Natureview

Farm
Group 4
Section A

l Chhabra | Abhishek Biswas | Chetan Dua | Diwaker Redhu | Kartikeya Bahl | Anubha
201001
|
150201002
| 150201029 | 150201035
| 150201041
| 150

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

Timeline
1989: founded in Cabot, Vermount manufactured and
marketed refrigerated cup yoghurt with 2 flavors (plain and
Vanila)

1996: Jim Wagner was hired as CFO Natureview farm was

funded by a VC firm.

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

years

Natureview Farm

Main Issues
An unplanned exit by its venture
capital investors

Naturview Farm wants to increase

revenues from presently $13 million
(1999) to $20 million by year 2001.
whether to achieve this revenue growth by expanding into
the supermarket channel and what is the best plan?

Natureview Farm

Market
Trend:
74%

67%
58%
44%

26%

Organic Dairy product Buyer

Heavy Organic Food Buyer
Light Organic Food Buyer

Price barrier to purchase

Would buy if less expensive
Need a wider selection

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)

Natureview Farm

Market
Trend:

channel used by organic food consumers

Yogurt market share by

Region

29%
46%

27%

25%
25%

supermarket
small health food store
narural food supermarket

Northeast
Southeast

26%

22%

Midwest
West

Natureview Farm

Market
Trend:

Yogurt market share by packaging segment

8%

12.50%

9%

9%
74%

3%
2%

Growth
8-oz cups and smaller
32-oz cups

childern's multipack
others

8-oz cups and smaller

Children's multipacks
32-oz. Cups

Natureview Farm

Market
Trend:
Distribution Channel

Sales

3%

Super
marke
t
Chann
el

Natur
al
foods
Chan
nel

97%

Natural foods

Supermarket

Natureview Farm

Length of
Channel
to Market

Natureview Farm

Competitor
s:

Yogurt Market share by Brand:

Supermarket Channel
5%
15%

33%

7%
24%

Yoplait
Columbi

24%

35%

23%

Dannon
Private label

Natural Foods Channel

Others

15%
19%

Natureview Farm
Horizon Organic
Others

Brown Cow
White Wave

Natureview Farm

The
Challenge:
Income statement, 1999

Revenues
COGS
Gross Profit
Expenses
Administration/freight
Sales
Marketing
Research and development
Net Income

13000000
8190000
4810000
2210000
1560000
390000
390000
260000

Natureview Farm

The
Challenge:

8-Oz. Cups

86%

3%

1999
2000
2001
1118000
11515400 11860862
0

32-Oz. Cups

14%

2%

1820000

Total
Revenues

Revenue Growth rate

1856400

1893528

1300000
0
13371800 13754390

Natureview Farm

Growth
Strategies:
Current Product New Product

Current Market

New Market

Market
Penetration
Strategy

Product
Development
Strategy

Market
Development
Strategy

Diversificati
on
Natureview Farm

Options:

Natureview Farm

Option 1:
Mr. Walter Bellini, Vice President Of
sales
Expand 6 SKUs of the 8-oz Size into
eastern and western supermarket
Regions.

Natureview Farm

Option
2:

Mr. Jac
k
Operat Gottlieb, Vice
ions
Preside
nt Of
Expan
d 4 SK
Us of t
Nation
he 32ally int
oz Size
o supe
r marke
t Chan
nel.

Natureview Farm

Option 3:
Ms. Kelly Riley, the assistant
marketing Director
Introduce 2 Childrens
Multipack into Natural Foods
Channel

Natureview Farm

Natureview Farm

 Potential for high growth

expected 1.5% market share
after 1 year(35 million units)

High expense - 3.04 million

Consumers in NE and W are

more likely to go for organic.

Direct competition with

biggies with huge cash power

Has highest dollar share of 74%.

