NATUREVIEW

OBJECTIVE: They have to make strategic marketing decisions to grow revenues to $20,000,000 from
their current $13,000,000 before the end of the 2001 fiscal year.

CUSTOMER TARGET: Yogurt is consumed by 40% of the US population. Among those 70% are women.
Organic dairy products are bought by 74% of heavy organic buyers and 29% of light organic buyers. For
natural food buyers, factors to see when buying yogurt are ingredients and whether it is organic or not.
Factors to check when deciding which yogurt to purchase are package, size, price, flavour, freshness,
ingredients and whether it was organic or not. Shoppers at Natural Food Stores are older, educated and
have higher incomes. 46% of organic food consumers bought at supermarkets. 25% bought at a small
health store. 29% at natural foods supermarket

Supermarket Channel (1999) Natural Foods Channel (1999)

Columbo 5% Other 35%
Dannon 33% Nature view Farm 24%
Other 23% Horizon Wave 19%
Private Label 15% White Wave 7%
Yoplait 24% Brown Cow 15%

OBJECTIVE: Natural Foods Customer is Brand Sensitive, Taste savvy and Less Price Sensitive so they
charged higher Retail prices.
COMPETITIVE ADVANTAGE:

HORIZON ORGANIC:
It flushes with cash from a recent IPO. It definitely produces a full range of organic dairy. It is also
known as a National Brand

BROWN COW:
Strong regional presence on the West coast

WEAKNESS:
Brown Cows yogurt was all natural but not organic. Horizons was organic but it had a shorter shelf life
than Natureviews product

GROWTH STRATEGY:
Its growth has involved high Gross Profit margin ( 37%)
In 1999, 100% Revenue generated from sales of refrigerated yogurt to natural foods stores.
High market capture with 8-oz
Choices for Christine Walker, VP Marketing
Option 1: Expand 6 SKUs of the 8-oz. product line into one or two selected supermarket
channel regions as Proposed by Walter Bellini VP Sales
Option 2: Expand 4 SKUs of the 32-oz. size nationally as Proposed by Jack Gottlieb, vice
president of operations
Option 3: Introduce 2 SKUs of a Childrens Multi-Pack into the Natural Foods Channel
Proposed by Kelly Riley, the assistant marketing director

Option 1 analysis
Option 1 - Expand 6 SKUs of the 8-oz product line into one or two selected supermarket
channel regions
Benefits
1. Great Upside Potential
2. For supermarket adding these products would attract higher-income less price-sensitive
customers
3. Unit volume growth of organic yogurt at supermarkets of 20% per year from 2001 to
2006
4. This option also has the highest incremental demand
Risks
1. Supporting 8-oz cup size would require quarterly trade promotions and a meaningful
marketing budget
2. Advertising plan would cost $1.2 million per region per year in addition to the
promotional ads expenses
3. SG&A expenses would increase by $320,000 annually
4. This option creates direct competition with national yogurt brands
Income forecast
Year 2000 Year 2001 Year 2002 Year 2003
Revenue $ 29,070,950 $ 32,285,140 $ 36,142,168 $ 40,770,602
Costs of Good Sold $ (19,040,000) $ (21,210,000) $ (23,814,000) $ (26,938,800)
Gross Profit $ 10,030,950 $ 11,075,140 $ 12,328,168 $ 13,831,802
Admin / Freight $ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)
Sales $ (1,880,000) $ (1,880,000) $ (1,880,000) $ (1,880,000)
Marketing $ (3,660,000) $ (3,660,000) $ (3,660,000) $ (3,660,000)
R&D $ (390,000) $ (390,000) $ (390,000) $ (390,000)
One-Time Slotting
Fee $ (1,200,000) - - -
Brokers' Fee @ 4% $ (642,838) $ (771,406) $ (925,687) $ (1,110,824)
Total Expense $ (9,982,838) $ (8,911,406) $ (9,065,687) $ (9,250,824)
Net Income $ 48,112 $ 2,163,734 $ 3,262,481 $ 4,580,978
Profit Margin 0.17% 6.70% 9.03% 11.24%
Option 2 Expand 4 SKUs of the 32-oz. size nationally
Benefits
1. Potentially give higher average gross profit margin than 8-oz size
2. It also has stronger competitive advantage like longer shelf life and lower marketing
expenses
Risks
1. Doubt on claim of new users would readily enter the brand via a multi-use size
2. Doubt on sales teams ability to achieve full national distribution in 12 months
3. Needs to hire sales personnel and establish relationships with supermarket brokers
4. The 32-oz. expansion option would increase SG&A expense by $160,000

Forecast

Year 2000 Year 2001 Year 2002 Year 2003

Revenue
$ 22,214,425 $ 24,057,310 $ 26,268,772 $ 28,922,526
Costs of Good
Sold $ (13,635,000) $ (14,724,000) $ (16,030,800) $ (17,598,960)
Gross Profit
$ 8,579,425 $ 9,333,310 $ 10,237,972 $ 11,323,566

