NatureView Farm Case study

1. NATUREVIEW FARM
CASE STUDY
NUSAIBAH ROSLAN MMJ 141005
SHARIFAH RADHIAH SYED AZMAN MMJ 141003
SITI AISAH MUHAMMAD MMJ 141013
Master of Technology & Innovation Management
MMJT 1043
Marketing of Technology & Innovative Products

2. BACKGROUND
1989
• Founded and manufactured in Cabot,Vermont
• First enter market 8-oz and 32-oz with plain and vanilla flavor
• Use natural ingredient with longer average 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 flavors & multipack yogurt (for children)

3. ISSUES
VC needed to cash out of its
investment
Need to find a path to grow
revenues by over 50% before
the end of 2001 ($20 mil)
Should Natureview Farm
expand into supermarket
channel?

4. THE 4PSPRODUCT
• Natural
yogurt
(organic)
• 8 –oz. size
with 12
flavors
• 32-oz. size
with 4
flavors
PRICE • Affordable
according
to it’s
channel
PLACE
• Natural
food
channel
• Wholesale
club
• National
retailer
channel
• Convenienc
e and drug
store
PROMOTION
• It’s natural
flavor with
high quality
and great
taste
growth in
the national
distribution
and natural
food
channel
• Low-cost
guerilla
marketing

5. PRODUCT
 12 yogurt flavors in 8-oz
 4 yogurt flavors in 32-oz
86%
14%
Revenues 2000
8-oz
32-oz
Start exploring kid multipack
yogurt product (4-oz)

6. SWOT ANALYSIS
STRENGTH WEAKNESS
 Strong brand
 Low cost
 No artificial thickeners used
 Unique, smooth and creamy
texture of yogurt
 Usage of natural ingredients
 Longer shelf life
 No alternative financing available
 Lacks potential of taking higher
risks and costs
 Doubt on sales team’s ability
OPPORTUNITY THREATS
 Strong relationships with leading
natural foods retailers
 Accumulation of cash by Horizon
from IPO
 Being dropped out of traditional
channel

7. MARKET TREND FOR YOGURT
PRODUCT
Packaging
type/size
Taste Flavor
Price Freshness Ingredient
Organic or
not

8. YOGURT MARKET SHARE BY
PACKAGING SEGMENT
74%
9%
8%
9%
8-oz. cup smaller
Children's multipacks
32-oz. cups
Others

9. YOGURT MARKET SHARE BY
REGION
26%
22%
25%
27%
Northwest
Midwest
Southwest
West

10. YOGURT DISTRIBUTION CHANNEL
97%
3%
Distribution Channel
Supermarkets
Natural food stores

11. LENGTH OF CHANNEL TO MARKET
Supermarket Channel Natural Foods Channel
Manufacturer
Distributor
Retailer
Customer
Manufacturer
Natural Foods
Wholesaler
Natural Foods
Distributor
Retailer
Customer
15%
27%
35%
9%
7%

12. YOGURT MARKET SHARE BY
BRAND
Dannon
33%
Yoplait
24%
Others
23%
Private
Label
15%
Columb
o
5%
Supermarket Channel
Naturevi
ew Farm
24%
Brown
Cow
15%
Horizon
Organic
19%
White
Wave
7%
Others
35%
Natural Foods Channel

13. 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

14. OPTIONS & DILEMMA
OPTION 1
• Expand in
Northeast
andWest
supermarket
region
• Bring in the 6
SKUs of the
8-oz. size
OPTION 2
• Expand in
supermarket
nationally
• Bring in the
4SKUs of the
32-oz. size
OPTION 3
• Stay in
natural food
channel
• Introduce 2
children’s
multipack

15. OPTION 1:
EXPAND 6 SKUS OFTHE 8-OZ INTO EASTERN
AND WESTERN SUPERMARKET REGIONS
PROs
8-oz have highest incremental
demand
High potential to increase revenue
First mover as organic yogurt
brand to enter supermarket
channel
CONs
High risk & high cost (marketing)
Require quarterly trade
promotions
Advertising plan would cost $1.2
million per region per year
SG&A expenses increase by
$320,000 annually
Need to pay one time slotting fee

16. SUPERMARKET CHANNEL MARGIN
ANALYSIS
Channel Selling
price
Margin Cost 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

