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NATUREVIEW FARM CASE STUDY
NATUREVIEW FARMCASE STUDY
CONTENTS Introduction Problems Market Trends Options Decision
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INTRODUCTION Founded in 1989 in Vermont
Manufacturer and marketer of refrigerated cup organic yogurt
Uses natural ingredients and special processes
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POINTS OF PARITY
Uses natural ingredients Much longer shelf life Strong reputation for high
quality and great taste
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WHY IT WORKS
Good product Guerrilla Marketing Strong relationship with
distributors
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PROBLEMS VCs need to cash out investment
Need to find a way to increase revenues by 50 % to $20 million
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4Ps Product Place Price Promotion
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Product
Natural yogurt 8 –oz size with 12 flavors 32 –oz size with 4 flavors
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Price Affordable More than that at supermarkets
which explains its quality
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Promotion
Low cost Guerrilla Marketing Good relationships with
distributors
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Place Natural channel Wholesale club National retailer channel Convenience and drug stores
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▫ MARKET TRENDS
Different ways in which market share is divided
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Channels used by customers
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SupermarketsSmall health storesNatural foods
Yogurt distribution channel
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SupermarketsNatural foods
Yogurt market share by region
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NortheastMidwestSoutheastWest
Yogurt distribution channel
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8 oz cups and smallerChildren multipacks32 oz cupsOthers
Yogurt share by brand: Supermarkets
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DannonYoplaitOthersColomboPrivate label
Yogurt distribution by brand -Natural Food stores
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Natureview FarmBrown CowHorizon OrganicWhite WaveOthers
Length of Supermarket Channel to Market
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Manufacturer
Distributor
Retailer
Customer
Length of Natural Foods Channel to Market-->
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Manufacturer
Natural Foods Wholesaler
Natural Foods Distributor
Retailer
Customer
OPTIONS Three options suggested
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OPTION 1 To expand six SKUs of the 8-oz. product line into one or two selected supermarket channel regions
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PROS ▫ Eight-ounce cups represented the largest dollar and unit share of the market
▫ Other natural foods brands had successfully expanded their distribution into the supermarket channel
▫ First mover advantage23
CONS Highest level of competition Increase in advertising and
SG&A costs High risk involved
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SUPERMARKET CHANNEL ANALYSIS
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Channel Margin Cost Price Selling Price
Natureview 33% 0.31 0.46
Distributor 15% 0.46 0.54
Retailer 27% 0.54 0.74
OPTION 1
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2000 2001
Unit Sales 35,000,000 35,000,000*1.2=42,000,000
Revenue 35,000,000*$0.46=$16,100,000
42,000,000*$0.46=$19,320,000
Cost 35,000,000*$0.31=$10,850,000
42,000,000*$0.31=$13,020,000
Gross Profit $5,250,000 $6,300,000
Expense
Advertisement $1,200,000*2=$2,400,000
$2,400,000
SG&A $320,000 $320,000
Slotting Fee $1,200,000
Broker’s Fee $16,100,000*0.4=$644,000
$19,320,000*0.4=$772,800
Net Profit $686,000 $2,487,200
OPTION 2 To expand four SKUs of the 32-oz. size nationally
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PROS 32 Oz cups generate an above-average gross profit margin (43.6% vs. 36.0% for the 8-oz. line)
Less competition Lower promotional expenses
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CONS Higher slotting fees National distribution in 12
months will be difficult Increase in SG&A costs
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SUPERMARKET CHANNEL ANALYSIS
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Channel Margin Cost Price Selling Price
Natureview 41% $0.99 $1.67
Retailer 15% $1.67 $1.97
Distributor 27% $1.97 $2.7
OPTION 2
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2000 2001
Unit sales 5,500,000 5,500,000
Revenue $9,185,000 $9,185,000
Cost $5,445,000 $5,445,000
Gross Profit $3,740,000 $3,740,000
Expense
Advertisement $480,000 $480,000
SG&A $160,000 $320,000
Slotting Fee $2,560,000
Broker’s Fee $367,400 $376,400
Net Profit $172,600 $2,572,600
OPTION 3 To introduce two SKUs of a children’s multi-pack into the natural foods channel
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PROS Strong relationships with the leading natural foods channel retailers
Very attractive Financial potential
Low sales and marketing expenses
High margins33
CONS Potential conflicts The year end revenue
objectives would not be met
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SUPERMARKET CHANNEL ANALYSIS
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Channel Margin Cost Price Selling Price
Natureview 38% $1.15 $1.84
Natural Foods Wholesaler
7% $1.84 $1.98
Distributor 9% $1.98 $2.18
Retailer 35% $2.18 $3.35
OPTION3
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2000 2001
Unit Sales 1,800,000 1,800,000
Revenue $3,312,000 $3,808,800
Cost $2,070,000 $2,380,500
Gross profit $1,242,000 $1,428,300
Expenses
Marketing $250,000 $250,000
Complementary case
$82,800 $95,220
Net Profit $909,200 $1,083,080
DECISION Option 1 is more favorable
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WHY Highest net revenue generated First mover advantage Cater to a larger market by
moving into supermarkets In addition they also consider
launching 32 oz product line
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DISCLAIMER Created by Bharat, IIT BHU, during a Marketing Internship under Prof. Sameer Mathur (IIM Lucknow)
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