NatureView Farm Inc. Case Study

AimTo analyze the problem presented in the problem case and then come up with a suggestion from the given alternatives

Founded in and manufactured in Cabot, Vermont 1989.

First enter market 8-oz and 32-oz with plain and vanilla flavor

Use natural ingredient with longer average shelf-life of 50 days

Brief history of NatureView

In 1999 ,Company revenue growth from $ 100,000 to $13 million

Fruit on the bottom yogurt Expand to 12 yogurt flavors &

multipack yogurt (for children)

VC firm which invested in NatureView now needed to cash out of its investment .

Thus , they need to find a suitable option to grow revenues by over 50% before the end of 2001 (from $13mil to 20 mil)

Problem Statement

The problem lies in the option of whether to expand into the supermarket of stick to the current channel of natural food retailers.

Analyzing the various options

Option 1

Expand 6 SKUs of the 8-oz into 2 supermarket regions (preferably with more yoghurt market)

Pros – 8 oz have highest incremental deamand

NV will be the first to act in this market Most increase to revenue

Cons

High risk due to high competition

May cause conflict with other channels

Requires high marketing and ad cost

Financial Analysis

Retail price – 0.74$Expected incremental units = 35 milIncremental revenue = 25.9 mil $Manufacturing cost = 35*0.31 = 10.85 mil $

ExpensesAdvertisement = 2*1.2 mil = 2.4 mil $SG&A = 320,000 $

Net income = 12.33 mil $

Analysis

This option has potential for revnue increase but has lots of risks involved. Alienation of other channels involved may cut down on revenue from other options. Other channels may prefer competitor brands.Thus this option is only viable if risks and costs are reduced

Option 2

Expand 4 SKUs of the 32-oz size nationally into supermarket regions

Pros Generates higher profit margin than 8ozLonger shelf life Low costs and competition Other channels not alienated

Cons

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

It will be hard for the sales team to reach nation wide sales in 12 months

Increases Sg&A costs

Financial Analysis

Retail price – 2.70$Expected incremental units = 5.5 milIncremental revenue = 14.85 mil $Manufacturing cost = 5.5*0.99 = 5.445 mil $

ExpensesAdvertisement = 4*0.12 mil = 0.48 mil $SG&A = 160,000 $

Net income = 8.765 mil $

AnalysisIf this option is chosen by Natureview, they would be one of only a few companies to offer the 32oz size of organic yogurt in the supermarket chain.Also , lack of competitors will help Natureview focus on sales onlyHowever this option is also very risky and has many unknown such as whether it is plausible to distribute nationally within one year

Option 2Introduce two SKUs of a children multipack into the natural foods channel

Pros The natural foods channels is growing at 20 % as compared to 3% of supermarkets.Sales teams is more likely to succeed here.More revenue gains

Cons

Conflicts and unknown factors which the team has not yet determined

Inconsistent with the premium brand positioning the wanted to establish

Financial Analysis

Retail price – 3.35$Expected incremental units = 1.8 milIncremental revenue = 6.03 mil $Manufacturing cost = 1.15*1.8 =2.07 mil $

Expenses

Negligible as compared to supermarkets

Net income = 3.96 mil $

Analysis

Does not meet the aim of NatureView to hit 20 mil in revenues hence is not a viable option at the moment

SuggestionBased on the given analysis , it is best to go for option 1 asA) It gives natureview a chance to enter

the supermarketsB) It does not alienate other channels

C) Has lesser risks and ad costs as compared to 8 0z product

Created by Amol Singh(IITD) for a summer internship under the guidance of Prof. Sameer Mathur (IIML).

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