Upload
yashwanth-adidala
View
114
Download
10
Embed Size (px)
Citation preview
Natureview
farm
HARVARD BUSSINESS SCHOOL CASE
Natureview
What does Natureview Farm do
Natureviewmanufactures and markets
refrigerated cup
YOGURT
Little History
Started in 1989, it manufactured cup Yogurt in its production facility in Cabot, Vermont.
Income in the beginning – below $100,000
Current Income (2000) - $13 million
Natureview’s TEAM
BARRY LANDERSCEO
Jack GottliebVP (operations)
Walter BelliniVP (sales)
Christine WalkerVP (marketing)
JIM WAGNERCFO
Kelly RileyAss. Marketing director
Special secret recipe
The key to
Natureview yogurt’s unique
smooth, creamy texture is the
family yogurt recipe developed by its
Founder
Other special factors
Cows untreated with
rGBH
Average shelf life
50 daysOther company’s shelf life
30 days
Current situation of Natureview
Channel : Natural foods stores
Yogurt Market Share, 1999 Natural foods channel
Natureview Farm 24%
Brown Cow 15%
Horizon Organic 19%
White Wave 7%
Others 35%
Current situation of Natureview
Natureview Products : Different sizes & their revenue
SIZENumber of flavours
Revenue generated
In a case
8-oz 12 86% 12 cups
32-oz 4 14% 6 cups
Current situation of Natureview
Income statement : Natureview, 1999
Revenues $13,000,000
Cost of Goods sold $8,190,000
Expenses
Administration $2,210,000
Sales $1,560,000
Marketing $390,000
R&D $390,000
Net income $260,000
Current situation of Natureview
Difficulties : Investor (VC firm) cashed out
What
Get a new investor
How
Attain max. possible valuation
So
IncreaseRevenues
$20million
revenue by
2001
GOAL
yogurt
Yogurt and its customers
Yogurtis a dairy productIt is a good source
of Calciumand improves
digestion
Yogurt and its customers
In 1999
US retail sales
$1.8 billion
2.3 billion units
CHANNEL SALESAVG SALES GROWTH
PER YEAR
Super markets 97% 3%
Natural food stores less than 3% 20%
Others minute -
Yogurt and its customers
Organic food customers
Supermarkets
46%
Natural food stores
29%
Health stores
25%
Organic dairy products
74% of
Heavy organic food buyers
29% of
Light organic food buyers
Yogurt and its customers
Yogurtwas purchased by
40% of US
population in
which over 70%are women
Yogurt and its customers
Yogurt market share : 1999, Supermarket channel
Package (size)Dollar
share (USD)
Dollar sales
change vs prior
year
8-oz cups & smaller 74% +3%
Children's multipacks 9% +12.5%
32-oz cups 8% +2%
Other 9% No change
channels
Sales and distribution process
Yogurtis largely distributed through
2channels
1Natural foods store
People’s favorite
2Supermarket
Obviously more powerful
Cost of yogurt
SIZE
AVERAGE RETAIL PRICE
NATUREVIEW'S
MANUFACTURING
COSTSNATURAL
FOODS
CHANNEL
SUPER
MARKET
CHANNEL
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
Yogurt Production costs & retail prices
Sales and distribution process
Natureview’sexpenses while passing through these
2channels
Supermarket expenses - 1
Retailer
27%
Distributor
15%
Customer
Broker
4%
Manufacturer
Supermarket expenses - 2
Introduction of products : Into Supermarket channel
$10,000 per
SKU (Stock Keeping Unit)
per retail chain
$80,000 to introduce 8 flavors of 8-oz cup for each supermarket
Supermarket expenses - 3
Promotion : Every 3 months
Average cost of
Advertising
$8,000 per region
Natural foods stores expenses - 1
Retailer
35%
Natural foods
distributor
15%
Customer
Natural foods
wholesaler
7%
Manufacturer
Natural foods stores expenses - 2
Nothing extra except…
1 free caseof each product
in its 1st year
solution
Solution..
