Natureview

Farm

Group 4
Section A
Aanchal Chhabra | Abhishek Biswas | Chetan Dua | Diwaker Redhu | Kartikeya Bahl | Anubhav Verma
150201001 | 150201002 | 150201029 | 150201035 | 150201041 | 150201100
 Case Overview
Natureview Farm,Inc. - Small Yogurt Manufacturer

Founded in 1989 (in Cabot, Vermont)

Gained 24% market share of natural foods channel

Use natural ingredients and special process

Organic yogurt with longer shelf life (50 days)

Natureview Farm
 Timeline
1989: founded in Cabot, Vermount
manufactured and marketed refrigerated cup
yoghurt with 2 flavors (plain and Vanila)

1996: Jim Wagner was hired as CFO

Natureview farm was funded by a VC firm.

1999: revenue grows from $100,000 to $13

million in 10 years

Natureview Farm
 Main Issues
An unplanned exit by its venture
capital investors

Naturview Farm wants to increase

revenues from presently $13 million
(1999) to $20 million by year 2001.

whether to achieve this revenue growth by expanding into

the supermarket channel and what is the best plan?

Natureview Farm
Market Trend:
74%
67%
58%
44%

26%

ORGANIC DAIRY PRODUCT BUYER Price barrier to purchase

Heavy Organic Food Buyer Would buy if less expensive
Light Organic Food Buyer Need a wider selection

Organic food market expected to grow from $6.5 billion(1999) to $ 13.3 billion
in worth in 2003

Characterstics of buyers:
High income
More educated
Live in northeast and west (majorly)
Natureview Farm
Market Trend:
channel used by organic Yogurt market share by
food consumers Region

29% 27% 26%

46%

25% 22%
25%

supermarket small health food store

narural food supermarket Northeast Midwest Southeast West

Natureview Farm
Market Trend:
Yogurt market share by
packaging segment 12.50%

9%
8%
9%

74% 3%
2%

GROWTH
8-oz cups and smaller Children's multipacks
8-oz cups and smaller childern's multipack
32-oz cups others 32-oz. Cups

Natureview Farm
Market Trend:
Sales
Distribution Channel

3%

Natural
Supermarket
foods
Channel
Channel
97%

Natural foods Supermarket

Natureview Farm
Length of
Channel
to Market

Natureview Farm
 Competitors:
Yogurt Market share by Brand:
Supermarket Channel Natural Foods Channel

5%
24%
15% 35%
33%

15%
23% 7%
19%
24%

Natureview Farm Brown Cow Horizon Organic

Dannon Yoplait Others Private label Columbi White Wave Others

Natureview Farm
The Challenge:
Income statement, 1999

Revenues 13000000
COGS 8190000
Gross Profit 4810000
Expenses
Administration/freight 2210000
Sales 1560000
Marketing 390000
Research and development 390000
Net Income 260000

Natureview Farm
 The Challenge:
Revenue Growth rate 1999 2000 2001

8-Oz. Cups 86% 3% 11180000 11515400 11860862

32-Oz. Cups 14% 2% 1820000 1856400 1893528

Total
Revenues 13000000 13371800 13754390

Natureview Farm
Growth Strategies:
Current Product New Product

Market Product
Current Market Penetration Development
Strategy Strategy

New Market Market

Diversificati
Development
on
Strategy

Natureview Farm
Options:

Natureview Farm
Option 1:
Mr. Walter Bellini, Vice President Of
sales

Expand 6 SKUs of the 8-oz Size into

eastern and western supermarket
Regions.

Natureview Farm
Natureview Farm
Option 3:

Ms. Kelly Riley, the assistant

marketing Director

Introduce 2 Childrens
Multipack into Natural Foods
Channel

Natureview Farm
Natureview Farm
 Potential for high growth
expected 1.5% market share High expense - 3.04 million
after 1 year(35 million units)

Consumers in NE and W are Direct competition with

more likely to go for organic. biggies with huge cash power

Has highest dollar share of 74%. Quaterly promotion required

Smaller length of channel to

market & reduction of price.

