Natureview Farm: HBS Case Explores Growth Strategies

Natureview Farm
Harvard Business School Case
Prof. Prem P. Dewani, & Prof Sameer Mathur

Faculty Marketing: IIM Lucknow
Case Overview
1.How has Natureview succeeded in natural
food channel?
Natureview Farm: HBS Case

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Case Overview
2. What are the two primary types of growth
strategies under consideration by
Natureview?
Prof. Prem Prakash Dewani

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Case Overview
3. How do the three options compared
financially in terms of yearly revenue, gross
margin required investment, and profit
potential?

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Case Overview
4. If the venture capitalist extended their deadline for
meeting the $ 20 million revenue target by 12 to 18 months,
would that change your recommended action plan?

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Lead Questions
5. What are the strategic advantages and
risks of each option? What channel
management and conflict issues are involved?

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Lead Questions
6. What action plan should the company
pursue? What changes in the current
marketing mix, sales, brand, and channel
partner arrangements do you recommend in
order to implement the action plan?

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Case Overview
If you forecast each option for two years
and five years out, does your
recommendation change?
Assume a unit sales growth of 20 % per annum for the

super market options, 15 percent, unit sales growth rate
p.a. for nature foods and an 8 percent discount rate

8
Learning Objective of the CASE
To explore potential risk and rewards
associated with a company’s choice of
channel and how these channel conflicts
can potentially be managed

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To understand the key issues related to consumer
product market development and product
development growth strategies.

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To develop understanding of margin
economics across distribution channel.

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Key Issue
Immediate ‘GO / NO GO’ entry

into the supermarket Channel?
WHY?

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Situation Analysis
1989 - Founded– Revenue $100 K. Yogurt products
. Introduced 2 Flavors
1996 – Jim Wagner Hired to steady profits
1997 - CFO Jim Wagner got VC capital Infused

capital in 1999
Today Feb 2000. Annual Revenue was $13 million in
1999. Total 12 Flavors in 8 Oz and 4 Flavors 32 Oz
VC to cash out at the end of 2001. Revenue
needs to grow to 20 million
13
How has Natureview succeeded in natural food channel?
Naturefarm attempts to convert a commodity

based product to a valuable product differentiating
in terms of (Organic, longer shelf life product, no
additives and preservative (Natural) product.
What is the Positioning of the Product

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Consumer behavior of the segment: willing to

pay more (higher prices) for the products they
perceive as ‘healthier’

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Positioning
Natureview’s refrigerated yoghurt brand
is positioned as ‘All Natural’ (without any
artificial colorings, flavorings and
stabilizers).

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Positioning
Shelf-life of the product is 50 days
against 30 days for competitive
products

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Positioning
# 1 Brand position in the natural foods
channel (24 % market share (= $13
million Natureview Revenue / $54 Million
dollar size of total natural foods yoghurt
market))

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The business where personal relationships, word

of mouth/ guerilla marketing helps in building the
‘Brand’

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Problem Statement
Which Channel and Product SKU Combination to
be used to derive sales volumes and trade up
consumers from lower value brands, while
retaining or building brand equity

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Distribution Channel
Natural Foods Channel Supermarket Channel
Manufacturer Manufacturer
Wholesaler
Wholesaler
Distributors
Retailer
Retailer
Customer Customer

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Market Channel Strategy
• Supermarket channel players / prices (8
• Smaller in size but experiencing 20 % growth
Oz Yoghurt). rate
Brokerage fee MSP $0.46 RPP $0.54 RSP $0.74
4 % sales • Number of intermediaries (One more as
compared to supermarket)
Natureview • Differences in terms of investments and
Distributor Retail Store
32.5 % Gross expertise required for success
15 % Margins 27 % Margins
Margins
Brokerage fee
Natural Food Channel
MSP $0.48 DPP $0.52 RPP $0.57 RSP $0.88
4 % sales
• Larger in size as compared to NF channel
• Growth rate is 3 % NF NF Retail
Natureview NF W
• Number of intermediaries are lesser as against NF. 36 % Gross Seller 7 %
Distributor Store
9% 35 %
Margins Margins
Margins Margins
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Market Typology
The Yogurt Market Natural
Foods
Channel
Channel Market Share
3%
32-oz. cups
8% Other
Children’s 9%
multipacks
9%
8-oz. cups and

smaller
74%
Supermarket
97%

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Distribution Channel
Natural Foods Channel
Natureview
Farm
Others
35%
24%
Supermarket Channel Supermarket
Channel
0%
Columbo
5%
Brown Cow
15% Private Label Dannon
15% 33%
Horizon Organic
19%
Others
White Wave 23%
7%
Yoplait
24%

