COMPANY OVERVIEW

1989 1999 2000 2001

A yogurt manufacturer founded in Cabot, Vermont.

Entered market with 8-oz and 32-oz yogurt cups with plain and vanilla flavor.

Saw company revenue growth from $100,000 to $13 million.

Fruit on the bottom of the yogurt was introduced.

Expanded to 12 yogurt flavors and multipack yogurt ( for children ).

Targeting company revenue growth to $20 million.

POINT OF DIFFERENCE

EVALUATION

The key to Natureview Farm’s yogurt flavor and texture was the family yogurt recipe developed by the company’s founder.

Usage of purely natural ingredients and not using artificial thickeners.

Average shelf life of 50 days as compared to competitors’ average shelf life of 30 days.

The company used milk from cows untreated with rGBH, an artificial growth hormone that increases milk production.

CENTRAL CASE

PROBLEM

The Venture Capitalist firm that funded Natureview’s strategic investments had to cash out.

Natureview had to grow its revenues to$20 million before the end of 2001 to placeit at a strong valuation.

To achieve this should Natureview expand into the supermarket channel or not?

DISTRIBUTION

CHANNELS

YOGURT DISTRIBUTION CHANNELSYogurt Sales Percentage Comparison (1995-2000)

Supermarket ChannelNatural Foods Channel

3%

97%

SUPERMARKET CHANNELManufacturer

Distributor

Customer

Retailer

15% Margin

27% Margin

NATURAL FOODS CHANNELManufacturer

Natural Foods Wholesaler

Retailer

Natural Foods Distributor

7% Margin

9% Margin

Customer

35% Margin

CASE SOLUTION

OPTIONS ANALYSIS

OPTION

Expand 6 Stock Keeping Units of the 8-oz into the Eastern and Western supermarket regions.

STRENGTHS

• 8-oz have incremental demand.

• A pipelines for large short term revenue.

WEAKNESSES

• Requires quarterly trade promotions.

• Need to pay one time slotting fees.

OPPORTUNITIES

• High potential to increase revenue based on the fact that 97% of the yogurts consumed between 1995-2000 were sold via supermarket channels.

• Opportunity for the company to be the first mover as an organic yogurt brand to enter the supermarket channel.

THREATS

• High risk and high cost of marketing.

• SG&A expenses increase by $320,000 annually.

• Advertising plan would cost $1.2 million per region per year.

OPTION

Expand 4 Stock Keeping Units of the 32-oz nationally into the supermarket regions.

STRENGTHS

• 32-oz cups generate an above average gross profit margin of 43.6% as compared to 36% for the 8-oz line.

• Lower promotional costs as compared to the 8-oz line.

WEAKNESSES

• The 32-oz expansion would increase SG&A expenses by $160,000.

• Expenses incurred in hiring sales personnel for establishing relationships with supermarket brokers is a weakness to be considered.

OPPORTUNITIES

• Few competitive offerings in the 32-oz size because of the product’s strong longer shelf life POD.

• Natureview’s brand has achieved 45% share of the 32-oz size segment in the natural foods channel and there is opportunity to replicate this success in the supermarket channel as well.

THREATS

• Risk pertaining to probability of new users entering the brand via a

multi-use size.

• Risk associated in dependence of the sales team to achieve full national distribution in a year.

OPTION

Expand 2 Stock Keeping Units of the Children Multipack into the natural foods channel.

STRENGTHS

• Lower sales and marketing expenses.

• No additional SG&A costs to introduce the multipack product.

• Considering reduced expenses, it would yield the strongest profit contribution of all strategies under consideration.

WEAKNESSES

• Has lower short term revenue as compared to moving to the supermarket channel.

OPPORTUNITIES

• The brand has 24% market share and dominates the natural foods channel and there is opportunity to grow even further and potentially dominate more than half the market in the natural foods channel.

• Natural foods channel is growing 7 times faster than the supermarket channel.

• The children’s multipack has a +12.5% Dollar Sales Change vs Prior Year which is greater than both 8-oz and 32-oz.

• The financial potential is very attractive.

THREATS

• Retailers are likely to demand more and more with growth.

SO, WHAT DECISION SHOULD BE MADE?

Option 3 which is expand 2 stock keeping units of the children’s multipack into the

natural foods channel.

WHY?

BECAUSE

• Expansion into the supermarket channel could potentially affect existing strong relationships with leading natural foods retailers.

• Difficult to get significant share in the supermarket channel due to strong competitive offering from major players like Dannon and Yoplait.

AND ALSO

• Opportunity to dominate more than half the natural foods channel cannot be ignored.

• Money saved is money earned and considering cost cutting with respect to marketing and sales makes this the most attractive option financially in terms of profits.

AND FINALLY

• The natural foods channel is growing 7 times faster than the supermarket channel and dominating this fast growing channel can place the company at a strong valuation as well as bring in good revenues and profits with a long term vision as compared to option 1 which is associated with a large number of risks.

SUMMARY

DISCLAIMERCreated by Sreedhar Radhakrishnan, PES University Bangalore during a marketing internship by Prof. Sameer Mathur, IIM Lucknow.