Others have tested it and

succeeded.
Natureview Farm
 sales price 0.74
retailer margin(27%) 0.20
price to retail 0.54
distributor margin( 15%) 0.08
sales price for natureview 0.46

2
(Northeast and
Number of regions west)

Retailers 20

Natureview Farm
 Incremental Option 1
Income Statement 2000 2001
Expected sales in units 35,000,000 42,000,000
Price per unit 0.46 0.46
Revenue 16,100,000 19,320,000
Cost per unit 0.31 0.31
COGS 10,850,000 13,020,000

Advertising Expense
Advertising per region 1,200,000 1,200,000
Total 2,400,000 2,400,000

Sales & Administrative

Marketing Staff 120,000 120,000
Sales Force 200,000 200,000
Broker's fee (4%) 644,000 772,800
Total 964,000 1,092,800
Slotting Fee
Number of SKUs 6
One SKU fee per chain 10,000
Retail Chains 20
Total Slotting Fee 1,200,000

Trade Promotion
Cost per promotion per retailer(Northeast) 7,500 7,500
Number of retailers 11 11
Cost per promotion per retailer(west) 15,000 15,000
Number of retailers 9 9
Promotion periods per year 4 4
Total cost of promotions 870000 870000

Net Profit -184,000 1,937,200

Natureview Farm
Natureview Farm
Natureview Farm
 Fewer competition
Lower on average trade
promotion expense
Higher profit margin for
32oz versus 8oz
High risk
Low Dollar share of 32 oz cups
Sales force expansion cost
$160,000

Expected 1st year sales of 5.5 Issue of pricing differentially

million units

Smaller length of channel to

market

Natureview Farm
 sales price 2.70
retailer margin(27%) 0.73
price to retail 1.97
distributor margin( 15%) 0.30
sales price for natureview 1.68

Number 0f regions 4

Retailers 64

Natureview Farm
 Incremental Option 2
Income 2000 2001
Expected sales in units 5,500,000 5,500,000
Price per unit 1.68 1.68
Revenue 9,240,000 9,240,000
Cost per unit 0.99 0.99
COGS 5,445,000 5,445,000

Advertising Expense
Advertising per region 120,000 120,000
Total 480,000 480,000

Sales & Administrative

Marketing Staff 160,000 160,000
Broker's fee (4%) 369,600 369,600
Total 529,600 529,600
Slotting Fee
Number of SKUs 4
One SKU fee per chain 10,000
Retail Chains 64
Total Slotting Fee 2,560,000

Trade Promotion

Cost per promotion per retailer(Avg.) 8,000 8,000

Number of retailers 64 64
Promotion periods per year 2 2
Total cost of promotions 1024000 1024000

Net Profit -798,600 1,761,400

Natureview Farm
Natureview Farm
 Leverage current relationships
within nature foods channel
Natural foods channel growing
faster than Supermarkets
Low cost
Low expected revenue
Requires R&D to develop
product
Miss opportunity to enter
Supermarkets before competitors.
Natureview Farm
sales price 3.35
retailer margin(35%) 1.17
price to retail 2.18
distributor margin( 9%) 0.20
price to wholesaler 1.98
wholesaler margin( 7%) 0.14
Selling price for natureview 1.84

Natureview Farm
 Incremental Option 3
Income 2000 2001
Expected sales in units 1,800,000 2,070,000
Price per unit 1.84 1.84
Revenue 3,312,000 3,808,800
Cost per unit 1.15 1.15
COGS 2,070,000 2,380,500

Sales & Administrative

Marketing Staff 250,000 250,000
complimentary case (2.5%) 82,800 95,220
Total 332,800 345,220

Net Profit 909,200 1,083,080

Natureview Farm
Our
recommendation:

Natureview Farm
 Most viable option to reach a goal of $20
million Revenues

High growth rate of 20% better than any other

option

First-Mover Advantage

More visibility of the product, new target

customers

Natureview Farm
Action Plan:
Design Trade
promotions
Differential pricing
Leverage the
relationship with Deploy maximum
brokers to strike a deal resources to make Incentivize retailers for
with supermarkets effective use of the the perceived loss.
channel. (Retailer Engagement
Schemes)
Choose 6 SKUs to be
introduced in Have a sale and
supermarkets. marketing function Work with retailers,
dedicated to distributors and
supermarket. wholesalers to reduce
Partner with more than cost, maintain margins &
one VC to minimize decrease the price
risk. Try to maintain the difference.
premium image of the
brand through unique
promotions Manage
Enter Super Channel
Markets Conflict

Natureview Farm
Marketing Mix : 8-oz , $0.78, Presence in supermarket
among other yogurt manufacturers,
in-store Promotion.

Sales : Analyse the sales using more

sophisticated methods.

Brand : Will Position itself the same as the

premium product

Channel Partner arrangements :

Work with retailers, distributors and wholesaler to

reduce costs and mantain margins.

Work to remove the price differentiation.

Natureview Farm
Any Questions? Natureview Farm