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History and Current Revenue Challenge
NF has successfully grown from $ 100,000 to

$ 13 million since its founding (10 years) (the
compounding annual growth rate 62.7 %)

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This has been achieved by expanding the

product line and achieving national
distribution in the natural foods channel

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Now company needs to achieve at least $ 20
million in revenue in 2001
With this growth rate, it is not possible….
What are additional options to come out of

present problem….??
27
Growth strategies under consideration by NF
Option 1 and 2 entail expanding current company products
into a new market, in the case, expanding 8 oz., and 32 oz.
product line into the supermarket channel (Market
development strategy)
Option 3 entails developing a new product for an existing

market. (Product development strategy)

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Growth strategies under consideration by NF
• Option 1 and 2 entail expanding ????
current company products into a
new market, in the case,
expanding 8 oz., and 32 oz.
product line into the supermarket
channel (Market development
strategy)
• Option 3 entails developing a new

product for an existing market.
(Product development strategy)
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Options for Resolving the Crisis

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Find out….
How do the three options compare
financially in terms of yearly revenue, gross
margin, required investment, and profit
potential?

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Options 1
Expand the supermarket channel with 6 SKU of
the 8 oz. product line. Natureview would partner
with 20 supermarket chains in two geographic
regions (Advocated by Walter Bellini, VP sales).

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Option 2
Expand into supermarket channel with 4 SKUs of the
32 oz. product line. This would be a national
expansion, involving partnerships with 64 supermarket
chains in all four geographic regions of the United
States (Advocated by Jack Gottlieb, VP of operations)

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Option 3
Remain with the natural foods channel, but
introduce a new product line, 2 SKUs of a
children’s multi-pack targeted to mothers (Advocated
by Kelly, Assistant Marketing Director).

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Comparing the Options an Overview
Option 1:
(Supermarket 8 OZ) Positives Negatives
• Largest Segment • Upset NF Partners
• Other natural brands entered • Organizational requirements
• Pre-empt competition • Large investment: How to pay for?
Option 2
(Supermarket: 32-OZ) • Longer Shelf Life • More Expensive, Less Visible for consumers
• Higher Gross Margins • Upset NF Partners
• Less Market Investments • Large Investment: How to pay for?
• Less competition (8 OZ)
Option 3
(Natural Foods, • Supports current fast growing
Children's Multipack) channel • Miss window of opportunity (Supermarket)
• Lowest Sales / Market, Investment • Less long term $$ potential

• Does not meet $ 7 K VC revenue growth
• Lowest Risk criterion
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Role of Broker
What if NF avoid paying the broker’s fee
and ‘go direct’ sell directly to dairy buyers in
supermarkets

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Role of Broker
Managing marketing funds, recommending and
executing trade promotions
Developing sales contacts and customer

service and support

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Role of Broker
Lack of scale or infrastructure by NF compared to
its supermarket yoghurt competitors
Smaller marketing budget of NF than the larger

yoghurt producers
Dannon and Yuplait (Competitors) marketing

spending exceeds NF sales
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Role of Broker
NF has a smaller product portfolio so does not
have much overall to offer dairy buyers
NF’s success depends on the service and

expertise provided by broker.

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Margin Chain for Manufacturer Selling Price (NF
Yoghurt)Supermarket Channel
Margin Chain for Manufacturer Selling Price (Natureview Yogurt)
Supermarket Channel 8-oz 32-oz Reference Implications
Retail Price $0.74 $2.70 Case Exhibit 3 ?
Retail Margin 27.00% 27.00% Text - Supermarkets
Retail Purchase Price (RPP) $0.54 $1.97
15 %
Distributor Margin 15.00% 15.00% Text - Supermarkets
Distributor Purchase Price (DPP) $0.46 $1.68
Manufacturer Sales Price (MSP) 0.46 1.68
Cost per Unit 0.31 0.99 Case Exhibit 3
Contribution per Unit Sold $0.15 $ 0.69
Manufacturer Gross Margin 32.50% 40.90%
Manufac turer Co st = MS P * (1 - % Manufac turer Gro ss Margin)
Manufac turer S elling Pric e = RPP * (1 - % Distributo r Margin) in S upermarket Channel
Manufac turer S elling Pric e = DPP * (1 - % Who lesaler Margin) in Natural Fo o ds Channel
Who lesaler S elling Pric e = RPP * (1- % Distributo r Margin) in Natural Fo o ds Channel
Distributo r S elling Pric e = RS P * (1 - % Retail Margin)
Natureview Farm: HBS Case 40

