nature view case analysis
TRANSCRIPT
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By Jasraj Singh
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To grow revenues by 50% by the end of 2001Reach from $13million to $20million in revenuesTo take a decision for achieving these goals
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Current situation
Market Leader in Natural Food Channel ButIn a dilemma to extend to Supermarket Channel or stick to Natural Food Channel?
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Background
Founded in 1989, Nature view Farm manufactured and marketed refrigerated cup yogurt under the Nature view Farm brand name.
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4 Ps
Product(Natural Yogurt
of size 32oz, 8-6oz,4oz)
Price(Affordable
according to its channel)
Place(Natural food channel, Drug
and Convenience
stores)
Promotion(Low cost guerrilla
marketing)
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Trends in Yogurt Market
Package size
Taste
Flavour Price
Ingredients
Organic or not
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Focus on Sales
Sell at Cheap Rate
Price sensitive
Charge Slot Fees
Trade promotion Ads
Super Marke
t Chann
els
Focus on Profits
Sell at Expensive Rate
Other Factors
No Slot Fees
No Trade promotion Ads
Natural Food Chann
els
VS
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97%
3%
Distribution Channel
Supermarkets ChannelNatural Food channel
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Manufacturer
Distributor
Retailer
Customer
15%
27%
Supermarket Channel
Manufacturer
Natural food Wholesaler
Natural Food Distributor
Retailer
Customer
7%
9%
35%
Natural Food Channel
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33%
24%
23%
15%
5%
Supermarket Channel
DannonYoplaitOtherPrivate labelsColumbo
24%
15%
19%7%
35%
Natural Food Channels
Nature view FarmBrown CowHorizon OrganicWhite WaveOthers
Yogurt Market Share By Brand
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Option1
• Expand in Northeast and West Supermarket region.
• Bring in 6 SKUs of 8-oz
Option2
• Expand in Supermarket Nationally
• Bring in 4SKUs of 32-oz
Option3
•Stay in Natural Channel•Introduce 2 children’s multipack
Dilemma For the Management
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Provides significant revenue potential.
8-oz have highest incremental demand
Give first mover advantage
Option 1
Pros
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Cons
High risk and High cost
Require quarterly trade promotions
Advertising plan would cost $1.2million
SG&A expenses increase by $320,000 annually
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Units sold 3,50,00,000
Revenue($0.55*35000000) 19250000
COGS($0.31*35000000) (10850000)
Gross Profit $8,400,000
Expenses
Advertisement Cost($1,200,000*2)
$2,400,000
SG&A expenses $320,000
Slotting Fees($10,000*6*20)
$1,200,000
Broker’s Fee(4%*19250000)
$770,000
Advertisement cost is abundance,Natureview would pay $4,800,000 on ads by 2001
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Option 2
Pros
Generate higher profit margin than 8-oz
Strong competitive advantage: long shelf life
Lower promotion expenses
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Cons
Entry of potential competitor
Inability of sales to achieve growth within 12months
Increases SG&A expenses by $160,000
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Units sales 5,500,000
Revenue($1.85*5,500,000) 10,175,000
COGS($0.99*5,500,000) 5,445,000
Gross Profit $4,730,000
Expenses
Advertisement Cost($1,200,00*4)
$480,000
SG&A expenses $160,000
Broker fees(4%*10,175000) $407,000
Slotting Fees($10,000*4SKUs*64)
$2,560,000The slotting is huge as Natureview have to 64 supermarkets
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Option 3
ProsFinancial potential is very attractive
Nature food channels growing 7 times faster than supermarkets
Fewer competitive offerings in this size
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Cons
Potential conflicts
Uncertain factors
Unprepared to handle the demands on resources
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Units sold 1,800,000
Revenue($2,13*1,800,000) $3,834,000
COGS($1.15*1,800,000) $2,070,000
Gross Profit $1,764,000
Expenses
Marketing $250,000
SG&A expenses $0
Broker’s fee $0
Slotting Fee $0
Cost Effective as there is no slotting, broker or SG&A expenses
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Financial Forecast 2001
Option 3Year Revenue
1999 $13,000,000
2000 $3,834,000
2001 $4,409,000
TOTAL $21,243,100
Meets the Goal of achieving 20million by 2001
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