Admin / Freight
$ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)
Sales
$ (1,720,000) $ (1,720,000) $ (1,720,000) $ (1,720,000)
Marketing
$ (1,894,000) $ (1,894,000) $ (1,894,000) $ (1,894,000)
R&D
$ (390,000) $ (390,000) $ (390,000) $ (390,000)
One-Time Slotting
Fee $ (2,560,000) - - -
Brokers' Fee @ 4%
$ (368,577) $ (442,292) $ (530,751) $ (636,901)
Total Expense
$ (9,142,577) $ (6,656,292) $ (6,744,751) $ (6,850,901)
Net Income
$ (563,152) $ 2,677,018 $ 3,493,221 $ 4,472,665
Profit Margin -2.54% 11.13% 13.30% 15.46%
Option 3 Introduce 2 SKUs of a Childrens Multi-Pack into the Natural Foods Channel
Benefits
1. Established leader in this channel
2. Perfect positioning for new multi-pack product
3. Long term the financial potential was very attractive
Risks
1. Established leader in this channel
2. Perfect positioning for new multi-pack product
3. Long term the financial potential was very attractive

Forecast
Year 2000 Year 2001 Year 2002 Year 2003

Revenue
$ 16,317,073 $ 16,383,414 $ 16,451,083 $ 16,520,104
Costs of Good
Sold $ (10,260,000) $ (10,007,640) $ (10,043,993) $ (10,081,073)
Gross Profit
$ 6,057,073 $ 6,375,774 $ 6,407,090 $ 6,439,032

Admin / Freight
$ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)
Sales
$ (1,560,000) $ (1,560,000) $ (1,560,000) $ (1,560,000)
Marketing
$ (640,000) $ (640,000) $ (640,000) $ (640,000)
R&D
$ (390,000) $ (390,000) $ (390,000) $ (390,000)
One-Time
Slotting Fee $ (82,927) - - -
Brokers' Fee @
4% $ (132,683) $ (135,337) $ (138,043) $ (140,804)
Total Expense
$ (5,015,610) $ (4,935,337) $ (4,938,043) $ (4,940,804)
Net Income
$ 1,041,463 $ 1,440,438 $ 1,469,046 $ 1,498,227
Profit Margin 6.38% 8.79% 8.93% 9.07%
SUMMARY

2000 2001 2002 2003 2004

OPTION 1
Revenue $ 29,070,950.00 $ 32,285,140.00 $ 36,142,168.00 $ 40,770,601.60 $ 46,324,721.92
Gross
Profit $ 10,030,950.00 $ 11,075,140.00 $ 12,328,168.00 $ 13,831,801.60 $ 15,636,161.92
Net
Income $ 48,112.00 $ 2,163,734.40 $ 3,262,481.28 $ 4,580,977.54 $ 6,163,173.04
Profit
Margin 0% 7% 9% 11% 13%
Profit
Growth 0% 4397% 51% 40% 35%

OPTION 2
Revenue $ 22,214,425.00 $ 24,057,310.00 $ 26,268,772.00 $ 28,922,526.40 $ 32,107,031.68
Gross
Profit $ 8,579,425.00 $ 9,333,310.00 $ 10,237,972.00 $ 11,323,566.40 $ 12,626,279.68
Net $
Income (563,152.00) $ 2,677,017.60 $ 3,493,222.12 $ 4,472,667.34 $ 5,648,001.41
Profit
Margin -3% 11% 13% 15% 18%
Profit
Growth 0% 575% 30% 28% 26%

OPTION 3
Revenue $ 16,317,072.85 $ 16,814,633.78 $ 17,386,828.84 $ 18,044,853.17 $ 18,801,581.15
Gross
Profit $ 6,057,072.85 $ 6,575,333.78 $ 6,840,133.84 $ 7,144,653.92 $ 7,494,852.01
Net
Income $ 1,041,463.11 $ 1,622,748.43 $ 1,864,660.69 $ 2,142,859.79 $ 2,462,788.76
Profit
Margin 6% 10% 11% 12% 13%
Profit
Growth 0% 56% 15% 15% 15%
 Decision Matrix

Decision Parameter Option 1 Option 2 Option 3

Revenue Objective Exceeds Exceeds Falls Short
Short Term Profits No No Gain
Long Term Profits High High Low
Channel Partners Highly Alienating Alienating Enhancing
Competitive Response Very Risky Risky Low
Cost to Induce Trial High Very High Low
Brand Equity Dilution Possible Possible No
Organizational capabilities Low Low High

Possible Conclusion

If we really hard press to answer the $20 million question, then its fairly simple answer. Go with
option 1.
We recommend Nature view to expand the multi pack into supermarket channel in Northeast
and West

The benefits would include the follow:

High growth (more than 12% from last year)

Minimized channel conflicts : Through this expansion, Nature view can make its revenue goal by
2001
No cannibalization or alienation
New target customers : Supermarket will be selling these multi packs relatively cheap
Higher expected annual demand.