Margin Chain for Manufacturer Selling Price (NF
Yoghurt):Natural Food Channel
Natural Foods Channel 8-oz 32-oz Multipack

Retail Price $0.88 $3.19 $3.35 Case Exhibit 3 Implications ?
Retail Margin 35.0% 35.0% 35.0% Text - Natural Foods
Retail Purchase Price (RPP) $0.57 $2.07 $2.18
Natural Foods Distributor Margin 9.0% 9.0% 9.0% Text - Natural Foods
Natural Foods Distributor Purchase Price $0.52 $1.89 $1.98
16 %
Wholesaler Margin 7.0% 7.0% 7.0% Text - Natural Foods
Wholesaler Purchase Price (WPP) $0.48 $1.75 $1.84
Manufacturer Sales Price (MSP) 0.48 1.75 1.84
Cost Per Unit 0.31 0.99 1.15 Case Exhibit 3
Contribution per Unit Sold $0.17 $0.76 $0.69
Manufacturer Gross Margin 36.0% 43.6% 37.6%

Market Share Analysis of yoghurt Market
Market dollar size % total Annual growth References
rate
Total refregerated yoghurt market $ 1,800,000,000 100 3.5 Text Yoghurt Category
Supermarket channel $ 1746000000 97 3 Text Yoghurt Category Channel
Naturalview channel $ 54000000 3 20 Text Yoghurt Category
Total regreferated yoghurt market $ 1,800,000,000 100 3.5

6 oz. and 8 oz. $ 1332000000 74 3
32 oz. $ 144000000 8 2 Size of Package
Children multipack $ 162000000 9 12.5
All others $ 162000000 9 0.1
Toral refregerated yoghurt market $ 1,800,000,000 100

Northeast $ 1746000000 26
Midwest $ 54000000 22 Geography
Southeast $ 1746000000 25
West $ 54000000 27

Formulae
Formulae for Option 1
Gross Profit $5.22m = 35m units * $0.15 contribution per unit
Sales Growth $16.07m = 35m units * $0.46 MSP
Market Share 1.5% = 35m units * $0.74 RSP / 97% supermarket share * $1.8bn
Gross Profit $3.77m = 5.5m units * $0.69 contribution per unit
Sales Growth $9.21m = 5.5m units * $1.68 MSP
Market Share 10.3% = 5.5m units * $2.70 RSP / 8% 32-oz share * $1.8bn
Gross Profit $1.25m = 1.8m units * $0.69 contribution per unit
Sales Growth $3.32m = 1.8m units * $1.84 MSP
Market Share 11.2% = 1.8m units * $1.84 RSP / 3% natural foods share * $1.8bn

Evaluation of Growth Options
Option 1 (8-oz.) 6 SKU to Supermarket Reference
20 Supermarket Chains
2 Regions
Ad Plan $12,00,000 per region per annum text, Option 1
Sales 3,50,00,000 units per annum text, Option 1
Slotting fees $10,000 per Chain per SKU text, Supermarket
Gross Profit $52,20,950 formula = units sold * $ contribution per unit
Less Ad Costs -$24,00,000 2 Regions
Less Incremental SGA -$3,20,000 $200K sales + $120K mkt text, Option 1
Less Slotting Fees -$12,00,000 20 Chains, 6 SKU per Chain
Trade Promotion
Expense -$8,70,000 11 sup’mkts in NE, 9 in West, 4 times p.a.
Less Broker's
Commissions -$6,42,838 4% of sales formula = MSP * units sold * 4%
Profit Contribution -$2,11,888
Sales Growth $1,60,70,950 Market Share sales growth = MSP * units sold
1.5% of supermarket yogurt sales (last year)
2.0% supermarket yogurt 6-8-oz sales (last year)

