NATUREVIEW FARMCASE ANALYSIS

SUBMITTED BY RISHAV KAR

JADAVPUR UNIVERSITY

BACK

GROUND

Founded in 1989

Yogurt manufacturer

Strong brand

Differentiators1. Long shelf life

2. Natural ingredients3. Reputation for high quality and good taste

SUCCESS STORIESNatural yogurt (organic) and special process

Affordable according to it’s channel

Average shelf life 50 days

Added flavors to both 8-ounce (oz.) and 32-oz. cup sizes of yogurt

Developed strong relationships with leading natural foods retailers

Raise revenue to $20 million by the end of

2001.

Whether or not to expand

into supermarkets?

Ultimate goal is to maintain brand image.

GOALS

OPTION 1

Bring in the 6 SKUs of the 8-

oz. size

Expand in Northeast and

West supermarket

region

RISKS

Advertising plan costs $1.2

million per region per year

Direct competition with national yogurt brands

SG&A expenses would increase

Year 2000 Year 2001 Year 2002 Year 2003

Revenue $ 29,070,950 $ 32,285,140 $ 36,142,168 $ 40,770,602

Costs of Good Sold $ (19,040,000) $ (21,210,000) $ (23,814,000) $ (26,938,800)

Gross Profit $ 10,030,950 $ 11,075,140 $ 12,328,168 $ 13,831,802

Admin / Freight $ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)

Sales $ (1,880,000) $ (1,880,000) $ (1,880,000) $ (1,880,000)

Marketing $ (3,660,000) $ (3,660,000) $ (3,660,000) $ (3,660,000)

R&D $ (390,000) $ (390,000) $ (390,000) $ (390,000)

One-Time Slotting Fee

$ (1,200,000) - - -

Brokers' Fee @ 4% $ (642,838) $ (771,406) $ (925,687) $ (1,110,824)

Total Expense $ (9,982,838) $ (8,911,406) $ (9,065,687) $ (9,250,824)

Net Income $ 48,112 $ 2,163,734 $ 3,262,481 $ 4,580,978

Profit Margin 0.17% 6.70% 9.03% 11.24%

OPTION 1 ANALYSIS :

OPTION 2

Expand supermarket with 4

SKUs of 32oz yogurt

Strong competitive advantage: longer

shelf life

Promotional expenses will be

lower

RISKS

It would increase SG&A expense by

$160,000

New users may won’t purchase

large 32oz quantity of product

Hiring salesperson with experience for

sophisticated supermarket

channel

Year 2000 Year 2001 Year 2002 Year 2003

Revenue $ 22,214,425 $ 24,057,310 $ 26,268,772 $ 28,922,526

Costs of Good Sold $ (13,635,000) $ (14,724,000) $ (16,030,800) $ (17,598,960)

Gross Profit $ 8,579,425 $ 9,333,310 $ 10,237,972 $ 11,323,566

Admin / Freight $ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)

Sales $ (1,720,000) $ (1,720,000) $ (1,720,000) $ (1,720,000)

Marketing $ (1,894,000) $ (1,894,000) $ (1,894,000) $ (1,894,000)

R&D $ (390,000) $ (390,000) $ (390,000) $ (390,000)

One-Time Slotting Fee

$ (2,560,000) - - -

Brokers' Fee @ 4% $ (368,577) $ (442,292) $ (530,751) $ (636,901)

Total Expense $ (9,142,577) $ (6,656,292) $ (6,744,751) $ (6,850,901)

Net Income $ (563,152) $ 2,677,018 $ 3,493,221 $ 4,472,665

Profit Margin -2.54% 11.13% 13.30% 15.46%

OPTION 2 ANALYSIS :

OPTION 3

To introduce two SKUs of a children’s multi-pack into

the channel

It would yield the strongest profit contribution of all

the strategies

Financially attractive and high margins

RISKS

Ignores the opportunity in the growing supermarket

channel

Can not achieve the target objective

Year 2000 Year 2001 Year 2002 Year 2003

Revenue $ 16,317,073 $ 16,383,414 $ 16,451,083 $ 16,520,104

Costs of Good Sold $ (10,260,000) $ (10,007,640) $ (10,043,993) $ (10,081,073)

Gross Profit $ 6,057,073 $ 6,375,774 $ 6,407,090 $ 6,439,032

Admin / Freight $ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)

Sales $ (1,560,000) $ (1,560,000) $ (1,560,000) $ (1,560,000)

Marketing $ (640,000) $ (640,000) $ (640,000) $ (640,000)

R&D $ (390,000) $ (390,000) $ (390,000) $ (390,000)

One-Time Slotting Fee $ (82,927) - - -

Brokers' Fee @ 4% $ (132,683) $ (135,337) $ (138,043) $ (140,804)

Total Expense $ (5,015,610) $ (4,935,337) $ (4,938,043) $ (4,940,804)

Net Income $ 1,041,463 $ 1,440,438 $ 1,469,046 $ 1,498,227

Profit Margin 6.38% 8.79% 8.93% 9.07%

OPTION 3 ANALYSIS :

Option 1 Recommended 8 –oz yogurt is the highest demand and have the largest dollar shareReach beyond the target objective of 20 million revenue by end of 2001A bit risky but in a long term will generate revenues of 200%

Creates a strong long term financial situationWill have the first mover advantages of natural product to enter supermarket

Hope you liked it!

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Rishav Karwww.linkedin.com/in/rishav-kar-703b15112?trk=hp-identity-name

Special thanks to Prof. Sameer Mathur, IIML for his guidance.www.linkedin.com/in/sameermathur