natureview harvard case study

Case study

Natureview Farm

Go Or Not GO decision

By Shivam Gupta IIT Roorkee

Why Study this

case

Objective of analysis of this case

To develop understanding of:

Natureview

Natureview farm, inc. is a small yogurt(a type of dairy product ) manufacturer started in 1989 .

Hits total revenue of $13 million and largest market share 24% of

yogurt in natural foods channel in 1999.

Management leaders

Christine Walker , Vice president of marketing

Jim Walker , Chief financial officer

Barry Landers , CEO

Walter Bellini, Vice president of sales

Jack Gottlieb, Vice president of operation

Kelly Riley , assistant marketing director

Current Situation analysis

The VC firm now needed to cash out of its investment in Natureview.

VC firm now needed to cash out of its

investment in Natureview

Natureview management had to find another investor or position itself for

acquisition

Company operates only in national food

chains and have better marketing

relationship

Revenues $ 13,000,000 100% Revenues

Cost of Goods $8,190,000 63%

Gross Profits $ 4810,000 37%

Expenses

Administration/freight $ 2,210,000

17%

Sales $ 1,560,000 12%

Marketing $ 390,000 3%

Research & Development

$ 390,000 3%

Net Income $ 260,000 2%

Natureview Farm Income Statement

Yogurt Sales by different channels

SupermarketChannel

natural foodchannel

3%

97%

Manufacturer

Distributor

Retailer

Customer

Supermarket Channel Process :

Manufacturer

Natural Foods Wholesaler

Natural Foods Distributor

Retailer

Customer

Natural Foods Channel process :

0.74

0.88

2.7

3.19

2.85

3.35

0 1 2 3 4

Supermarket channel price

Natural Foods channel price

4-oz multipack 32-oz cup 8-oz cup

Comparison of Market price(in U.S. $) of product in both the channels

74%

8% 9%

9%

Yogurt Market share by packing Segment (Super market channel,in % U.S. Dollars)

8-oz cup

32-oz cup

4-oz multipack

other

33%

24% 23%

15% 5%

Supermarket Channel

Dannon Yoplait

Others Private Label

Columbo

24%

15%

19%

7%

35%

Natural Foods Channel

NatureviewBrown CowHorizon OrganicWhite Wave

Yogurt Market Share by Brand ( In U.S. Dollars)

To overcome this Situations, Natureview management team

target to increase its total

revenue by 50 % to the end of

year 2001 ..

But howwww ????????????

Lets take it …..

Natureview operates in natural food channel ,where growing its revenue by 50

% in short term is nearly impossible

Company don’t have any experience in marketing through

supermarket channel….

Supermarket channel is comprised of lots

of potential competitors .

Risk of turning of its core natural foods

channel’s wholesalers and retailers

towards its competitors’ brand .

What is

1

To expand six SKUs of the 8-oz by Walter Bellini, vice president of sales

It has the largest Dollar & Unit share . Two competitors already has got succeeded. To have significant first mover advantage .

Highly risky

Direct competition with market leaders

Need high initial capital due to large no of SKUs.

Financial Analysis

Beneficiary Cost($) Margin(%) Price ($)

Natureview 0.31 63.44 0.51

Distributor 0.51 15 0.56

Retailer 0.58 27 0.74

Description Year 2000 Year 2001

No. of increment 35,000,000 42,000,000

Revenue $ 17,850,000 $ 21,420,000

Cost of Production $ 10,850,000 $ 13,02,000

Gross Profit $ 7,000,000 $ 8,400,000

Other Expenses

Slotting fee $ 1,200,000 $ 0

SG&A $ 200,000 $ 200,000

Marketing $ 120,000 $ 120,000

Advertising $ 2,400,000 $ 2,400,000

Broker’s fee $ 714,000 $ 856,800

Net income $2,366,000 $ 5,680,000

2

To expand four SKUs of the 32-oz by Jack Gottlieb, vice president of

operations.

It has the largest Gross Profit margin . Less competition due to larger shelf life. Less promotion cost .

New customer would readily enter new brand via multi use size.

Lowest in the shelf ,low interaction with customers

Slotting fee would be higher .

Financial Analysis

Beneficiary Cost($) Margin(%) Price ($)

Natureview 0.99 86 01.85

Distributor 1.85 15 2.13

Retailer 2.13 27 2.70

Description Year 2000 Year 2001

No. of increment 5,500,000 5,500,000

Revenue $ 10,175,000 $ 10,175,000

Cost of Production $ 5,445,000 $ 5,445,000

Gross Profit $ 4,730,000 $ 4,730,000

Other Expenses

Slotting fee $ 2,560,000 $ 0

SG&A $ 160,000 $ 160,000

Marketing $ 480,000 $ 480,000

Advertising (promotion)

$ 75,000 $ 75,000

Broker’s fee $ 407,000 $ 407,800

Net income $1,048,000 $ 3,608,000

3

To expand two SKUs of the 4-oz multipacks by Kelly Riley, assistant

marketing manager .

Supermarket channel could potentially effect its core channel . Its core brand positioning would be helpful to launch new product effectively. Growth rate of natural food channel is 7 times more than supermarket channel .

Management team believed that they could manage channel conflict.

Natural food channel has less potential for expansion.

Growth rate would not a key factor for short term .

Financial Analysis

Beneficiary Cost($) Margin(%) Price ($)

Natureview 1.15 85 2.13

Distributor 2.28 9 2.48

Retailer 2.48 35 3.35

Wholesaler 2.13 7 2.28

Description Year 2000 Year 2001

No. of increment 1,800,000 2,070,000

Revenue $ 3,834,000 $ 4,409,100

Cost of Production $ 2,070,000 $ 2,380,500

Gross Profit $ 1,764,000 $ 2,028,600

Other Expenses

Slotting fee $ 0 $ 0

SG&A $ 0 $ 0

Marketing $ 250,000 $ 250,000

Complementary cases

$ 95,850 $ 0

Broker’s fee $ 153,360 $ 176,364

Net income $1,264,790 $ 1,602,236

Comparison of all three Solutions

Solution No.

Revenue Before expansion(1999)

Revenue After Expansion(2001)

Result (% increase by)

1 13,000,000 34,420,000 164%

2 13,000,000 23,175,000 78%

3 13,000,000 16,834,000 29%

2 choices are

there……..

Lets have a look at other

marketing issues

Supermarket Customer choose yogurt according to

• Package type /size • Taste • Flavor • Price • Freshness • Ingredients • Organic or not

Natural foods channel customers take decision according to :

• Ingredients • Organic or not • Product’s health promoting qualities

Natureview Core

Health promoting qualities

No artificial

Thickners

longer shelf life

Pure organic product

8-oz have more

chances to get succeed in supermarket channel.

But it has also high potential to harm company’s core distribution channel

To avoid it , company should launch this

product with new brand positioning .

HOWWWWWWWW

Company would launch 8-oz

size cup with a new unique flavor, with self

co-branding strategy .

.

Why New Flavor

Because of

A new unique flavor would attract more and

more customers towards itself .

Because in Supermarket customers don’t care for health qualities much they care for taste and flavor more

New flavor would

differentiate

the product from other potentials competitors and give a good brand positioning .

Why self c0-branding

Disclaimer

This presentation is made by SHIVAM GUPTA ,IIT ROORKEE during my internship at IIM Lucknow under

guidance of Prof. SAMEER MATHUR.