Option 2 (32-oz.) 4 SKU to Supermarket
64 Supermarket Chains
4 Regions
per region per
Ad Plan $1,20,000 annum text, Option 2
Sales 55,00,000 units per annum text, Option 2
Slotting fees $10,000 per Chain per SKU text, Supermarket
Gross Profit $37,69,425 formula = units sold * $ contribution per unit
Less Ad Costs -$4,80,000 4 Regions
Less Incremental SGA -$1,60,000 Half of Option One text, Option 2
Less Slotting Fees -$25,60,000 64 Chains 4 SKU
Trade Promotion 64 Chains 2x per
Expense -$10,24,000 annum text, Option 2, Supermarkets
Less Broker's
Profit Contribution -$8,23,152
Sales Growth $92,14,425 Market Share sales growth = MSP * units sold
10.3% of 32-oz yogurt sales nationally (last year)
Option 3 (Multipack) 2
Ad Plan -$2,50,000 text, Option 3
Sales 18,00,000 units per annum text, Option 3
Free Cases (slotting) fee -$82,927 2.5% of Manufacturer Sales (net of broker fees)
Gross Profit $12,47,073
Less Ad Costs -$2,50,000
Less Free Cases -$82,927 formula = 1.8m units sold * MSP * 2.5%
Less Broker's
Profit Contribution $7,81,463
Sales Growth Year 1 $33,17,073 Market Share sales growth = MSP * units sold
11.2% of natural foods channel (last year)

Results Option 1 Option 2 Option 3
Gross Profit $52,20,950 $37,69,425 $12,47,073
Profit Contribution -2,11,888 -8,23,152 7,81,463

Sales Growth $1,60,70,950 $92,14,425 $33,17,073
1.5% of
Market Share supermarket 10.3% of 32 oz. 11.2% of yogurt sales
national yogurt through natural food
yogurt sales sales channel
Formulae for Option One (8-oz. to supermarket channel):

$5.22 m gross profit = 35 m units sales (from case) * $0.15 unit contribution . $16.1 m sales growth = 5 m units *
$0.46 MSP
1.5% share of supermarket yogurt sales = 35 m units * $0.74 supermarket retail price /
[97% supermarket share * $1.8 billion
2.0% market share of 6-8 oz. supermarket yogurt sales = 35 m units * $0.74 supermarket retail price / [97% supermarket share *
$1.8 billion * 74% share for 6-8 oz.

Results Option 1 Option 2 Option 3
Gross Profit $52,20,950 $37,69,425 $12,47,073
Profit Contribution -2,11,888 -8,23,152 7,81,463

Sales Growth $1,60,70,950 $92,14,425 $33,17,073
1.5% of
Market Share supermarket 10.3% of 32 oz. 11.2% of yogurt sales
national yogurt through natural food
yogurt sales sales channel
Option 3
Option 2
Option 1 Not meeting the
Growing gross profits
Growing sales does immediate
but not net income
not necessarily requirement of
Although meeting
corresponds to revenue but growing
revenue
growing profitably bottom line
requirements but ???
profitability

Two and five years forecast for options
Option one ($ 000s) year 1 2 3 4 5 reference
Incremental sales (million units) 35 42 50.4 60.48 72.58 35000 growing at 20 % P A
Incremental sales (Dollars) 16100 19320 23184 27820.8 33386.8 Units * $0.46 per unit
Less Manufacturing cost 10850 13020 15624 18748.8 22499.8 Unit * $0.31 per unit
incremental gross margins 5250 6300 7560 9072 10887
Less broker fees 644 772.8 927.36 1112.832 1335.472 sale * 4 %
less slotting fees 1200 0 0 0 0 20 chains * 6 SKU
Price * # retailers per
Trade promotions 870 870 870 870 870 region * 4 times p.a.
Marketing support 2400 2400 2400 2400 2400 $ 1.2 mm per region p.a.
Incremental CG & A 320 320 320 320 320 Fixed annual cost
Incremental Profit -184 1937.2 3042.64 4369.168 5961.528
2 Year NPV 8% Discount Rate $ 1.44 Million
5 Years NPV 8% Discount Rate $ 11.01 Million