17. PROJECTION INCOME STATEMENT
2000 2001
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
Projected Revenue $ 13 000 000 + 25 900 000 = $ 38, 900
000
$ 13 000 000 + 31 080 000 = $ 44,
080 000
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
Broker’s 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

18. OPTION 2:
EXPAND 4 SKUS OFTHE 32-OZ SIZE NATIONALLY
INTO SUPERMARKET REGIONS
PROs
Generate higher profit margin than 8-oz
size
Strong competitive advantage: longer
shelf life
Lower promotion expenses
CONs
Doubt on claim of new users would readily
“enter the brand” via a multi-use size
Doubt on sales team’s ability to achieve
full national distribution in 12 months
Needs to hire sales personnel and
establish relationships with supermarket
brokers
The 32-oz. expansion option would
increase SG&A expense by $160,000

19. SUPERMARKET CHANNEL MARGIN
ANALYSIS
Channel Selling
price
Margin Cost price
Retailer $2.70 27% $2.70 x 73% = $0.1.97
Distributor $1.97 15% $0.54 x 85% = $1.67
Natureview $1.67 ($1.67/$0..99)/$1.67
=41%
$0.99

20. PROJECTION INCOME STATEMENT
2000 2001
Unit sales 5,500,000 5,500,000
Revenues growth 550000 x 2.70 = 14,850,000 14,850,000
Projected revenue 14850000 + 13000000 =
27,850,000
27,850,000
Cost 5500000 x 0.99 = 5445000 5445000
Gross profit 9,405,000 22,405,000
Expense:
Slotting fee 4 x 10000 x 64 = 2,560,000 0
SG & A 160,000 160,000
Marketing 120000 x 4 = 480000 480,000
Broker's fee (4% revenues) 367,400 367,400
Net profit 18,837,600 21,397,600

21. PROs
The sales team was confident that they
could achieve distribution for the two
SKUs.
The financial potential was very
attractive.
It would yield the strongest profit
contribution of all the strategies under
consideration.
The natural foods channel was growing
almost seven times faster than the
supermarket.
CONs
There were many potential conflicts and
other uncertain factors that the
manager could not determine.
Can not achieve the target objective of
Natureview farm
OPTION 3:
INTRODUCETWO SKUS OF A CHILDREN MULTIPACK
INTOTHE NATURAL FOODS CHANNEL

22. NATURE FOOD CHANNEL MARGIN
ANALYSIS
channel Selling
Price
Margin Cost Price
Retailer $3.35 35% $3.35 x 65% = $2.18
Distributor $2.18 9% $2.18 x 91% = $1.98
Nature foods
wholesalers
$1.98 7% $1.98 x 93% = $1.84
Natureview $1.84 ($1.84 - $1.15) / $1.84
=38%
$1.15

23. PROJECTION INCOME STATEMENT
2000 2001
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
Revenue projection 6,030,000 + 13,000,000 =
19,030,000
6,934,500 + 13,000,000 =
19,934,500
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
Expense:
Marketing 250,000 250,000
Complementary cases 6,030,000 x 2.5% = 150,750 6,934,500 x 2.5% = 173,363
Net profit 16,559,250 17,130,637

24. WHICH ONE TO CHOOSE?

25. COMPARISON OF OPTIONS FOR
YEAR 2001
Option Option 1 Option 2 Option 3
Gross Margin 33% 41% 38%
Unit sales 42, 000 000 5,500,000 2,070,000
Revenue projection 44, 080 000 27,850,000 19,934,500
Cost $ 13 020 000 $ 5 445 000 $ 2,380,500
Gross profit $ 31, 060 000 22,405,000 17,554,000
Expense:
SG & A $ 640, 000 160,000 0
Marketing $ 2, 400, 000 480,000 250,000
Broker's fee (4%
revenues)
$ 772, 800 367,400 0
Complementary cases 0 0 173,363
Net profit $ 27, 247, 200 $ 21,397,600 $ 17,130,637

26. DECISION
Go for option 1
Reach beyond the target objective of 20 million revenue by
end of 2001 with projected of
 $31 060 000
8 –oz yogurt is the highest demand
 In supermarket, can expose to more range of customers
Will have the first mover advantages of natural product to
enter supermarket
A bit risky but in a long term will generate revenues of 200%
(as looking at two other competitors)

27. THANK YOU