THE NATUREVIEW FARM
A HARVARD BUSINESS SCHOOL CASE
TARGET
INCREASE REVENUES BY 50%
COMPANY HISTORY :
Entered the market in the year 1989
JIM WANGLER the company CFO Hired in 1996 developed financial controls which brought steady profit to company
In 1997 company arranged funds from a VC firm to fund strategic investments
PROBLEM
THE VCs NEED TO CASH OUT THEIR INVESTMENT IN NV FARM.NV NEEDS TO FIND NEW INVESTORS OR BRACE ITSELF FOR A TAKEOVER AND INCREASED REVENUE SHALL HELP IN MAXIMUM POSSIBLE VALUATION
ADVANTAGES WITH NV PRODUCTS :
1.Average shelf life of 50 days compared to competitors 30 days
2.Cows untreated with RGBH and artificial and artificial growth Hormones
3.Due to larger shelf life there was less requirements of plants as larger time required to deliver the product to shelf from a far off plant can be afforded.
SUPERMARKETS NATURAL FOOD STORES
MARKET SHARE 97% 3%
GROWTH RATE 3% pa 20% pa
SHOPPER’S PROFILE
More Educated
High income group
Older
46% of organic product market
29% of organic product market
PRODUCTS1.Natural yogurt (organic)
•8oz size with 12 flavors
•32oz size with 4 flavors
PRICEAffordable according to the research by different channels
PLACE•Natural food channels•Wholesale club•National Retailer channel•Convenience and Drug store
PROMOTION•Low cost guerilla marketing•It’s natural flavor with high quality and great taste growth in national distribution and food channel
Sales
8oz32oz
86%
14%
Yogurt Market Share By Packing Segments:
Sales
8oz Smaller cupChildren Multipack32oz CupsOther
Yogurt Market Share By Regions:
Sales
NorthwestMidwest SouthwestWest
Channel to Market:
SUPERMARKET CHANNEL NATURAL FOOD CHANNEL
Manufacturer
Distributor
Retailer
Customer
15%
27%
Manufacturer
Natural Food wholesaler
Natural food distributer
Retailer
Customer
7%
9%
35%
Yogurt Sale By Brand:
Sales
Dannon
Yoplait
Private Label
Columbo
Others
Supermarket channel
Sales
Natureview FarmBrown CowHorizon OrganicWhite WaveOthers
Natural Food Channel
COST AND PROFIT ANALYSIS
NATURAL FOOD CHANNELS
SUPERMARKET FOOD CHANNELS
MANUFACTURING
8oz Cups $0.88 $0.74 $0.31
32oz Cups $3.19 $2.70 $0.99
4oz Cup Multipack $3.35 $2.85 $1.15
OPTIONS AVAILAIBLE
OPTION 1:
ADVISOR: Walter Bellini (VP SALES)
Expand 6 SKU (Stock Keeping Units) of 8oz Product Line into one or two selected Supermarkets
• 6 SKUs chosen are best selling of 8oz Line
• Provides enough Balance between having enough cups on shelf to provide good shelf presence while not incurring high slotting
expense
Reason For Advice:
•8 oz cups are the largest selling
• Same strategy has been used by other companies with success and
NV farm is in better position to exploit the idea
• Urgency due to rumors that another rival is about to expand
in supermarket and there is scope for only one expansion there.
• Higher Risk and cost due to high competition
• Advertisement: $1.2 million
• SG&A for sales staff:$200000
• SG&A for Marketing: $120000
•Requirement of One time slotting fee
• 1.5% Market Share by the end of 1st year if the broker could
exploit their contact well with top 11 chain of North East and
top 9 of West.
Profit and Loss Analysis:
Channel Selling Price Margin Cost Price
Retailer $0.74 27% $0.54
Distributor $0.54 15% $0.46
Nature view $0.46 33% $0.31
OPTION 2:
ADVISOR: Jack Gottileb ,VP Operations
Expand 4 SKUs of 32oz size nationally
REASONS:• Though smaller Market share but generates
above average profit for NV farm•Few competition due to longer shelf life .It is projected that company could sell 5.5 million units in 1st year ,it is required to expand in 64
supermarket chain.
•People may not enter the brand with 32oz cups• Sales team may fail to
achieve nationwide distribution in 12months• SG&A increases by
$160000
• Lack of Competition
Channel Selling Price Margin Cost Price
Retailer $2.70 27% $1.97
Distributer $1.97 15% $1.67
Nature view $1.67 41% $0.99
Profit and Loss Analysis:
OPTION 2:
Advisor: Kelly Riely (Assistant Marketing Director)
Expand 2 SKUs of Children Multipack in Natural Food Channels
Reason For Advice:
• Good relations with Natural Food Retailers could be exploited
•There are chances of damaging these relations in case of a supermarket expansion
• Lack of sufficient skill set to go ahead with supermarket expansion
• Sales team was confident of achieving distribution of 2SKUs in Limited time
• Attractive financial potential
Profit and Loss Analysis:
Channel Selling Price Margin Cost Price
Retailer $3.35 35% $2.18
Distributer $2.18 9% $1.98
Natural Food Wholesaler
$1.98 7% $1.84
Nature view $1.84 38% $1.15
OPTION 1 OPTION 2 OPTION 3
Gross Margin 33 41 38
Unit Sales 42000000 5500000 2070000
Revenue Projection $ 44080000 $ 27850000 $ 19934500
Cost $ 13020000 $ 5445000 $ 2380500
Gross Profit $ 31060000 $ 22405000 $ 17554000SG&A $ 640000 $ 160000 0
Marketing $ 2400000 $ 480000 $ 250000
Broker’s Fee 772800 367400 0
Complementary cases
0 0 0
Net Profit $ 27247200 $ 21397600 $ 17130637
Number Analysis:
DECISIONGo For Option 3:
Reasons:1. Does not damage the relations with Natural Chain Partners2. Net Profit, though lower than the other option remains a lucrative one
and completes the target3. The other options can be implemented a few years Later after proper
consultation with partners and sufficient planning4. Does not put undue pressure on the sales and marketing team 5. No Broker Fee involved6. No need of employing a new sales and marketing team7. A rather risk free option.
Disclaimer
These Slides Have Been prepared By Abhinav Pratyush of The Indian School of Mines ,Dhanbad during a marketing internship under Professor Sameer Mathur of IIM Lucknow