Option two ($ 000s) year 1 2 3 4 5 reference
Incremental sales (million units) 5.5 6.6 7.92 9.50 11.40 5500 growing at 20 % P A
Incremental sales (Dollars) 9214 11.57 13269 15923 19107 Units * $1.68 per unit
Less Manufacturing cost 5445 6534 7841 9409 11291 Unit * $0.99 per unit
Incremental gross margins 3769 4523 5428 6514 7816
Less broker fees 2 Year NPV 369 442 8% 531
Discount Rate 637
$ 1.44 Million 764 sale * 4 %
less slotting fees 2560 0 0 0
$ 11.01 0 64 chains * 4 SKU
% Years NPV 8% Discount Rate Million Price * # retailers per
Trade promotions 1024 1024 1024 1024 1024 region * 2 times p.a.
Marketing support 480 480 480 480 480 $ 120,000 per region p.a.
Incremental Profit 823 2417 3233 4213 5388

Option three ($ 000s) year 1 2 3 4 5 reference
Incremental sales (million units) 1.80 2.07 2.38 2.74 3.15 1.8 mm growing at 15 % P A
Incremental sales (Dollars) 3317 3815 4387 5045 5802 Units * $1.84 per unit
Less Manufacturing cost 2070 2381 2738 3148 3620 Unit * $1.15 per unit
Incremental gross margins 1247 1434 1649 1897 2181
Less broker fees 133 153 175 202 232 sale * 4 %
less slotting fees 83 0 0 0 0 64 chains * 4 SKU
$ 11.01 Price * # retailers per
Trade promotions % Years NPV 0 0 0
8% Discount Rate 0
Million 0 region * 2 times p.a.
Marketing support 250 250 250 250 250 $ 120,000 per region p.a.
Incremental Profit 781 1032 1224 1445 1699

NPV Calculations
NPV Calculations for Natureview farm Option 3

year 1 2 3 4 5
781 1032 1224 1445 1699
723.1481 884.7737 971.6507 1062.118 1156.311 4798.001

($' 000s) Option 1 (8 Oz) Option 2 (32-Oz) Option 3 (Multipack)
One Year Revenue 16071 9214 3317
One Year Profit -212 -823 781
Revenue After 2 years 19285 11057 3815
NPV of Profits over 2 years 1436 1310 1608
Revenue after 5 years 33325 19107 5802
NPV of profits over 5 years 11013 10640 4798
• Assumption: we assumed ‘static’ multi year economic analysis in order to simplify the analysis
Our forecast assume no competitive response function and that Natureview will continue to be able to price its products in the
natural food channel at current level
Natureview will not introduce product to additional chains (and thus not incur incremental slotting fees) over the projected
five years

Analysis
What are the strategic advantages and
risks of each option?
What channel management and conflict

issues are involved?

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Option 1: For
Entering the supermarket channel with the 8-oz. size
provides the company with its greatest revenue-
generating potential.
(The Supermarket channel represents 97% of the refrigerated
category dollar sales; the 8-oz. size is the #1 best-selling
size in this channel, representing 74% of total category
dollar sales).

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Option 1: For
Popularity: Natural/organic products are increasingly
popular, causing supermarket retail buyers to seek
product to expand natural and organic food choices
for shoppers.

56
Option 1: For
If Natureview doesn’t jump on this “first-mover”
opportunity, the company may lose out to its natural
foods channel competitors. There is room for only a few
natural brands on the supermarket shelves.

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Option 1: For
The 8-oz. size is merchandised at eye level, helping
to generate consumer awareness.

58
Option 1: Against
Entering the supermarket channel will likely upset
Natureview’s current channel partners— the natural
foods brokers and retailers.
 Yogurt is not a loss-leader product in the dairy.

 It is an important product to natural foods retailers.
 This “backlash” could put the majority of partners
off-track

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Option 1: Against
Entering Supermarket channel with the 8-oz. size will
be noticed by the current channel competitors, all of
whom have deep pockets and can significantly
outspend Natureview.

60
Option 1: Against
Natureview’s organization,, do not have experience
dealing with this channel (operations, sales, and
marketing teams).

61
Option 1: Against
The supermarket channel brokers and retailers are
much more sophisticated than their counterparts in
the natural foods channel and will place much
greater demands on the company.

