Analysis of Natureview Farm HBR case in a Marketing Internship under Prof.Sameer Mathur

1. NATUREVIEW FARM
CASE STUDY

2. 1.Natureview founded in 1989 which sells refrigerated yogurt cups.
2.First to enter market with 8-oz and 32-oz cups with plain and vanilla
flavor.
3.Uses natural ingredient with longer average shelf-life of 50 days
Company revenue growth from $ 100,000 to $13 million
Uses Low-Cost “Guerilla Marketing Tactics”
Increased its production to 12 yogurt flavors in 8-oz. cups
(86% revenues) and four flavors in 32-oz. cups (14% revenues)
Multipack yogurt products for children
1989
1999
2000
INTRODUCTION

3. COMPANY DECISION MAKERS
✓Chief Financial Officer - Barry Landers
✓Chief Executive Officer - Jim Wagner
✓Vice President of Sales - Walter Bellini
✓Vice President of Marketing - Christine Walker
✓Vice President of Operations - Jack Gottlieb

5. GENERAL MARKET TREND
• The organic foods market, worth $6.5 billion in 1999, is predicted to grow to $13.3
billion in 2003, that is only in 4 years
• In the previous five years, yogurt sales through supermarkets had grown an
average of 3% per year, while sales through natural food stores had grown 20% per
year.
• Forty-six percent of organic food consumers bought organic products at a
supermarket, 25% at a small health foods store, and 29% at a natural
foods supermarket.
• Industry experts were predicting unit volume growth of organic yogurtat
supermarkets of 20% per year from 2001 to 2006.

6. Product
•Size
•Flavors
•Natural
•Organic
THE FOUR P’s

7. ABOUT THE PRODUCT…
• 12 yogurt flavors in 8-oz.
• 4 yogurt flavors in 32-oz.
8-oz
32-oz
86%
14%

8. 74%
8%
9%
9% 8-Oz Cup Smaller
32-oz Cups
Children's Multipacks
Others
MARKET SHARE OF THE PRODUCTS

9. 26%
22%
25%
27%
Market Share (1999)
Northwest Midwest Southwest West
MARKET SHARE BY REGION

10. Supermarket Channel Natural Foods Channel
LENGTH OF CHANNEL TO MARKET

12. OPTION 1
• Expand 6 SKUs of the 8 oz. The Product line of the best
selling in market into one or two selected super market
channel regions
• 8-oz have highest incremental demand in
Market
• High potential to increase revenue
• First mover as organic yogurt brand to
enter supermarket channel
• Unit volume growth of organic yogurt at
supermarkets of 20% per year from 2001
to 2006 predicted
PROS
• High risk & high cost (marketing)
• 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
CONS

13. 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
FINANCIAL ANALYSIS-OPTION 1

14. Description Type 2000 2001
Unit Sales 35,000,000 35,000 000 x 1.2 = 42,000,000
Revenue Growth $ 35,000,000 x $ 0.46 = $ 16,100,000 $42,000,000 x $0.46 = $
19320000
Projected
Revenue
$ 13,000,000 + 16100000 = $
291,00,000
$ 13,000,000 + $19320000 = $
32,320,000
Cost 35 000 000 x $ 0.31 = $ 10,850,000 $42 000 000 x $0.31 = $ 13 020
000
Gross Profit of
increased sales
$ 16,100,000- $ 10,850,000 =$5250000 $ 6,300,000
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 = 1,200,000
Broker’s Fee $ 16 100 000 x 0.04 = $ 644 000 $ 19 320 000 x 0.04 = $ 772 800
Net Profit $ $5250000-$4,564,000=$686,000 $ 2,487,200

15. 0
10000000
20000000
30000000
40000000
50000000
60000000
70000000
80000000
Unit Sales Revenue Growth Cost Gross Profit Advertisement
2000 2001 Column1
FINANCIAL ANALYSIS IN 2000 AND 2001

16. OPTION 3
• Expand in supermarket nationally
• Bring in the 4 SKUs of the 32-oz. size
• Generate higher profit margin than 8-oz
size (43.6% vs 36% share)
• Longer shelf life
• Much Lower promotion and marketing
expenses than option 1
PROS
• Doubt on claim of new users would readily
“enter the brand” via a multiuse size
• Doubt on sales team’s ability to achieve full
national distribution in 12 months
• The 32-oz. expansion option would increase
SG&A expenses by $160,000
CONS

17. 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
FINANCIAL ANALYSIS-OPTION 2
• On Estimated Analysis,The net profit comes out to be around $180,000 in year 2000
and $2,500,000 by the end of 2001 and the revenue increases $9,000,000.

18. OPTION 2
• Stay in natural food channel
• Introduce 2 children’s multipack
• 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 & Lowest amount of risk
PROS
• There were many potential conflicts and
other uncertain factors that the manager
could not determine
• Can not achieve the target objective of
Natureview farm
CONS

19. FINANCIAL ANALYSIS-OPTION 3
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
• Increased revenue of about 3.3 million dollars in 2000 and 3.9 million dollars by
• end of 2001 which would be comparatively lesser than both the other options
• Low risk but not higher and faster growth, safer method.
• Highest profit margin among the 3 options at about 37%.

20. COMPARISON OF 3 OPTIONS
Options Total Marginal Revenue
1
$25,200,000
2
$14,638,000
3
$6,030,000

21. ✓ Best option to achieve a revenue of $20 million in a year
✓ First brand to enter added advantage
✓ Deep market penetration and Net profit is good enough
as shown in the financial analysis.
✓ Will have the first mover advantages of natural product
to enter supermarket
✓ Supermarket maximize sales volume.
✓ 8-oz is most popular sizes

22. DISCLAIMER
These slides were created by Venkata Sridhar, under the guidance of Prof.
Sameer Mathur , under a summer internship on Marketing.