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Transcript of Nature view
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NATUREVIEW FARM CASE STUDY
BY-NAMAN GOYALIIT GUWAHATI
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Background
1989 Founded and manufactured in Cabot, Vermont Enter market with 8oz and 32oz with plain and vanilla flavor Use natural ingredient and shelf-life of 50 days
1999 Company revenue growth from $100,000 to $13 million Fruit on the bottom yogurt
2000 Expand to 12 yogurt flavor and multipack flavor
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Issues
Venture capitals needed to cash out of its investment Need to find a path to grow revenues over 50% before the end of
2001 to attract other investors Which channel to choose for expansion-Supermarket or Natural
Food stores
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The 4 Ps
Product Natural yogurt with 8oz pack in 12 flavors and 32oz pack in 4 flavors
Price Affordable price to its channels
Place Natural food channel, wholesale club, national retailer channel, drug-
store Promotion
It’s natural flavor with high quality and great taste growth in national distribution and natural food channel and low-cost guerilla marketing
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Product
8-oz 32-oz
86%
14%
Revenue
8-oz 32-oz
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SWOT Analysis Strength Strong Brand Low Cost Natural Ingredients used Unique, smooth and creamy texture
of yogurt Longer shelf-life
Opportunity Strong relationship with leading natural
food retailers
Weakness No alternative finances available Lacks potential of taking higher risks
and costs Doubt on sales team’s abilities
Threat Accumulation of cash by Horizon
from IPO Being dropped out of traditional
channel
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Yogurt market share by packaging segment
8oz cup smaller
74%
Children's multipacks
9%
32oz packs8%
Others9%
Sales
8oz cup smallerChildren's multipacks32oz packsOthers
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Yogurt market share by region
North-West26%
Mid-West22%South-West
25%
West27%
SalesNorth-West Mid-West South-West West
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Yogurt distribution channels
Sales
Supermarkets Natural Food stores
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Length of channel to market-Supermarket
Manufacturer Distributor Retailer Customer
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Length of channel to market-Natural food store
ManufacturerNatural Food Wholesaler Natural foods
distributor Retailer Customer
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Yogurt market share by brand
33%
24%
15%
5%
23%
SalesDannon Yoplait Private LabelColumbo Others
24%
15%
19%
7%
35%
SalesNatural View Farm Brown Cow Horizon OrganicWhite Wave Others
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Yogurt Production Costs and Retail Prices by Channel
Natural food Channel
Supermarket Food Channel
Manufacturing Cost
8-oz cup$ 0.88 $0.74 $ 0.31
32-oz cup$3.19 $2.70 $ 0.99
4-oz cup multipack $3.35 $2.85 $ 1.15
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Options and Dilemma
Option 1 Option 2 Option 3• Expand in
Northeast and West supermarket region
• Bring in the 6 SKUs of the 8oz size
• Expand in supermarket nationally
• Bring in the 4 SKUs of the 32-oz size
• Stay in natural food channel
• Introduce 2 children’s pack
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Option 1:Expand 6 SKUs of the 8-oz
Pros Cons
Largest dollar and unit share 2 competitors already got
succeeded To have significant first mover
advantage
Highly risky Direct competitions with market
leader Need High initial capital due to
large number of SKUs
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Financial Analysis
Beneficiary Cost($) Margin(%) Price($)
Natureview 0.31 63.44 0.51
Distributor 0.51 15 0.56
Retailer 0.58 27 0.74
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Financial AnalysisDescription Year 2000 Year 2001No. of Increment 35,000,000 42,000,000Revenue 17,850,000 21,420,000Cost of Production 10,850,000 1,302,000Gross Profit 7,000,000 8,400,000Other ExpensesSlotting Fees 1,200,000 0SG&A 200,000 200,000Marketing 120,000 120,000Advertising 2.400,000 2,400,000Broker’s Fees 714,000 856,800Net Income 2,366,000 5,680,000
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Option 2:Expand 4 SKUs of the 32-oz
Pros Cons
Largest Gross Profit margin Less competition due to larger
shelf life Less promotion cost
New costumer would readily enter new brand
Lowest in the shelf Low interaction with customers Slotting fee would be highr
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Financial Analysis
Beneficiary Cost($) Margin(%) Price($)
Natureview 0.99 86 1.85
Distributor 1.85 15 2.13
Retailer 2.13 27 2.70
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Financial AnalysisDescription Year 2000 Year 2001No. of Increment 5,500,000 5,500,000Revenue 10,175,000 10,175,000Cost of Production 5,445,000 5,445,000Gross Profit 4,730,000 4,730,000Other ExpensesSlotting Fees 2,560,000 0SG&A 160,000 160,000Marketing 480,000 480,000Advertising 75,000 75,000Broker’s Fees 407,000 407,000Net Income 1,048,000 1,048,000
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Option 3:Expand 2 SKUs of the 4-oz
Pros Cons
Supermarket channel can effect its core channel
Its core brand positioning would be helpful to launch new product effectively
Growth rate of natural food channel is seven times more than supermarket channel
Management team believed they could manage channel conflict
Natural food channel has less potential to expand
Growth rate would not be a key factor for short term
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Financial Analysis
Beneficiary Cost($) Margin(%) Price($)
Natureview 1.15 85 2.13Wholesaler 2.13 7 2.28Distributor 2.28 9 2.48Retailer 2.48 35 3.35
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Financial AnalysisDescription Year 2000 Year 2001No. of Increment 1,800,000 2,070,000Revenue 3,834,000 4,409,100Cost of Production 2,070,000 2,380,000Gross Profit 1,764,000 2,028,000Other ExpensesSlotting Fees 0 0SG&A 0 0Marketing 250,000 250,000Complementary Cases 95,850 0Broker’s Fees 153,360 176,364Net Income 1,264,790 1,602,000
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Comaprision of Options
Option No. Revenue before expansion(1999)
Revenue before expansion(2001)
Result(%)
1 13,000,000 34,420,000 164
2 13,000,000 23,175,000 78
3 13,000,000 16,834,000 29
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Conclusions
Had 3 options Option 1 yields the most profit So option 1 should be chosen
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Thank You