Natureview Farms Case

7/23/2019 Natureview Farms Case

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Group 4Section A



Natureview Farm

Case

Overview• Natureview Farm,Inc. - Small Yogurt Manufacturer

•

Founded in 1989 (in Cabot, Vermont)

• Gained 24% market share of natural foods channel

• Use natural ingredients and special process

• Organic yogurt with longer shelf life (50 days)



Natureview Farm

Timeline1989: founded in Cabot, Vermount manufactured andmarketed refrigerated cup yoghurt with 2 flavors (plain and Vanila)

1996: Jim Wagner was hired as CFO Natureview farm wasfunded by a VC firm.

1999: revenue grows from $100,000 to $13 million in 10 years



Natureview Farm

Main Issues

Naturview Farm wants to increaserevenues from presently $13 million(1999) to $20 million by year 2001.

An unplanned exit by its venturecapital investors

whether to achieve this revenue growth by expanding intothe supermarket channel and what is the best plan?



Natureview Farm

67%

58%

44%

#rice barrier t$ %urchase

&$uld buy i' less e(%ensive

)eed a wider selecti$n

*r+anic Dairy %r$duct Buyer

74%

26%

,eavy *r+anic -$$d Buyer

.i+ht *r+anic -$$d Buyer

Organic food market expected to grow from $6.5 billion(1999) to $ 13.3 billion in

worth in 2003

Characterstics of buyers:• High income• More educated• Live in northeast and west (majorly)

Market

Trend:



Natureview Farm

Market

Trend:

26%

22%25%

27%

Yogurt market sare !"#egion

)$rtheast /idwest

$utheast &est

46%

25%

2$%

annel used !" organi &ood onsumers

su%ermarket

small health '$$d st$re

narural '$$d su%ermarket



Natureview Farm

Market

Trend:

74%

$%

8%$%

Yogurt market sare !" 'akaging segment

1$3 cu%s and smaller childern4s multi%ack

!2$3 cu%s $thers

(rowt

)%

*2+5,%

2%

$3 cu%s and smaller

Children4s multi%acks

!2$3 Cu%s



Natureview Farm

Market

Trend:Distribution Channel

)atural

'$$dsChannel

u%ermarke

tChann

el

)%

$7%

-ales

)atural '$$ds u%ermarket



Natureview Farm

Length ofChannelto Market



Natureview Farm

Com'etitor

s:

))%

24%

2)%

*5%5%

-u'ermarket Cannel

Dann$n 6$%lait *thers

#rivate label C$lumbi

Yogurt Market share by Brand:

24%

*5%

*$%7%

)5%

.atural /oods Cannel

)atureview -arm Br$wn C$w

,$ri3$n *r+anic &hite &ave

*thers



Natureview Farm

Te

Callenge:Income statement, 1999

Revenues 13000000

COGS 8190000

Gross Profit 4810000Expenses

Administration/freight 2210000

Sales 1560000

Marketing 390000Research and development 390000

Net Income 260000



Natureview Farm

Te

Callenge: RevenueGrowth rate 1999 2000 2001

8-Oz. Cups

86% 3%1118000

0

11515400 11860862

32-Oz. Cups 14% 2% 1820000 1856400 1893528

Total

Revenues

13000000 13371800 13754390



Natureview Farm

(rowt

-trategies:Market

PenetrationStrategy

Product

DevelopmentStrategy

MarketDevelopmentStrategy

Diversification

Current 0rodut .ew 0rodut

Current Market

.ew Market



Natureview Farm

O'tions:



Natureview Farm

Option 1:Mr. Walter Bellini, Vice President Ofsales

Expand 6 SKUs of the 8-oz Size intoeastern and western supermarketRegions.



Natureview Farm

O ption 2:Mr. Jack Gottlieb, Vice Pres

ident Of

O perations

E x pand 4 SKUs of the 32-oz Size

Nationall y into su permarket Channel.



Natureview Farm

Option 3:

Ms. Kelly Riley, the assistantmarketing Director

Introduce 2 Children’sMultipack into Natural Foods

Channel



Natureview Farm



Natureview Farm

• Potential for high growthexpected 1.5% market shareafter 1 year(35 million units)

•

Consumers in NE and W aremore likely to go for organic.

• Has highest dollar share of 74%.

•

Smaller length of channel tomarket & reduction of price.

• Others have tested it andsucceeded.

