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REPORT ON NATUREVIEW FARM By: Shashank Chauhan (S6052) Bipul Bibhakar (S6012) Barun Ghatury (S6011) Aditya

REPORT ON NATUREVIEW FARM

By:

Shashank Chauhan (S6052)

Bipul Bibhakar (S6012)

Barun Ghatury (S6011)

Aditya Singh (S6002)

BACKGROUND:

Natureview Farm, a Vermont-based producer of organic yogurt with $13 million in revenues,

is the leading national yogurt brand (24% market share) sold into natural foods stores. It has

achieved this through its special yogurt manufacturing process and through cultivating

personal relationships with dairy buyers in the natural foods channel. Set in 2000, when the

company faces financial pressure to grow revenues to $20 million by the end of 2001 due to a

planned exit by its venture capital investors. The immediate decision point that the

protagonist, Natureview's vice president of marketing, faces is whether to achieve this

revenue growth by expanding into the supermarket channel.

Nature View Farm Income Statement 1999 ($) 90,00,000 81,90,000 80,00,000 70,00,000 60,00,000 48,10,000 45,50,000
Nature View Farm Income Statement 1999
($)
90,00,000
81,90,000
80,00,000
70,00,000
60,00,000
48,10,000
45,50,000
50,00,000
40,00,000
Nature View Farm Income
30,00,000
Statement 1999 ($)
20,00,000
10,00,000
2,60,000
0
Cost of
Gross Profit
Expenses
Net Income
Goods Sold

Yogurt Market share by Packaging Segment ,1999 (Super market channel, in % U.S dollar)

Segment ,1999 (Super market channel, in % U.S dollar) 4 3.5 3 2.5 2 1.5 1

4

3.5

3

2.5

2

1.5

1

0.5

0

3.35

3.19

2.7

2.7 2.85 0.88 0.74

2.85

0.88

0.88 0.74
0.74
0.74
0.74
0.74
0.74

0.74

0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74
0.74

8-oz. cup

32-oz. cup

4-oz. cup

 

multipack

Average Retail Price($) (Natural0.74 8-oz. cup 32-oz. cup 4-oz. cup   multipack Food Channel) Average Retail Price($) (Supermarket Channel)

Food Channel)

Average Retail Price($)cup 32-oz. cup 4-oz. cup   multipack Average Retail Price($) (Natural Food Channel) (Supermarket Channel)

(Supermarket Channel)

GOAL:

“Uniquely positioned the product to capitalized on the growing trend in natural and organic foods in supermarket”

MARKET NEWS:

“Bellini heard rumours that one of the Natureview’s major natural competitors would soon try to expand into the supermarket channel.

MARKET POTENTIAL :

Industry expert predicting unit volume growth of organic yogurt at supermarket of 20% per year from 2001 to 2006.

These prediction were relative to unit growth projections of 2% to 4% of yogurt category in the supermarket.

Number of Retailer in the Region

17 25 33 30
17
25
33
30

NortheastNumber of Retailer in the Region 17 25 33 30 Midwest Southeast West

MidwestNumber of Retailer in the Region 17 25 33 30 Northeast Southeast West

SoutheastNumber of Retailer in the Region 17 25 33 30 Northeast Midwest West

WestNumber of Retailer in the Region 17 25 33 30 Northeast Midwest Southeast

COMPETITOR ANALYSIS:

DIRECT

 

CURRENT

STRENGTH

IMAGE

PAST/CURRENT

COMPETITORS

PERFORMANCE

&

PERSONALITY

 

STRATEGY

SUPER

WEAKNESS

 

MARKETS

NATUREVIEW

-

24% market

- Longer shelf life

- Quality,

-

Build

(natural food

healthy, unique

relationships

store)

-Only in

-

Grow revenue

-

$13 million

natural food

 

revenue

stores

DANNON

-Many products

-Market

-High visibility.

-Follow

and flavours

leader

consumer trends

-Something for

-33% market

-Artificial

everyone

share

YOPLAIT

-Many products

-Brand name

-Caring brand

-Make gains on dannon.

and flavours

-Artificial

 

-

24% market

-Differentiation

share

COLOMBO

-

5% combined

-National

-good for you

-Maintain sales

market share

distribution

-Differentiation

OPTION ANALYSIS:

   

OPTION 1.

 

OPTION 2.

 

OPTION 3.

 

-

Advocated by : Walter

-

Suggested by : Jack

-

Proposed by:

Bellini, vice president sales

Gottlieb, vice president of operations.

Walker‟s colleague Kelly Riley, the assistant marketing

PROPOSED

-

-

 

PLANS

Expand 6 SKU‟s of the

8-oz. Product line into one or two selected supermarket channel regions.

Expand 4 SKUs of the 32-oz.

director.

-

Introduce 2 SKUs of

a children multipack into the natural foods

 

channel.

