Natureview Farms

-Mayank Pandey
-Pratyush Chawla
-Anubhav Saraswat
-Sujay Vats
-Mahwish Farooqui
-Vatsalya Kumar
 Case Background
The Organization The Product
Natureview farms company small Yogurt Refrigerated cup yogurt
manufacturer Family yogurt recipe natural ingredients and a
Established in 1989 special process
Has had an equity infusion in the form of VC No artificial thickeners used
funding 50 day shelf life for NVF | competitors: 30 day
The VC now wants to cash out of his investment 8 oz (12 flavors) and 32 oz (4 flavors)

The Case is seen from the perspective of:

Christine Walker Vice President Marketing
Her CEO expects a coherent view and an action plan
The customers, competitors and channels must be kept in view
 Problem Statement
VC wants to cash out of his investment

To enable that, company should have strong valuation

Currently valuation is being driven by sales figures

Therefore they need to increase revenues

Current distribution channel serves only 3% of the total demand

What is the best distribution strategy to adopt to achieve the top-line to $20 mn by end of 2001 from
levels of $13 mn from end 1999.
 Market Size Projection
3%: Yogurt sold through
Natural food stores = 54 mn
77.76 mn @ growth
rate of 20% pa

1.8 bn
1.86 bn @ growth rate
of 3% ps

97%: Yogurt sold through Super

markets stores = 1.75 bn
 Natureview revenue projection
1999 54 mn 24% market share 12.9 mn

2001 77.76 mn 24% market share 18.66 mn BAU: Market share 24%

2001 77.76 mn 26% market share 20.22 mn Increase market share 26%

If Natureview were to continue with its traditional distribution strategy but increase its market share to
26% then it will achieve its revenue growth targets.
 Risks in targeting only market share increase
I. Customers have indicated that they would buy more natural products if they were priced lower
II. Natureviews competitors have plans to enter into the Supermarket segment
III. Supermarkets can outcompete the Natural food stores on price
Risk 1: A natural product offered by a competitor in the supermarkets may outcompete the current product
offering of Natureview and also erect an entry barrier against future use if that channel

I. Sooner or later someone with a Natural Product offering will enter the supermarket space
II. This may prevent Natureview from using the supermarket channel later on
Risk 2: If Natureview gets stuck with only Natural food stores as its only distribution channel it may lose all
of its bargaining power to them thus adversely affecting its bargaining power.
 Option 1: Channel Margin Analysis

Selling
Channel Margin Cost price
price
Retailer $0.74 27% $0.74 x 73% = $0.54
Distributor $0.54 15% $0.54 x 85% = $0.46
Natureview $0.46 ($0.46/$0.31)/$0.46 = 33% $0.31
 Option 1: Profitability
FY2000 FY2001
Unit Sales 35 000 000 35 000 000 x (1+20%) = 42 000 000
Revenue Growth $ 35 000 000 x $ 0.74 = $ 25 900 000 42 000 000 x 0.74 = $ 31 080 000
$ 13 000 000 + 31 080 000 = $ 44,080,
Projected Revenue $ 13 000 000 + 25 900 000 = $ 38,900,000 000
Cost 35 000 000 x $ 0.31 = $ 10 850 000 42 000 000 x 0.31 = $ 13 020 000
Gross Profit $ 28, 050 000 $ 31, 060 000
Expenses
Advertisement $ 1 200 000 x 2 region = $ 2,400 000 $ 2,400 000
SG&A $ 320 000 $ 640 000
Slotting Fee 6 x $ 10 000 x 20 retails = 1200 000
Brokers Fee $ 16 100 000 x 0.04 = $ 644 000 $ 19 320 000 x 0.04 = $ 772 800
Net Profit $ 23, 486 000 $ 27, 247 200
 Option 2: Channel Margin Analysis

Selling
Channel Margin Cost price
price
Retailer $2.70 27% $0.74 x 73% = $1.97
Distributor $1.97 15% $0.54 x 85% = $1.67
Natureview $1.67($1.67/$0..99)/$1.67 = 41% $0.99
 Option 2: Profitability
FY2000 FY2001
Unit Sales 5,500,000 5,500,000
Revenue Growth 550000 x 2.70 = 14,850,000 14,850,000
14850000 + 13000000 =
Projected Revenue 27,850,000 27,850,000
Cost 5500000 x 0.99 = 5445000 5445000
Gross Profit 9,405,000 22,405,000
Expenses
Marketing 120000 x 4 = 480000 480000
SG&A 160,000 160,000
Slotting Fee 4 x 10000 x 64 = 2,560,000 0
Brokers Fee 367,400 367,400
Net Profit 18,837,600 21,397,600
 Option 3: Channel Margin Analysis

Selling
Channel Margin Cost price
price

Retailer $3.35 35% $3.35 x 65% = $2.18

Distributor $2.18 9% $2.18 x 91% = $1.98

Wholesalers $1.98 7% $1.98 x 93% = $1.84

Natureview $1.84 ($1.84 - $1.15) / $1.84 = 38% $1.15

 Option 3: Profitability
FY2000 FY2001
Unit Sales 1,800,000 1,800,000 x 1.15 = 2,070,000
Revenue Growth 1,800,000 x 3.35 = 6,030,000 2,070,000 x 3.35 = 6,934,500
Projected
6,030,000 + 13,000,000 = 19,030,000 6,934,500 + 13,000,000 = 19,934,500
Revenue
Cost 1,800,000 x 1.15 = 2,070,000 2,070,000 x 1.15 = 2,380,500
Gross Profit 16,960,000 17,554,000
Expenses
Marketing 250,000 250,000
Complementary
6,030,000 x 2.5% = 150,750 6,934,500 x 2.5% = 173,363
Cases
Net Profit 16,559,250 17,130,637
 Decision
Based on profitability analysis one would be tempted to recommend option 1
However considering the following points:
Channel conflict between Multi food stores and supermarkets
Lack of marketing expertise for supermarket marketing
Unique brand positioning
We recommend option 2 in the short run and then 1 in the long run.

Using option 2 right now along with aggressive market share expansion in the existing channels will give us
the required revenue targets and also develop experience in managing the supermarket distribution
network