Nature view

NATUREVIEW FARM CASE STUDY

BY-NAMAN GOYALIIT GUWAHATI

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

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

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

Product

8-oz 32-oz

86%

14%

Revenue

8-oz 32-oz

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

Yogurt market share by packaging segment

8oz cup smaller

74%

Children's multipacks

9%

32oz packs8%

Others9%

Sales

8oz cup smallerChildren's multipacks32oz packsOthers

Yogurt market share by region

North-West26%

Mid-West22%South-West

25%

West27%

SalesNorth-West Mid-West South-West West

Yogurt distribution channels

Sales

Supermarkets Natural Food stores

Length of channel to market-Supermarket

Manufacturer Distributor Retailer Customer

Length of channel to market-Natural food store

ManufacturerNatural Food Wholesaler Natural foods

distributor Retailer Customer

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

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

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

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

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

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


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

Financial Analysis


Natureview 0.99 86 1.85

Distributor 1.85 15 2.13

Retailer 2.13 27 2.70

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


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

Financial Analysis


Natureview 1.15 85 2.13Wholesaler 2.13 7 2.28Distributor 2.28 9 2.48Retailer 2.48 35 3.35

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

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

Conclusions

Had 3 options Option 1 yields the most profit So option 1 should be chosen

Thank You