average cost of
Advertising
$8,000per region

30. Natural foods stores expenses - 1
Retailer
35%
Natural foods
distributor
15%
Customer
Natural foods
wholesaler
7%
Manufacturer

31. Natural foods stores expenses - 2
Nothing extra except…
1 free case
of each product
in its 1st year

32. solution

33. Solution..
A meeting with
Senior management team
gave rise to
3solutions

34. 3
proposals

35. Walter Bellini
Expand into
1 or 2 selected
supermarkets with
6 SKUs of 8-oz cups

36. Option 1 – KEY POINTS
8-oz cups have more Dollar share
Few companies have successfully entered and
increased their revenue 200%
Supermarkets will only authorize one brand (for
yogurt). Better to enter first
1
2
3

37. Option 1 – Sales Increment
According to Walter increment in annual sales would be
35 million units
Revenue = 35 million * $0.74
Revenue Generated - $25.9MILLION
well over the
$20 million goal

38. Option 1 – GROSS PROFIT
Manufacturing costs = 35 million * $0.31
= $10,850,000
Gross profit = $15,050,000

39. Option 1 – Fees
Broker fee = 4% of sales = $1,036,000
Total = $7,357,000
Distributor margin = 15% = $2,257,500
Retailer margin = 27% = $4,063,500

40. Option 1 – COSTS (1/4)
Advertising costs $1.2 million per region per year
2 supermarkets = 2 regions
TOTAL COSTS - $2.4MILLION

41. Option 1 – COSTS (2/4)
Launching costs $10,000 per SKU per supermarket
2 supermarkets & 6 SKUs
TOTAL COSTS - $120,000

42. Option 1 – COSTS (3/4)
Promotion costs $8,000 per region, every 3 months
2 supermarkets & 4 times
TOTAL COSTS - $64,000

43. Option 1 – COSTS (4/4)
SG&A expenses $200,000 for sales staff & $120,000
for additional marketing
Sales, General & Administrative
TOTAL COSTS - $320,000

44. Option 1 – TOTAL EXTRA COSTS
$320,000
$2,400,000
$64,000
$120,000
$2,904,000

45. Option 1 – Net Income
Extra costs = $2,904,000
Revenue = $25,900,000
Fee = $7,357,000
Manufacturing costs = $10,850,000
NET INCOME = $4,789,000

46. Option 1 - Report
There is a high income and revenues, also
Greater risks (8-oz competitors)
Potential natural foods market of
Natureviewcan be lost.

47. Jack Gottlieb
Expand into
64 selected
supermarkets with
4 SKUs of 32-oz cups

48. Option 2 – KEY POINTS
32-oz cups have generated above average Gross-
profit margin
Fewer competitors have long shelf-life. So,
Natureview will be at advantage
Promotion for 32-oz is done only twice a year, by
supermarkets
1
2
3

49. Option 2 – Sales Increment
According to Jack increment in annual sales would be
5.5 million units
Revenue = 5.5 million * $2.70
Revenue Generated - $14.85MILLION
well over the
$20 million goal with the current $13 million

50. Option 2 – GROSS PROFIT
Manufacturing costs = 5.5 million * $0.99
= $5,455,000
Gross profit = $9,395,000

51. Option 2 – Fees
Broker fee = 4% of sales = $594,000
Total = $4,539,900
Distributor margin = 15% = $1,409,250
Retailer margin = 27% = $2,536,650

52. Option 2 – COSTS (1/4)
Advertising costs $120,000 per region per year
64 supermarkets = 4 regions
TOTAL COSTS - $480,000

53. Option 2 – COSTS (2/4)
Launching costs $10,000 per SKU per supermarket
64 supermarkets & 4 SKUs
TOTAL COSTS - $2,560,000

54. Option 2 – COSTS (3/4)
Promotion costs $8,000 per region, every 6 months
64 supermarkets & 2 times
TOTAL COSTS - $1,024,000

55. Option 2 – COSTS (4/4)
SG&A expenses $160,000 for sales staff
Sales, General & Administrative
TOTAL COSTS - $160,000

56. Option 2 – TOTAL EXTRA COSTS
$1,024,000
$480,000
$160,000
$2,560,000
$4,224,000

57. Option 2 – Net Income
Extra costs = $4,224,000
Revenue = $14,850,000
Fee = $4,539,900
Manufacturing costs = $5,455,000
NET INCOME = $631,100

58. Option 2 – Report
There is a high revenues, also risks
Potential natural foods market of
Natureviewcan be lost.
Also distribution
is difficult to achieve

59. Kelly Riley
Introduce
Natural food stores
2 SKUs of children multipacks

60. Option 3 – KEY POINTS
Already have a strong relationship with natural
foods stores
Natural foods channel is growing 7 times faster
than supermarket
Financial potential is very attractive. Gross
profitability of the line would be 37.6%
1
2
3

61. Option 3 – Sales Increment
According to Kelly increment in annual sales would be
1.8 million units
Revenue = 1.8 million * $3.35
Revenue Generated - $6,030,000
It is only above
$19 million with the current $13 million

62. In addition to that..
Natural foods stores has
sales increase of
20% annually.
That adds up to the remaining
1 million

63. Option 3 – GROSS PROFIT
Manufacturing costs = 1.8 million * $1.15
= $2,700,000
Gross profit = $3,960,000

64. Option 3 – Fees
Wholesaler margin = 7% = $277,200
Total = $2,019,600
Distributor margin = 9% = $356,400
Retailer margin = 35% = $1,386,000

65. Option 3 – COSTS
Complimentary cases 2.5% of manufacturer sales
= 2.5% of $6,030,000
Extra costs = $400,750
Marketing costs = $250,000

66. Option 3 – Net Income
Extra costs = $400,750
Revenue = $6,030,000
Fee = $2,019,600
Manufacturing costs = $2,700,000
NET INCOME = $909,650

67. Option 3 - Report
Best option with
lowest risks
Also good possibility of achieving the
$20 million goal

68. conclusion

69. Yogurt and its customers
After this heavy analysis,
Kelly Riley’s
proposal seems to be more
profitable & healthy

70. Natural food stores
rules

71. DISCLAIMER
These slides are made by Adidala Yashwanth
during an internship under Prof Sameer
Mathur, IIM Lucknow