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Case Study on
Natureview Farm
Small Yoghurt manufacturer in USOne of the major sellers at Natural food stores
Natureview Farm INC.
Formed in 1989Revenue grown from
$100,000 to $13 million from 1989-1999
Revenue for the year 1999
Present Challenge of Natureview Farm
Finding a path to grow revenue from $13 million to $20 million before the end of 2001
But How?
Competitors of Nature View FarmNatural Food Channel-Brown Cow Horizon OrganicWhite WaveOthersMajor Yoghurt Sellers/Potential
Competitors in Supermarket ChannelDannonYoplaitBreyers Columbo
Yoghurt sold in Supermarket = 97%Yoghurt sold in Natural Food Store = 3%
BUT
Average Yoghurt Sale growth per year in Supermarket = 3%
Average Yoghurt Sale growth per year in Natural Food Store = 20%
Supermarket = 46% Small Health Stores = 25% Natural Food Stores = 29%
Organic Food Consumers
To 67% households PRICE is a barrier
58% expressed that they would buy more organic food if it were less expensive
Yoghurt purchased by = 40% US Population
(Out of which 70% are women)
8 oz and smallerMultipack 6 packs of 4 oz cups
Or 8 pack of 2
oz cups
32 oz
Different sizes of Yoghurt
Size Dollar Share
Dollar Share
changes vs. Prior Year
8 oz cups and smaller 74
%+3%
Children’s Multipack
9% +12.5%
32 oz 8% +2%
Other 9% NC
100%
Yogurt Market Share by Packaging Segment, 1999 (Supermarket channel, in % U.S. dollars)
Region Dollar Share Number of Retailers
Northeast 26% 25
Midwest 22% 30South East 25% 33
West 27% 17
Yogurt Market Share by Region, 1999 (Supermarket channel, in % U.S. dollars)
Relatively streamlined distribution systems of supermarkets Allow to maintain lower prices
Distribution in the natural foods channel involved 4, instead of three parties
SUPERMARKETS FOR PRICE SENSITIVE SEGMENT
Manufacturer
Distributor
Retailer
Customer
Manufacturer
Retailer
Customer
Natural Foods Wholesaler
Natural Foods Distributor
LENGTH
CHANNELs
OF
Supermarket Channel Natural Foods Channel
Sizes Actual Cost
Supermarket
Natural Food Store
8 oz $0.31 $0.74 $0.88
32 oz $0.99 $2.70 $3.19
4 oz Multipack
$1.15 $2.85 $3.35
Yogurt Production Costs and Retail Prices by Channel
Competition in Supermarket Channel and Natural Food
Channel
Dannon 33%Yopailt 24%Others 23%
Private Label 15%Columbo 5%
Nature View 24%Brown Cow 15%
Horizon Organic 19%White Wave 7%
Others 35%
Yogurt Market Share by Brand, 1999 (Supermarket and Natural Foods channels,
in % U.S. dollars) SUPERMARKET CHANNEL
NATURAL FOOD CHANNEL
The Senior Management Team’s Three Options
2 of them included Entry in Supermarket channel
1 option emphasizes on the need to retain in Natural Foods Channel only
ARGUMENTS FOR1. Eight-ounce cups represented the largest
dollar and unit share of the refrigerated yogurt market
2. Nature View is uniquely positioned to capitalize on the growing trend in natural and organic foods in supermarkets
3. The first brand to enter the supermarket channel could have a significant first-mover advantage
1.To expand six SKUs of the 8-oz. product line into one or two selected supermarket channel regions
$1.2 Million per region per month for Advertisement
Additional $320,000 on SG&AAdditional $200,000 for Brokers in 2 regions$120,000 for Marketing Staff$60,000 SKU charges
Total Charges = $1,900,000
ADDITIONAL COSTS DUE TO OPTION 1
ARGUMENTS FOR
1. They currently generated an above-average gross profit margin for Natureview (43.6% vs. 36.0% for the 8-oz. line).
2. There were fewer competitive offerings in this size
3. Promotional expenses would be lower (the 32-oz. size was promoted only twice a
year)
2. To expand four SKUs of the 32-oz size nationally
$40,000 for SKUAdditional $160,000 for SG&A$12,000 per region per year for
marketing
Total Charges = $212,000
ADDITIONAL COSTS DUE TO OPTION 2
ARGUMENSTS FOR1. Expansion into the supermarket channel could
potentially affect these relationships with the leading natural foods channel retailers
2. Skeptical if Natureview had the necessary resources or skill-set to sell effectively to and through supermarkets.
3. Perfect position from which to launch its own children’s multi-pack product offering into their core sales channel
4. Financial potential was very attractive5. The natural foods channel was growing almost seven
times faster than the supermarket channel6. No additional SG&A costs
3. To introduce two SKUs of a children’s multi-pack into the natural foods channel
ADDITIONAL COSTS DUE TO OPTION 3
Total Charges = $0
Sales Projections for Natureview’s Strategic Options
Options Actions Anticipated Incremental
Retail Unit Sales 1 Expand 6 SKUs of
the 8-oz. size into eastern and
western supermarket
regions
35,000,000
2 Expand 4 SKUs of the 32-oz. size nationally into supermarket
channel
5,500,000
3 Introduce 2 children’s
multipacks into natural foods
channel
1,800,000
Total Revenue = (Unit Sales*Cost per
Unit) – Total Charges Incurred
by Natureview
Net Revenue = (35,000,000*0.74) – 1,900,000
= $ 24,000,000
Option 1
Option 2Net Revenue = (5,500,000*2.70) – 212,000
= $ 14,638,000
Option 3Net Revenue = (1,800,000*3.35) – 0
= $ 6,030,000
TOTAL REVENUEOPTION TOTAL REVENUE
1 $25,200,000
2 $14,638,000
3 6,030,000
As per the Calculation, Option 1 seems to be the Optimal
Solution to reach the revenue of $20 Million before the end of
2001i.e.
To expand six SKUs of the 8-oz. product line into one or two
selected supermarket channel regions
DISCLAIMERCreated by Akanksha Rai Sharma, MSITDuring a marketing internship by Prof. Sameer Mathur , IIM Lucknow