Case Study on

Natureview Farm

Small Yoghurt manufacturer in USOne of the major sellers at Natural food stores

Natureview Farm INC.

Formed in 1989Revenue grown from

$100,000 to $13 million from 1989-1999

Revenue for the year 1999

Present Challenge of Natureview Farm

Finding a path to grow revenue from $13 million to $20 million before the end of 2001

But How?

Competitors of Nature View FarmNatural Food Channel-Brown Cow Horizon OrganicWhite WaveOthersMajor Yoghurt Sellers/Potential

Competitors in Supermarket ChannelDannonYoplaitBreyers Columbo

Yoghurt sold in Supermarket = 97%Yoghurt sold in Natural Food Store = 3%

BUT

Average Yoghurt Sale growth per year in Supermarket = 3%

Average Yoghurt Sale growth per year in Natural Food Store = 20%

Supermarket = 46% Small Health Stores = 25% Natural Food Stores = 29%

Organic Food Consumers

To 67% households PRICE is a barrier

58% expressed that they would buy more organic food if it were less expensive

Yoghurt purchased by = 40% US Population

(Out of which 70% are women)

8 oz and smallerMultipack 6 packs of 4 oz cups

Or 8 pack of 2

oz cups

32 oz

Different sizes of Yoghurt

Size Dollar Share

Dollar Share

changes vs. Prior Year

8 oz cups and smaller 74

%+3%

Children’s Multipack

9% +12.5%

32 oz 8% +2%

Other 9% NC

100%

Yogurt Market Share by Packaging Segment, 1999 (Supermarket channel, in % U.S. dollars)

Region Dollar Share Number of Retailers

Northeast 26% 25

Midwest 22% 30South East 25% 33

West 27% 17

Yogurt Market Share by Region, 1999 (Supermarket channel, in % U.S. dollars)

Relatively streamlined distribution systems of supermarkets Allow to maintain lower prices

Distribution in the natural foods channel involved 4, instead of three parties

SUPERMARKETS FOR PRICE SENSITIVE SEGMENT

Manufacturer

Distributor

Retailer

Customer

Manufacturer

Retailer

Customer

Natural Foods Wholesaler

Natural Foods Distributor

LENGTH

CHANNELs

OF

Supermarket Channel Natural Foods Channel

Sizes Actual Cost

Supermarket

Natural Food Store

8 oz $0.31 $0.74 $0.88

32 oz $0.99 $2.70 $3.19

4 oz Multipack

$1.15 $2.85 $3.35

Yogurt Production Costs and Retail Prices by Channel

Competition in Supermarket Channel and Natural Food

Channel

Dannon 33%Yopailt 24%Others 23%

Private Label 15%Columbo 5%

Nature View 24%Brown Cow 15%

Horizon Organic 19%White Wave 7%

Others 35%

Yogurt Market Share by Brand, 1999 (Supermarket and Natural Foods channels,

in % U.S. dollars) SUPERMARKET CHANNEL

NATURAL FOOD CHANNEL

The Senior Management Team’s Three Options

2 of them included Entry in Supermarket channel

1 option emphasizes on the need to retain in Natural Foods Channel only

ARGUMENTS FOR1. Eight-ounce cups represented the largest

dollar and unit share of the refrigerated yogurt market

2. Nature View is uniquely positioned to capitalize on the growing trend in natural and organic foods in supermarkets

3. The first brand to enter the supermarket channel could have a significant first-mover advantage

1.To expand six SKUs of the 8-oz. product line into one or two selected supermarket channel regions

$1.2 Million per region per month for Advertisement

Additional $320,000 on SG&AAdditional $200,000 for Brokers in 2 regions$120,000 for Marketing Staff$60,000 SKU charges

Total Charges = $1,900,000

ADDITIONAL COSTS DUE TO OPTION 1

ARGUMENTS FOR

1. They currently generated an above-average gross profit margin for Natureview (43.6% vs. 36.0% for the 8-oz. line).

2. There were fewer competitive offerings in this size

3. Promotional expenses would be lower (the 32-oz. size was promoted only twice a

year)

2. To expand four SKUs of the 32-oz size nationally

$40,000 for SKUAdditional $160,000 for SG&A$12,000 per region per year for

marketing

Total Charges = $212,000

ADDITIONAL COSTS DUE TO OPTION 2

ARGUMENSTS FOR1. Expansion into the supermarket channel could

potentially affect these relationships with the leading natural foods channel retailers

2. Skeptical if Natureview had the necessary resources or skill-set to sell effectively to and through supermarkets.

3. Perfect position from which to launch its own children’s multi-pack product offering into their core sales channel

4. Financial potential was very attractive5. The natural foods channel was growing almost seven

times faster than the supermarket channel6. No additional SG&A costs

3. To introduce two SKUs of a children’s multi-pack into the natural foods channel

ADDITIONAL COSTS DUE TO OPTION 3

Total Charges = $0

Sales Projections for Natureview’s Strategic Options

Options Actions Anticipated Incremental

Retail Unit Sales 1 Expand 6 SKUs of

the 8-oz. size into eastern and

western supermarket

regions

35,000,000

2 Expand 4 SKUs of the 32-oz. size nationally into supermarket

channel

5,500,000

3 Introduce 2 children’s

multipacks into natural foods

channel

1,800,000

Total Revenue = (Unit Sales*Cost per

Unit) – Total Charges Incurred

by Natureview

Net Revenue = (35,000,000*0.74) – 1,900,000

= $ 24,000,000

Option 1

Option 2Net Revenue = (5,500,000*2.70) – 212,000

= $ 14,638,000

Option 3Net Revenue = (1,800,000*3.35) – 0

= $ 6,030,000

TOTAL REVENUEOPTION TOTAL REVENUE

1 $25,200,000

2 $14,638,000

3 6,030,000

As per the Calculation, Option 1 seems to be the Optimal

Solution to reach the revenue of $20 Million before the end of

2001i.e.

To expand six SKUs of the 8-oz. product line into one or two

selected supermarket channel regions

DISCLAIMERCreated by Akanksha Rai Sharma, MSITDuring a marketing internship by Prof. Sameer Mathur , IIM Lucknow