natureview farm case study

N a t u r e V i e wC a s e S t u d y

Siddharth Putuvely

BACKGROUND

Founded in 1989, Natureview Farm manufactured and marketed refrigerated cup yogurt.

Background

Strengths•Strong Brand•Low Cost•Relation with Distributors

Differences•Natural and Organic Ingredients

•Long Shelf Life•High Quality and Taste

Revenue of 20 million

dollars need by end of

year

2001VC firms want to

cash out.Revenue

reached 13 million dollars

2000 Natureview arrange for

an equity infusion

from a venture

capital (VC)firm to fund

strategic investments

1997Jim Wagner

joined as CFO

1996Natureview

was founded

with 2 yogurt

flavours

1989

Background cont.

5

Data on the Yogurt Industry

D a t a o n t h e Yo g u r t I n d u s t r y

Supermarket97%

Natural Food Stores

3%

Yogurt Sales

Supermarket

Natural Food Stores

6 and 8 Oz74%

Multipack9%

32 Oz8%

Others9%

Yogurt Sales by Size

6 and 8 OzMultipack32 OzOthers

D a t a o n t h e Yo g u r t I n d u s t r y

28%

60%

12%

Yogurt Consumption

Consuming womenNon ConsumingConsuming men

8

N a t u r e v i e w ’ s 4 P ’ s

• Size• Flavour• Natural• Organic

Product

Natural Food ChannelsPlace

High PricePrice

• Retail level• Wholesale Level• Distributor Level

Promotion

CURRENT SITUATION

10

C u r r e n t S i t u a t i o n

The VC firm that invested in Natureview now needed to cash out of its investment. Their management had to find another investor or position itself for acquisition, and increasing revenues was critical in order to attain the highest possible valuation for the company.

OBJECTIVE

12

O B J E C T I V E

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.

ANALYSING OPTIONS

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Expand 6 SKUs of the 8-oz product line into one or two selected supermarket channel regions

OPTION 1

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O P T I O N 1 A N A LY S I S

ProsGreat revenue Potential

Supermarkets sold 97% of all yogurtconsumed

Unit volume growth of organic yogurt at supermarkets of 20% per year from 2001 to 2006

O P T I O N 1 A N A LY S I S

ConsSupporting 8-oz cup size would require quarterly trade promotions and a meaningful marketing budget

Advertising plan would cost $1.2 million per region per year in

addition to the promotional ads expenses

17

O P T I O N 1 A N A LY S I S

Cons

SG&A expenses would increase by $320,000 annuallyThis option creates direct

competition with national yogurt brands

Deteriorates the relationship with the natural stores

18

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

OPTION 2

19

O P T I O N 2 A N A LY S I S

ProsPotentially give higher average gross profit margin than 8-oz size It also has stronger

competitive advantage like longer shelf life and lower marketing expenses

O P T I O N 2 A N A LY S I S

ConsDoubt on sales team’s ability to achieve full national distribution in 12 months

Needs to hire sales personnel and establish relationships with

supermarket brokers

Doubt on claim of new users would readily “enter the brand” via a multi-use size

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

OPTION 3

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O P T I O N 3 A N A LY S I S

ProsEstablished leader in this channel Perfect positioning for new

multi-pack productLong term the financial potential was very attractive

O P T I O N 3 A N A LY S I S

ConsWon’t enter supermarkets where 97% sales happen.

Low early financial revenue

Options Action

Anticipated IncrementalRetail Unit Sales Avg Retail Price Sales Revenue Money after removing margins Ad cost Slotting fee Incemental SGA Increase in Revenue Total Revenue

Option 1

Expand 6 SKUs of the 8-oz. size intoeastern and western supermarket regions 3,50,00,000 0.74 25900000 16070950 2400000 1200000 320000 12150950 25150950

Option 2

Expand 4 SKUs of the 32-oz. sizenationally into supermarket channel 55,00,000 2.7 14850000 9214425 480000 2560000 160000 6014425 19014425

Option 3

Introduce 2 children’s multipacks intonatural foods channel 18,00,000 3.35 6030000 3317072.85 301750 0 0 3015322.85 16015322.85

A n a l y s i n g D a t a

25

D e c i s i o n M a t r i x

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

RECOMMENDATION

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Option 3: 1. High Growth (12% per year)2. Minimum Channel conflicts3. New target customers :

Supermarket will be selling these multi packs relatively cheap.

4. Higher expected annual demand.

Re c o m m e n d a t i o n

THANK YOU!