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N a t u r e V i e wC a s e S t u d y
Siddharth Putuvely
BACKGROUND
Founded in 1989, Natureview Farm manufactured and marketed refrigerated cup yogurt.
Background
Strengths•Strong Brand•Low Cost•Relation with Distributors
Differences•Natural and Organic Ingredients
•Long Shelf Life•High Quality and Taste
Revenue of 20 million
dollars need by end of
year
2001VC firms want to
cash out.Revenue
reached 13 million dollars
2000 Natureview arrange for
an equity infusion
from a venture
capital (VC)firm to fund
strategic investments
1997Jim Wagner
joined as CFO
1996Natureview
was founded
with 2 yogurt
flavours
1989
Background cont.
5
Data on the Yogurt Industry
D a t a o n t h e Yo g u r t I n d u s t r y
Supermarket97%
Natural Food Stores
3%
Yogurt Sales
Supermarket
Natural Food Stores
6 and 8 Oz74%
Multipack9%
32 Oz8%
Others9%
Yogurt Sales by Size
6 and 8 OzMultipack32 OzOthers
D a t a o n t h e Yo g u r t I n d u s t r y
28%
60%
12%
Yogurt Consumption
Consuming womenNon ConsumingConsuming men
8
N a t u r e v i e w ’ s 4 P ’ s
• Size• Flavour• Natural• Organic
Product
Natural Food ChannelsPlace
High PricePrice
• Retail level• Wholesale Level• Distributor Level
Promotion
CURRENT SITUATION
10
C u r r e n t S i t u a t i o n
The VC firm that invested in Natureview now needed to cash out of its investment. Their management had to find another investor or position itself for acquisition, and increasing revenues was critical in order to attain the highest possible valuation for the company.
OBJECTIVE
12
O B J E C T I V E
They have to make strategic marketing decisions to grow revenues to $20,000,000 from their current $13,000,000 before the end of the 2001 fiscal year.
ANALYSING OPTIONS
14
Expand 6 SKUs of the 8-oz product line into one or two selected supermarket channel regions
OPTION 1
15
O P T I O N 1 A N A LY S I S
ProsGreat revenue Potential
Supermarkets sold 97% of all yogurtconsumed
Unit volume growth of organic yogurt at supermarkets of 20% per year from 2001 to 2006
O P T I O N 1 A N A LY S I S
ConsSupporting 8-oz cup size would require quarterly trade promotions and a meaningful marketing budget
Advertising plan would cost $1.2 million per region per year in
addition to the promotional ads expenses
17
O P T I O N 1 A N A LY S I S
Cons
SG&A expenses would increase by $320,000 annuallyThis option creates direct
competition with national yogurt brands
Deteriorates the relationship with the natural stores
18
To expand four SKUs of the 32-oz. size nationally
OPTION 2
19
O P T I O N 2 A N A LY S I S
ProsPotentially give higher average gross profit margin than 8-oz size It also has stronger
competitive advantage like longer shelf life and lower marketing expenses
O P T I O N 2 A N A LY S I S
ConsDoubt on sales team’s ability to achieve full national distribution in 12 months
Needs to hire sales personnel and establish relationships with
supermarket brokers
Doubt on claim of new users would readily “enter the brand” via a multi-use size
21
To introduce two SKUs of a children’s multi-pack into the natural foods channel
OPTION 3
22
O P T I O N 3 A N A LY S I S
ProsEstablished leader in this channel Perfect positioning for new
multi-pack productLong term the financial potential was very attractive
O P T I O N 3 A N A LY S I S
ConsWon’t enter supermarkets where 97% sales happen.
Low early financial revenue
Options Action
Anticipated IncrementalRetail Unit Sales Avg Retail Price Sales Revenue Money after removing margins Ad cost Slotting fee Incemental SGA Increase in Revenue Total Revenue
Option 1
Expand 6 SKUs of the 8-oz. size intoeastern and western supermarket regions 3,50,00,000 0.74 25900000 16070950 2400000 1200000 320000 12150950 25150950
Option 2
Expand 4 SKUs of the 32-oz. sizenationally into supermarket channel 55,00,000 2.7 14850000 9214425 480000 2560000 160000 6014425 19014425
Option 3
Introduce 2 children’s multipacks intonatural foods channel 18,00,000 3.35 6030000 3317072.85 301750 0 0 3015322.85 16015322.85
A n a l y s i n g D a t a
25
D e c i s i o n M a t r i x
Decision Parameter Option 1 Option 2 Option 3 Revenue Objective Exceeds Exceeds Falls Short Short Term Profits No No Gain Long Term Profits High High Low Channel Partners Highly Alienating Alienating Enhancing Competitive Response Very Risky Risky Low Cost to Induce Trial High Very High Low Brand Equity Dilution Possible Possible No Organizational capabilities Low Low High
RECOMMENDATION
27
Option 3: 1. High Growth (12% per year)2. Minimum Channel conflicts3. New target customers :
Supermarket will be selling these multi packs relatively cheap.
4. Higher expected annual demand.
Re c o m m e n d a t i o n
THANK YOU!