Quaterly promotion required

Smaller length of channel to

market & reduction of price.
Others have tested it and
succeeded.
Natureview Farm

sales price
retailer margin(27%)
price to retail
distributor margin( 15%)
sales price for natureview

0.74
0.20
0.54
0.08
0.46

Number of regions

2
(Northeast and
west)

Retailers

20

Natureview Farm

Incremental
Income Statement
Expected sales in units
Price per unit
Revenue
Cost per unit
COGS

Advertising Expense
Advertising per region
Total

Sales & Administrative

Marketing Staf
Sales Force
Broker's fee (4%)
Total
Slotting Fee
Number of SKUs
One SKU fee per chain
Retail Chains
Total Slotting Fee

Trade Promotion
Cost per promotion per retailer(Northeast)
Number of retailers
Cost per promotion per retailer(west)
Number of retailers
Promotion periods per year
Total cost of promotions

Net Profit

Option 1
2000
35,000,000
0.46
16,100,000
0.31
10,850,000

1,200,000
2,400,000

120,000
200,000
644,000
964,000

6
10,000
20
1,200,000

7,500
11
15,000
9
4
870000

-184,000

2001
42,000,000
0.46
19,320,000
0.31
13,020,000

1,200,000
2,400,000

120,000
200,000
772,800
1,092,800

7,500
11
15,000
9
4
870000

1,937,200

Natureview
Farm
Natureview Farm

Natureview Farm

 Fewer competition
Lower on average trade
promotion expense
Higher profit marginfor
32ozversus 8oz
Expected 1st year sales of 5.5
million units

High risk

Low Dollar share of 32 oz cups

Sales force expansion cost
$160,000

Issue of pricing diferentially

Smaller length of channel to

market
Natureview Farm

sales price
retailer margin(27%)
price to retail
distributor margin( 15%)
sales price for natureview

Number 0f regions
Retailers

2.70
0.73
1.97
0.30
1.68

4
64

Natureview Farm

Incremental
Income
Expected sales in units
Price per unit
Revenue
Cost per unit
COGS

Advertising Expense
Advertising per region
Total

Sales & Administrative

Marketing Staf
Broker's fee (4%)
Total
Slotting Fee
Number of SKUs
One SKU fee per chain
Retail Chains
Total Slotting Fee

Trade Promotion

Option 2
2000
5,500,000
1.68
9,240,000
0.99
5,445,000

120,000
480,000

160,000
369,600
529,600

4
10,000
64
2,560,000

2001
5,500,000
1.68
9,240,000
0.99
5,445,000

120,000
480,000

160,000
369,600
529,600

Cost per promotion per retailer(Avg.)

Number of retailers
Promotion periods per year
Total cost of promotions

Net Profit

8,000
64
2
1024000

-798,600

8,000
64
2
1024000

1,761,400
Natureview Farm

Natureview Farm

Leverage current relationships

within nature foods channel
Natural foods channel growing
faster than Supermarkets
Low cost

Low expected revenue

Requires R&D to develop
product
Miss opportunity to enter
Supermarkets before competitors.

Natureview Farm

sales price
retailer margin(35%)
price to retail
distributor margin( 9%)
price to wholesaler
wholesaler margin( 7%)
Selling price for natureview

3.35
1.17
2.18
0.20
1.98
0.14
1.84

Natureview Farm

Incremental

Option 3

Income

2000

2001

Expected sales in units

1,800,000

2,070,000

Price 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 Staf

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
recommenda
tion:

Natureview Farm

Most viable option to reach a goal of $20

million Revenues

High growth rate of 20% better than any other

option

First-Mover Advantage

More visibility of the product, new target

customers

Natureview Farm

Action
Plan:
Leverage the
relationship with
brokers to strike a deal
with supermarkets
Choose 6 SKUs to be
introduced in
supermarkets.
Partner with more than
one VC to minimize
risk.

Enter Super
Markets

Design Trade
promotions

Deploy maximum
resources to make
efective use of the
channel.
Have a sale and
marketing function
dedicated to
supermarket.
Try to maintain the
premium image of the
brand through unique
promotions

Diferential pricing
Incentivize retailers for
the perceived loss.
(Retailer Engagement
Schemes)
Work with retailers,
distributors and
wholesalers to reduce
cost, maintain margins &
decrease the price
diference.

Manage
Channel
Conflict

Natureview Farm

Marketing Mix : 8-oz , $0.78, Presence in supermarket

among other yogurt manufacturers,
in-store Promotion.
Sales
: Analyse the sales using more
sophisticated methods.
Brand
: Will Position itself the same as the
premium product
Channel Partner arrangements :
Work with retailers, distributors and wholesaler to
reduce costs and mantain margins.
Work to remove the price diferentiation.
Natureview Farm

Any Questions?

Natureview Farm