Natureview Farm Case Study

1. NATUREVIEW FARM
Harvard Business Case Analysis

2. • Founded 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 ays
• Revenue growth from $100,000 to $13 million
• Fruit on the bottom yogurt
• Expanded to 12 flavors
• Introduced multi pack yogurt for children
Background

3. Vice president
Chief Financial Officer
Chief executive officer
Vice president of sale
Vice president of operation
Assistant marketing director
Christine Walker
Jim Wagner
Barry Landers
Walter Bellini
Jack Gottlieb
Kelly Riley

4. Supermarkets
Small health
stores
Natural food
supermarket
Target Customers

5. Shoppers at Natural
Food Stores are older,
educated and have
higher incomes
Target Customers

6. ANALYSIS OF THE CASE

7. S W
O T
STRENGTHS WEAKNESSES
OPPORTUNITIES THREATS
• Strong Brand
• No artificial thickeners
used
• Usage of natural
ingredients
• Longer shelf life
• No alternative financing
available
• Lacks potential of taking
risks and costs
• Doubt on sales team’s
ability
• Strong relationship with
leading natural foods
retailers
• Accumulation of cash by
horizon from IPO
• Being dropped out of
traditional channel

8. FACTORS
DECIDING
WHICH
YOGURT TO
PURCHASE ?
PACKAGE
TYPE/SIZE
TASTE
FLAVOR
PRICEFRESHNESS
INGREDIENTS
PRODUCT
ORGANIC
OR NOT

9. VC firm now
needs to cash
out of its
investment
The management
team needs to
find a way to
increase the
firm’s revenues
to $20 million by
the end of 2001

10. To come with a plan that takes the company to
$20 million in revenues by the end of 2001
To do so keeping in mind the words of the CEO “
We owe it to our customers, our suppliers, and our
distribution partners to make the right strategic
choices regarding the revenue growth objective
before us”

11. 
Senior Management proposed three options to
grow Natureview’s revenue

12. OPTION 1
• Expand 6 SKUs of the 8-oz. product line into
one or two selected supermarket channel
regions a
• Proposed by Walter Bellini VP Sales

13. 1. Great Upside Potential
2. For supermarket adding these
products would attract higher-
income less price-sensitive
customers
3. Unit volume growth of organic
yogurt at supermarkets of 20%
per year from 2001 to
2006
4. This option also has the highest
incremental demand
1. Supporting 8-oz cup size would
require quarterly trade promotions
and a meaningful marketing budget
2. Advertising plan would cost $1.2
million per region per year in
addition to the promotional ads
expenses
3. SG&A expenses would increase by
$320,000 annually
4. This option creates direct
competition with national yogurt
brands

14. Channel Natureview Distributor Retailer
Margin ($0.46-$0.31)/$0.46
= 33%
15% 27%
Cost Price $0.31 $0.54*85% = $0.46 $0.74*73% = $0.54
Selling
Price
$0.46 $0.54 $0.74
Analysis for OPTION 1

15. Year 2000 Year 2001 Data from
Unit Sales 35,000,000 units 35,000,000*(1+20%)
= 42,000,000
Exhibit 6
Revenue 35,000,000*$0.46
= $16,100,000
42,000,000*$0.46
= $19,320,000
From previous slide
Cost 35,000,000*$0.31
= $10,850,000
42,000,000*$0.31
= $13,020,000
Exhibit 3
Gross Profit $5,250,000 $6,300,000 Revenue – Cost
Advertisement 1,200,000*2 Regions
= $2,400,000
$2,400,000
Page 7
SG & A $320,000 $640,000
Page 7
Slotting Fees 10,000*6*20 retails
= $1,200,000
--
Page 5
Broker’s Fee 16,100,000*4%
= $644,000
19,320,000*4%
= $772,800
Page 4
Net Profit $686,000 $2,487,200

16. OPTION 2
• Expand 4 SKUs of the 32-oz. size nationally
• Proposed by Jack Gottlieb, vice president of
operations

17. 1. Potentially give higher
average gross profit margin than
8-oz size
2. It also has stronger
competitive advantage like
longer shelf life and lower
marketing
expenses
1. Doubt on claim of new users
would readily “enter the brand” via
a multi-use size
2. Doubt on sales team’s ability to
achieve full national distribution in
12 months
3. Needs to hire sales personnel
and establish relationships with
supermarket brokers
4. The 32-oz. expansion option
would increase SG&A expense by
$160,000

18. Channel Natureview Distributor Retailer
Margin ($1.67-$0.99)/$1.67
= 41%
15% 27%
Cost Price $0.99 $1.97*85% = $1.67 $2.70*73% = $1.97
Selling
Price
$1.67 $1.97 $2.70
Analysis for OPTION 2

19. Year 2000 Year 2001 Data from
Unit Sales 5,500,000 units 5,500,000
Exhibit 6
Revenue 5,500,000*$1.67
= $9,185,000
$9,185,000
From previous slide
Cost 5,500,000*$0.99
= $5,445,000
$5,445,000
Exhibit 3
Gross Profit $3,740,000 $3,740,000 Revenue – Cost
Marketing 120,000*4 Regions
= $480,000
$480,000
Page 8
SG & A $160,000 $320,000
Page 8
Slotting Fees 10,000*4*64 retails
= $2,560,000
--
Page 5
Broker’s Fee 9,185,000*4%
= $367,400
$367,400
Page 4
Net Profit $172,600 $2,572,600

20. OPTION 3
• Introduce 2 SKUs of a Children’s Multi-Pack
into the Natural Foods Channel
• Proposed by Kelly Riley, the assistant
marketing director

21. 1. Established leader in this
channel
2. Perfect positioning for
new multi-pack product
3. Long term the financial
potential was very attractive
1. Established leader in
this channel
2. Perfect positioning for
new multi-pack product
3. Long term the financial
potential was very
attractive

22. Analysis for OPTION 3
Channel Natureview Natural Food
Wholesalers
Distributor Retailer
Margin ($1.84-$1.15)/$1.84
= 38%
7% 9% 35%
Cost
Price
$1.15 $1.98*93%
= $1.84
$2.18*91%
= $1.98
$3.35*73%
= $2.18
Selling
Price
$1.84 $1.98 $2.18 $3.35

23. Year 2000 Year 2001 Data from
Unit Sales 1,800,000 units 1,800,000*(1+15%)
= 2,070,000
Exhibit 6
Revenue 1,800,000*$1.84
= $3,312,000
2,070,000*$1.84
= $3,808,800
From previous slide
Cost 1,800,000*$1.15
= $2,070,000
2,070,000*$1.15
= $2,380,500
Exhibit 3
Gross Profit $1,242,000 $1,428,300 Revenue – Cost
Marketing $250,000 $250,000
Page 8
Comp. case $3,312,000*2% = $82,800 $3,808,800*2.5% = $95,220
Page 8
Net Profit $909,200 $1,083,080

24. POSSIBLE CONCLUSION
Go with OPTION 1

25. • High growth (more than 12% from last year)
• First-mover advantage
• Minimized channel conflicts
• Through this expansion, Nature view can
make it’s revenue goal by 2001
• New target customers : Supermarket will be
selling these multi packs relatively cheap
• Higher expected annual demand.

26. 1. Background
2. Target Customers
3. SWOT analysis
4. Issue
5. Objective
6. Options
7. Evaluation of every option
8. Recommendation

27. Created by Aditi Garg, DTU, during a marketing
internship under Prof Sameer Mathur, IIM Lucknow