natureview farm : case review hbr
TRANSCRIPT
NATUREVIEW FARMCASE STUDY
HARVARD BUSINESS SCHOOL CASE
What Is NATUREVIEW?Nature View
Inc., is a small yogurt manufacturing company
that was started in
1989.
Company Background
1989
•Company was founded in Vermont.
•Manufactured and marketed yogurt.
1999
•Company profits grew to $13million.
•Fruit on the bottom yogurt.
2000
•Expand to multi pack yogurt(for children).
•Expand to 12 flavors for 8-oz. packing.
•Developed strong relation with natural food retailer chains.
PERSON OF INTEREST
• Vice President : Christine Walker
• Chief Financial Officer : Jim Wagner
• Chief Executive Officer : Barry Landers
• Vice President, Sales : Walter Bellini
• Vice Presi., Operations : Jack Gottlieb
• Asst. Marketing Director : Kelly Riley
EARLYDAYS
IN
1989 Entered
market with 8oz and 32 oz cups.
VARI
ETY Initially had only 2 flavours: plain and vanilla
Started as $100,000 million company in 1989.
PROGRESSFlavored yogurt
production led to brand extension. New equipments
were needed eventually.
National distribution and
shared leadership in natural foods
channel.
Aided by low cost “guerilla
marketing” tactics, they grew int $13
million company in 2000.
Strengths:1. Strong brand2.Low cost3.No artificial thickeners4. Longer shelf life
Weakness:1. No alternative
financing available 2. doubts sales
team ability
Opportunity:Strong relation with leading nature food retailers. Threats:1. Accumulation of
cash by horizon from IPO.
2. Being dropped out of traditional
channelNatureView FarmANALYSI
S
ISSUE
VC needed to cash out of its
investment.
Need to make company revenue $20 million
before 2001 end.
They need another investor or position itself
for acquisition hence, need highest possible
valuation.
THE BIG QUESTION ..!!!
Should NatureView expand Into
SUPERMARKET Channel?
THE BIG QUESTION ..!!!
How to RETAIN its traditional channel
Retailers, Customers and Suppliers if it enters
Supermarket Channel..??
NV Income Statement,1999
MAJOR PROBLEMS
How to reach
$20million target by 2001
end?
Supermarket
Channels vs.
Natural Food
Stores
Analysis of senior managem
ent team’s three
options.
• Increase product sale.• Increase product line and quality.• Adopt more efficient techniques to maximize revenue.• Increase shelf life further to expand market to farther places.
HOW to reach $20 million Mark…???
INCREASE MANUFACTURING
ADD MORE NUMBER OF PACKS IN A CASE
ENTER SUPERMARKET CHANNEL
EXPLORE OTHER SUCH CHANNELS
INTRODUCE MORE FLAVORS
SALES BOOSTING STRATEGIES
YOGURTSALES
DISTRIBUTION
CHANNELS
• Supermarket
• Natural food retail stores
DOMINANT
• Warehouse clubs
• Drug stores
• Mass merchandiser
Minor
Where do people buy
Organic products from?
Factors affectingYOGURT CHOICE…!!
Package size/shape Flavours Price
Freshness Ingredients Organic or not
Yogurt Market Share by Packaging
Segment, 1999
NATURAL
FoodCHANNEL
MANUFACTURER
NATURAL FOODS WHOLESALER (margin 7%)
NATURAL FOODS DISTRIBUTOR (margin 9%)
RETAILER (margin 35%)
CONSUMER
SUPER-MARKE
TCHANNEL • OVERALL COST IS LESS.
MANUFACTURER
DISTRIBUTOR (15% margin)
RETAILER (27% margin)
CONSUMER
Yogurt production cost and retail
prices by channel
3 OPTIONS proposed by
SENIORMARKETINGTEAM
OPTIONS and DILEMMA
OPTION 1By
WALTER BELLINI,VICE PRESIDENT,SALES
PROS
8-oz have highest incremental demand
High potential to increase revenue.
First mover as organic yogurt brand to enter supermarket channel.
CONSHigh risk and high cost (marketing)
Require quarterly trade promotions.
Advertising will cost $1.2 million per region per year.
SG&A expenses increase by $320,000 per annum.
Need to pay one time slotting fee.
OPTION 2By
JACK GOTTLEIB,VICE PRESIDENT,OPERATIONS
PROS
Generate higher profit margins than 8-oz. size.
Strong competitive advantage : longer shelf life
Lower promotion expenses.
CONS
Doubt if new user will accept the brand via multi use size.
Doubt on sales team capability to achieve full nation distribution in just 12 months.
Needs to hire sales personnel and develop relations with supermarket brokers.
The supermarket expansion will increase the SG&A expense by $160,000.
OPTION 3By
KELLY RILEY,ASSISTANT MARKETING
DIRECTOR
PROS
Sales team was confident that they could achieve distribution for two SKUs.
The financial potential was very attractive.
It would yield the strongest profit contribution among all the proposal
under consideration.The natural foods channel was growing
almost seven times faster than the supermarket channel.
CONS
There were many potential conflicts and other uncertain
factors that the manager could not determine.
Cannot achieve the target objective of NatureView
farm.
ANALYSINGthe
THREE OPTIONS
SALES PROJECTIONS
of NatureView’s options
COST ANALYSIS
Total Fixed cost for all the three options remains same.
Total cost= Total Fixed cost + Advertising cost + Promotion Cost + SKU cost
DIFFERENCE BETWEEN 3 OPTIONS
INFERENCES
drawn..
I. •As per cost analysis , option 3 seems to be the best option.
II.•Taking other factors into consideration
like distributor , retailer etc, option 3 has no risk of loss.
III. •However, sales team capabilities remain a big question In this option.
IV. •Still the overall risk factors are minimum in this case.
RECAP
• What is NatureView?• Brief company Background and key
personnel• Early days and progress of company• Major issues addressed in the case• How to increase sales and revenue• Survey exhibits & factors affecting
yogurt choice• Supermarket Channels vs. Natural
Channels• Analysis of 3 proposed options• Difference between options• Inference
DISCLAIMERDISCLAIMERCreated by Anusha A. Sharma, VNIT
Nagpur, during Marketing Management Internship under Prof.
Sameer Mathur .