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Natureview farm - Case Study

  2. What is Natureview farm? Who are the major players?
  3. Natureview Farm, Inc., a small yogurt manufacturing company started in 1989 and based out of Vermont. • Chief Executive Officer (CEO) - Barry Landers • Chief Financial Officer (CFO) - Jim Wagner • Vice President of Marketing - Christine Walker • Vice President of Sales - Walter Bellini • Vice President of Operations – Jack Gottlieb • Assistant Marketing Director - Kelly Riley
  5. • Organic yogurt was manufactured in Cabot, Vermont. • Uses natural ingredients and a special process • Unique smooth, creamy texture w/o the artificial thickeners • Uses milk from cows untreated with rGBH, an artificial growth hormone • Shelf life – 50 days
  6. • 4 variants • 12 flavors in 8-oz. cups • 4 flavors in 32-oz. cups • 4-oz. cups • Tube packs • Creative, low-cost “guerilla marketing” • Revenue - $13 million in 1999
  7. Revenue in 1999
  9. • To increase revenue to $20 million before the end of 2001 from $13 million in 1999 • Whether to expand into the supermarket channel
  11. •Study the refrigrated yogurt market in US •Supermarket Channel vs. Natural Foods Stores •Evalaute Senior Management Team’s Three Options
  12. The refrigrated yogurt market in US
  13. The refrigrated yogurt market in US • Total U.S. retail sales reached $1.8 billion and sales volume was 2.3 billion units in 1999 • Top 4 competitors—Dannon, Yoplait, Breyers, and Columbo • Supermarkets sold 97% of all yogurt, and natural food stores the rest • 6- and 8-oz. yogurt cups the most popular sizes
  14. Factors considered when deciding which yogurt to purchase • package type/size • Taste • Flavor • Price • Freshness • Ingredients • whether the product was organic
  15. Supermarket Channel vs. Natural Foods Stores
  16. Supermarket Channel • Large consumer products manufacturers, such as Procter & Gamble and Coca Cola, has dedicated sales forces • Smaller manufacturers like Natureview Farms use sales brokers • If smaller manufacturers chose to expand into the supermarket channel, it depends on its broker’s knowledge • streamlined distribution systems
  17. • Required to pay a one-time “slotting fee” for each SKU only in the first year of introduction • Participate in regular trade promotions • If the SKU is not profitable for the supermarket within the year, the supermarket discontinues the product • $10,000 per SKU per retail chain
  18. Natural Foods Channel • Charges higher retail prices for the same products than supermarkets • Lower price sensitivity • Longer distribution system • Requires a one-time allotment of one free case of product for every new SKU in its first year
  19. Senior Management Team’s Three Options
  20. Option 1 • Expand 6 SKUs of the 8-oz. product line into one or two selected supermarket channel • 8-oz cups represented the largest dollar and unit share • First brand to enter the channel could therefore have a significant first-mover advantage
  21. • Holds great potential but also higher risks and costs • 8-oz. size has the highest competition trade promotion and marketing spending • Would cost $1.2 million per region per year • Could achieve a 1.5% share of supermarket yogurt sales after one year • Incremental annual sales volume of just over 35 million units
  22. Option 2 •Expand 4 SKUs of the 32-oz. size nationally • They generate an above-average gross profit margin for Natureview • Fewer competitive offerings in this size • Competitive advantage because of longer shelf life • Marketing expense - $120,000 per region per year
  23. • Concerns about sales team’s ability to achieve full national distribution in just 12 months • Less-noticeable • Need to hire experience sales personnel
  24. Option 3 • Introduce two SKUs of a children’s multi-pack into the natural foods channel • Had strong relationships with the leading natural foods channel • Easy expansion • Provides the perfect positioning
  25. • Concerns about necessary resources or skill-set to sell effectively to and through supermarkets • Marketing expenses estimated at $250,000 • Would yield the strongest profit contribution among 3 options • Additional R&D and Operations required
  27. • Highest sales projection is obtained in Option 1 • Highest profit contribution is obtained in Option 3 • Marketing expenses highest in Option 1 and least in Option 3 • Option 1 and 2 involves greater risk of moving into a new market but Option 3 paddles in the safe and comfort zone • To achieve a 50% increase in revenue i.e, $20 million in 2001 from $13 million in 1999, the most suitable option would be Option 1 “Expand 6 SKUs of the 8-oz. product line into one or two selected supermarket channel”