natureview farm case analysis
TRANSCRIPT
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NATUREVIEW FARMCASE STUDY
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CONTENTS Introduction Problems Market Trends Options Decision
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INTRODUCTION Founded in 1989 in Vermont
Manufacturer and marketer of refrigerated cup organic yogurt
Uses natural ingredients and special processes
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POINTS OF PARITY
Uses natural ingredients Much longer shelf life Strong reputation for high
quality and great taste
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WHY IT WORKS
Good product Guerrilla Marketing Strong relationship with
distributors
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PROBLEMS VCs need to cash out investment
Need to find a way to increase revenues by 50 % to $20 million
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4Ps Product Place Price Promotion
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Product
Natural yogurt 8 –oz size with 12 flavors 32 –oz size with 4 flavors
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Price Affordable More than that at supermarkets
which explains its quality
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Promotion
Low cost Guerrilla Marketing Good relationships with
distributors
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Place Natural channel Wholesale club National retailer channel Convenience and drug stores
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▫ MARKET TRENDS
Different ways in which market share is divided
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Channels used by customers
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SupermarketsSmall health storesNatural foods
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Yogurt distribution channel
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SupermarketsNatural foods
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Yogurt market share by region
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NortheastMidwestSoutheastWest
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Yogurt distribution channel
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8 oz cups and smallerChildren multipacks32 oz cupsOthers
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Yogurt share by brand: Supermarkets
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DannonYoplaitOthersColomboPrivate label
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Yogurt distribution by brand -Natural Food stores
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Natureview FarmBrown CowHorizon OrganicWhite WaveOthers
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Length of Supermarket Channel to Market
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Manufacturer
Distributor
Retailer
Customer
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Length of Natural Foods Channel to Market-->
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Manufacturer
Natural Foods Wholesaler
Natural Foods Distributor
Retailer
Customer
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OPTIONS Three options suggested
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OPTION 1 To expand six SKUs of the 8-oz. product line into one or two selected supermarket channel regions
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PROS ▫ Eight-ounce cups represented the largest dollar and unit share of the market
▫ Other natural foods brands had successfully expanded their distribution into the supermarket channel
▫ First mover advantage23
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CONS Highest level of competition Increase in advertising and
SG&A costs High risk involved
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SUPERMARKET CHANNEL ANALYSIS
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Channel Margin Cost Price Selling Price
Natureview 33% 0.31 0.46
Distributor 15% 0.46 0.54
Retailer 27% 0.54 0.74
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OPTION 1
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2000 2001
Unit Sales 35,000,000 35,000,000*1.2=42,000,000
Revenue 35,000,000*$0.46=$16,100,000
42,000,000*$0.46=$19,320,000
Cost 35,000,000*$0.31=$10,850,000
42,000,000*$0.31=$13,020,000
Gross Profit $5,250,000 $6,300,000
Expense
Advertisement $1,200,000*2=$2,400,000
$2,400,000
SG&A $320,000 $320,000
Slotting Fee $1,200,000
Broker’s Fee $16,100,000*0.4=$644,000
$19,320,000*0.4=$772,800
Net Profit $686,000 $2,487,200
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OPTION 2 To expand four SKUs of the 32-oz. size nationally
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PROS 32 Oz cups generate an above-average gross profit margin (43.6% vs. 36.0% for the 8-oz. line)
Less competition Lower promotional expenses
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CONS Higher slotting fees National distribution in 12
months will be difficult Increase in SG&A costs
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SUPERMARKET CHANNEL ANALYSIS
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Channel Margin Cost Price Selling Price
Natureview 41% $0.99 $1.67
Retailer 15% $1.67 $1.97
Distributor 27% $1.97 $2.7
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OPTION 2
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2000 2001
Unit sales 5,500,000 5,500,000
Revenue $9,185,000 $9,185,000
Cost $5,445,000 $5,445,000
Gross Profit $3,740,000 $3,740,000
Expense
Advertisement $480,000 $480,000
SG&A $160,000 $320,000
Slotting Fee $2,560,000
Broker’s Fee $367,400 $376,400
Net Profit $172,600 $2,572,600
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OPTION 3 To introduce two SKUs of a children’s multi-pack into the natural foods channel
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PROS Strong relationships with the leading natural foods channel retailers
Very attractive Financial potential
Low sales and marketing expenses
High margins33
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CONS Potential conflicts The year end revenue
objectives would not be met
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SUPERMARKET CHANNEL ANALYSIS
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Channel Margin Cost Price Selling Price
Natureview 38% $1.15 $1.84
Natural Foods Wholesaler
7% $1.84 $1.98
Distributor 9% $1.98 $2.18
Retailer 35% $2.18 $3.35
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OPTION3
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2000 2001
Unit Sales 1,800,000 1,800,000
Revenue $3,312,000 $3,808,800
Cost $2,070,000 $2,380,500
Gross profit $1,242,000 $1,428,300
Expenses
Marketing $250,000 $250,000
Complementary case
$82,800 $95,220
Net Profit $909,200 $1,083,080
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DECISION Option 1 is more favorable
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WHY Highest net revenue generated First mover advantage Cater to a larger market by
moving into supermarkets In addition they also consider
launching 32 oz product line
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DISCLAIMER Created by Bharat, IIT BHU, during a Marketing Internship under Prof. Sameer Mathur (IIM Lucknow)
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