• High expense - 3.04 million

•

Direct competition with biggies with huge cash power

• Quaterly promotion required



Natureview Farm

sales price 0.74retailer margin(27%) 0.20price to retail 0.54

distributor margin( 15%) 0.08sales price for natureview 0.46

Number of regions

2

(Northeast and

west)

Retailers 20



Natureview Farm

Incremental Option 1Income Statement 2000 2001

Expected sales in units 35,000,000 42,000,000

Price per unit 0.46 0.46

Revenue 16,100,000 19,320,000Cost per unit 0.31 0.31

COGS 10,850,000 13,020,000

Advertising Expense Advertising per region 1,200,000 1,200,000

Total 2,400,000 2,400,000

Sales & AdministrativeMarketing Staff 120,000 120,000Sales Force 200,000 200,000

Broker's fee (4%) 644,000 772,800 Total 964,000 1,092,800Slotting Fee

Number of SKUs 6One SKU fee per chain 10,000

Retail Chains 20 Total Slotting Fee 1,200,000

Trade PromotionCost per promotion per retailer(Northeast) 7,500 7,500

Number of retailers 11 11Cost per promotion per retailer(west) 15,000 15,000

Number of retailers 9 9Promotion periods per year 4 4 Total cost of promotions 870000 870000

Net Profit -184,000 1,937,200

Natureview Farm



Natureview Farm



Natureview Farm

• Fewer competition

• Lower on average tradepromotion expense

• Higher profit margin for32oz versus 8oz

• Expected 1st year sales of 5.5

million units

• Smaller length of channel tomarket

• High risk

• Low Dollar share of 32 oz cups

• Sales force expansion cost$160,000

• Issue of pricing differentially



Natureview Farm

sales price 2.70

retailer margin(27%) 0.73

price to retail 1.97

distributor margin( 15%) 0.30

sales price for natureview 1.68

Number 0f regions 4

Retailers 64



Natureview Farm

Incremental Option 2

Income 2000 2001

Expected sales in units 5,500,000 5,500,000

Price per unit 1.68 1.68

Revenue 9,240,000 9,240,000

Cost per unit 0.99 0.99

COGS 5,445,000 5,445,000

Advertising Expense

Advertising per region 120,000 120,000

Total 480,000 480,000

Sales & Administrative

Marketing Staff 160,000 160,000

Broker's fee (4%) 369,600 369,600 Total 529,600 529,600

Slotting Fee

Number of SKUs 4

One SKU fee per chain 10,000

Retail Chains 64

Total Slotting Fee 2,560,000

Trade Promotion

Cost per promotion per retailer(Avg.) 8,000 8,000

Number of retailers 64 64

Promotion periods per year 2 2

Total cost of promotions 1024000 1024000

Net Profit -798,600 1,761,400



Natureview Farm



Natureview Farm

• Leverage current relationships

within nature foods channel

• Natural foods channel growingfaster than Supermarkets

•

Low cost

• Low expected revenue

• Requires R&D to developproduct

• Miss opportunity to enter

Supermarkets before competitors.



Natureview Farm

sales price 3.35

retailer margin(35%) 1.17

price to retail 2.18

distributor margin( 9%) 0.20

price to wholesaler 1.98 wholesaler margin( 7%) 0.14

Selling price for natureview 1.84



Natureview Farm

Incremental Option 3

Income 2000 2001

Expected sales in units 1,800,000 2,070,000Price per unit 1.84 1.84

Revenue 3,312,000 3,808,800

Cost per unit 1.15 1.15

COGS 2,070,000 2,380,500

Sales & Administrative

Marketing Staff 250,000 250,000

complimentary case (2.5%) 82,800 95,220

Total 332,800 345,220

Net Profit 909,200 1,083,080



Natureview Farm

Our

reommenda

tion:



Natureview Farm

• Most viable option to reach a goal of $20million Revenues

• High growth rate of 20% better than any otheroption

• First-Mover Advantage

• More visibility of the product, new targetcustomers



Natureview Farm

• Leverage therelationship with

brokers to strike a deal with supermarkets

• Choose 6 SKUs to beintroduced insupermarkets.

• Partner with more thanone VC to minimizerisk.

Enter SuperMarkets

• Deploy maximumresources to makeeffective use of thechannel.

• Have a sale andmarketing functiondedicated tosupermarket.

• Try to maintain thepremium image of the

brand through unique

promotions

Design Tradepromotions

• Differential pricing

• Incentivize retailers forthe perceived loss.(Retailer Engagement

Schemes)

• Work with retailers,distributors and

wholesalers to reducecost, maintain margins &decrease the pricedifference.

ManageChannelConflict

1tion0lan:



Natureview Farm

Marketing Mix : 8-oz , $0.78, Presence in supermarketamong other yogurt manufacturers,

in-store Promotion.

Sales : Analyse the sales using moresophisticated methods.

Brand : Will Position itself the same as thepremium product

Channel Partner arrangements :

•

Work with retailers, distributors and wholesaler toreduce costs and mantain margins.

• Work to remove the price differentiation.



NatureviewFarm

Any Questions?

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Natureview Farms Case

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