-

6 SKU‟s chosen were

the best-selling SKU‟s of the 8-oz. Line.

 

-

8-oz cups represented

-

32-oz generate an

-

Natureview Farms‟s

the largest dollar & unit share of the refrigerated yogurt market,

providing significant revenue potential.

Other natural foods

above average gross

all-natural ingredients

STRENGTHS

profit margin for Natureview (43.6% vs 36.0% for the 8-oz line)

would provide the perfect positioning from which to launch its own multi pack product offering into

-

-

Fewer competition in

their core channels.

brands had successfully

the segment. Achieved 45% share of this size segment.

expanded theri distribution into the supermarket channel. Two brands:

-

Sales team was

confident they could

 

achieve distribution

The management

-

team assumed to sell approx. 5.5 million incremental unit in the first year.

for two SKUs.

 

Silk

-

Financial potential

Soyamilk

was very attractive.

   

-

R&D and operation

Amy‟s Organic foods

Increased their revenue by 200% in 2 years.

would need to develop the multipack product. Natureview would incur no additional SG&A cost to

introduce multipack.

 

-

Concept have high

-

Management team

- Customer demand is variable.

potential but High risk and cost.

doubted that new user would readily “enter the brand” via

-

Supermarket

a multi-use size.

 

THREATS

retailers would likely authorize only one organic yogurt brand.

The first brand to

enter the channel could therefore have a significant first- mover advantage.

-

-

Have to hire sales

person with experience for

sophisticated supermarket channel.

-

Bellini concerned

about his sales team ability to achieve full

 

national distribution in 12 months.

FINANCIAL DATA ANALYSIS:

 

OPTION 1.

 

OPTION 2.

 

OPTION 3.

-

Advertising team:

- Slotting expenses will be higher, Promotional expenses will be lower as 32-oz. Is promoted only twice in a year.

Projected total revenue for two multipack SKU approx. 10% of the food channel category dollar sales.

-

advertising plan would cost $1.2 million per region per year.

-

Sales, general, &

 

-

Gross profitability would be

administrative (SG&A) expenses would increase by $320,000 annually, $200,000 would be incremental SG&A for additions to sales staff required to manage the supermarket brokers in two regions & $120,000 for additional marketing staff.

-

For 32-oz. Expansion,

37.6%.

marketing expenses will be lower i.e. 10% projected for 8-oz. Size, representing $120,000 per year

-

Sales and marketing

channel will be lower.

-

The cost of complementary

-

Increase SG&A by

cases was estimated at 2.5% of the product line manufacture sales.

$160,000.

-Assume company could sell

 

approx 5.5 million incremental units in the first year.

-

Marketing expenses were

-

Could achieve 1.5% share

estimated to be $250,000.

of supermarket yogurt after 1 year with incremental annual sales of just over 35 million

units.

 

Dollar Share (Supermarket channel, in % U.S

dollars)

27% 26% 22% 25%
27%
26%
22%
25%

NortheastDollar Share (Supermarket channel, in % U.S dollars) 27% 26% 22% 25% Midwest Southeast West

MidwestDollar Share (Supermarket channel, in % U.S dollars) 27% 26% 22% 25% Northeast Southeast West

SoutheastDollar Share (Supermarket channel, in % U.S dollars) 27% 26% 22% 25% Northeast Midwest West

WestDollar Share (Supermarket channel, in % U.S dollars) 27% 26% 22% 25% Northeast Midwest Southeast

RECOMMENDATION STRATEGY:

EXPAND PRODUCT LINE TO INCLUDE YOGURT MULTI-PACKS:

Natureview Farm should expand its already successful organic yogurt product line to include

two versions of a yogurt multi-pack priced at $3.35 each. This strategy will allow the

company to reach their set revenue goal the quickest due to the fact that the annual growth

rate of sales of yogurt multi-packs is 12.5%, versus only 3% for the 6 oz. size and 2% for 8%.

The profit margins from multi-packs are also significantly higher than those of single

servings. Flavors will be chosen from the line‟s most successful flavors but will be given

creative names that will appeal to kids. The multi-packs will be positioned as the healthy

snack alternative for kids.

PROMOTIONAL IDEAS:

Online presence

- Web site targeted

- Add value through recipes, message board & special offers

- Kid-friendly site easy

recipes & science section

- Extranet site facilitating

sales/ distribution channel

activities

Guerilla marketing

- low-budget creative

promotions in-store

- schools promotion activity.

In-store tastings

- Saturdays at natural foods retailers 4x yr.

- Staffed by Natureview Farm sales reps

Social responsibility

- Community involvement program.

- Generate local „buzz‟

through press coverage

Point-of-purchase - Floor sticker displays in- store to catch kids‟ attention - Attractive shapes like a animal or bird to attract.