A meeting with
Senior management teamgave rise to
3 solutions
3 proposals
Walter Bellini
Expand into
1 or 2 selectedsupermarkets with
6 SKUs of 8-oz cups
Option 1 – KEY POINTS
8-oz cups have more Dollar share
Few companies have successfully entered and increased their revenue 200%
Supermarkets will only authorize one brand (for yogurt). Better to enter first
1
2
3
Option 1 – Sales Increment
According to Walter increment in annual sales would be 35 million units
Revenue = 35 million * $0.74Revenue Generated - $25.9MILLION
well over the
$20 million goal
Option 1 – GROSS PROFIT
Manufacturing costs = 35 million * $0.31
= $10,850,000
Gross profit = $15,050,000
Option 1 – Fees
Broker fee = 4% of sales = $1,036,000
Total = $7,357,000
Distributor margin = 15% = $2,257,500
Retailer margin = 27% = $4,063,500
Option 1 – COSTS (1/4)
Advertising costs $1.2 million per region per year
2 supermarkets = 2 regions
TOTAL COSTS - $2.4MILLION
Option 1 – COSTS (2/4)
Launching costs $10,000 per SKU per supermarket
2 supermarkets & 6 SKUs
TOTAL COSTS - $120,000
Option 1 – COSTS (3/4)
Promotion costs $8,000 per region, every 3 months
2 supermarkets & 4 times
TOTAL COSTS - $64,000
Option 1 – COSTS (4/4)
SG&A expenses $200,000 for sales staff & $120,000 for additional marketing
Sales, General & Administrative
TOTAL COSTS - $320,000
Option 1 – TOTAL EXTRA COSTS
$320,000
$2,400,000
$64,000
$120,000
$2,904,000
Option 1 – Net Income
Extra costs = $2,904,000
Revenue = $25,900,000
Fee = $7,357,000
Manufacturing costs = $10,850,000
NET INCOME = $4,789,000
Option 1 - Report
There is a high income and revenues, also
Greater risks (8-oz competitors)
Potential natural foods market of
Natureview can be lost.
Jack Gottlieb
Expand into
64 selectedsupermarkets with
4 SKUs of 32-oz cups
Option 2 – KEY POINTS
32-oz cups have generated above average Gross-profit margin
Fewer competitors have long shelf-life. So, Natureview will be at advantage
Promotion for 32-oz is done only twice a year, by supermarkets
1
2
3
Option 2 – Sales Increment
According to Jack increment in annual sales would be 5.5 million units
Revenue = 5.5 million * $2.70Revenue Generated - $14.85MILLION
well over the
$20 million goal with the current $13 million
Option 2 – GROSS PROFIT
Manufacturing costs = 5.5 million * $0.99
= $5,455,000
Gross profit = $9,395,000
Option 2 – Fees
Broker fee = 4% of sales = $594,000
Total = $4,539,900
Distributor margin = 15% = $1,409,250
Retailer margin = 27% = $2,536,650
Option 2 – COSTS (1/4)
Advertising costs $120,000 per region per year
64 supermarkets = 4 regions
TOTAL COSTS - $480,000
Option 2 – COSTS (2/4)
Launching costs $10,000 per SKU per supermarket
64 supermarkets & 4 SKUs
TOTAL COSTS - $2,560,000
Option 2 – COSTS (3/4)
Promotion costs $8,000 per region, every 6 months
64 supermarkets & 2 times
TOTAL COSTS - $1,024,000
Option 2 – COSTS (4/4)
SG&A expenses $160,000 for sales staff
Sales, General & Administrative
TOTAL COSTS - $160,000
Option 2 – TOTAL EXTRA COSTS
$1,024,000
$480,000
$160,000
$2,560,000
$4,224,000
Option 2 – Net Income
Extra costs = $4,224,000
Revenue = $14,850,000
Fee = $4,539,900
Manufacturing costs = $5,455,000
NET INCOME = $631,100
Option 2 – Report
There is a high revenues, also risks
Potential natural foods market of
Natureview can be lost.
Also distributionis difficult to achieve
Kelly Riley
IntroduceNatural food stores
2 SKUs of children multipacks
Option 3 – KEY POINTS
Already have a strong relationship with natural foods stores
Natural foods channel is growing 7 times faster than supermarket
Financial potential is very attractive. Gross profitability of the line would be 37.6%
1
2
3
Option 3 – Sales Increment
According to Kelly increment in annual sales would be 1.8 million units
Revenue = 1.8 million * $3.35Revenue Generated - $6,030,000
It is only above
$19 million with the current $13 million
In addition to that..
Natural foods stores has
sales increase of
20% annually.
That adds up to the remaining
1 million
Option 3 – GROSS PROFIT
Manufacturing costs = 1.8 million * $1.15
= $2,700,000
Gross profit = $3,960,000
Option 3 – Fees
Wholesaler margin = 7% = $277,200
Total = $2,019,600
Distributor margin = 9% = $356,400
Retailer margin = 35% = $1,386,000
Option 3 – COSTS
Complimentary cases 2.5% of manufacturer sales
= 2.5% of $6,030,000
Extra costs = $400,750
Marketing costs = $250,000
Option 3 – Net Income
Extra costs = $400,750
Revenue = $6,030,000
Fee = $2,019,600
Manufacturing costs = $2,700,000
NET INCOME = $909,650
Option 3 - Report
Best option with
lowest risks
Also good possibility of achieving the
$20 million goal
conclusion
Yogurt and its customers
After this heavy analysis,
Kelly Riley’s proposal seems to be more
profitable & healthy
Natural food stores
rules
DISCLAIMER
These slides are made by Adidala Yashwanthduring an internship under Prof Sameer Mathur, IIM Lucknow