62
Option 1: Against
The greatest demands will be placed on the marketing
department. Historically, the company’s marketing
efforts have focused on packaging and public
relations. Entering the supermarket channel will
require the development of more professional and
comprehensive marketing strategies and plans.

63
Option 1: Against
Natureview will not be granted good shelf space in the
supermarket dairy case. The company doesn’t have
the scale or offer the support needed to buy eye-
level shelf space.

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Option 2: For
As with Option 1, entering the supermarket
channel with the 32-oz. size allows the company
to participate in the large supermarket channel,
but with less investment than what is required
for the 8-oz. size.

Option 2: For
Natural/organic products are increasingly in
demand causing supermarket retail buyers to
move toward attracting more customers to their
stores by offering more natural and organic food
choices.

Option 2: For
If Natureview doesn’t jump on this “first-mover”
opportunity, the company may lose out to its
natural foods channel competitors. There is room
for only a few natural brands on the supermarket
shelves.

Option 2: For
The 32-oz. size has a competitive advantage
because of its 50-day shelf life. (Longer shelf life
is more critical for multi-use sizes than the smaller
cup sizes.)

Option 2: For
The 32-oz. size provides an opportunity to enter
the supermarket channel “under the radar
screen”—with an offering that is far less likely to
trigger a competitive reaction.

Option 2: For
Based on the experience with the 32 -oz. size,
Natureview keeps the option open to expand the
8-oz. into the channel at a later date

Option 2: Against
• Entering the supermarket channel will likely
upset Natureview’s current channel partners,
the natural foods brokers, and retailers. Yogurt
is not a loss-leader product in the dairy case and
it is an important product to natural foods
retailers. This “backlash” could put the majority
of Natureview’s current revenue and profit
stream at risk.
Option 2: Against
Against Option 2
• While less so than with the 8-oz. size, entering this channel with the
32-oz. size will still be noticed by the current channel competitors, all
of whom have deep pockets and could significantly outspend
Natureview.

Option 2: Against
Against Option 2
• Natureview’s organization, including its operations, sales,

and marketing teams, do not have experience dealing with
this channel. The supermarket channel brokers and retailers
are much more sophisticated than their counterparts in the
natural foods channel and will place much greater demands
on the company.

Option 2: Against
Against Option 2
• The 32-oz. size appeals to frequent yogurt consumers and is

sold at a much higher price point than the 8-oz. size ($2.70
vs. $0.74/cup, respectively). This may make it difficult to
attract these users to the Natureview brand.

Option 2: Against
Against Option 2
• The 32-oz. size is merchandised “in the well” (the lowest,

least visible shelf in the refrigerated case)—making it
potentially more difficult to generate awareness of the
brand at the point of sale.

Against Option 2 Option 3: For
• Introducing a children’s multipack product offering into the
natural foods channel will be eagerly accepted by the
company’s current retailers. This segment is the fastest-
growing segment of the total refrigerated yogurt category,
and a truly natural product does not currently exist.
• The natural foods channel is growing at +20%/year.
Natureview can continue to generate strong growth while it
grows along with this “rising star” channel.

Against Option 2 Option 3: For
• Natureview needs to jump into the children’s multipack
segment before its natural brand competitors do.
• This option will meet the required revenue performance
with significantly less investment and risk than entering the
supermarket channel.

Option 3: Against
Against Option 2
• Even though it is a faster-growing channel, the natural foods

channel is significantly smaller than the supermarket
channel. A focus on the natural foods channel would “cap”
Natureview’s long-term revenue potential

Option 3: Against
Against Option 2
• Natureview’s natural brand competitors are rumoured to be

considering a move into the supermarket channel as well. If
one or more natural brand competitors enter(s) the
supermarket channel, this could close the window on
Natureview’s opportunity, either temporarily or permanently

Option 3: Against
Against Option 2
• Even though they are currently relatively unsophisticated, the

natural foods retailers are quickly gaining knowledge and are
beginning to implement supermarket-type sales systems, such
as retail scanners. As this channel continues to develop, it is
very likely natural foods retailers will place demands similar
to the supermarket channel retailers on Natureview.
Natureview therefore would only delay, not avoid, the
necessity of developing its organizational abilities.

What action plan should the company pursue?
Option 1
Key risks are
• Alienating the company’s current channel partners
• Attracting the attention of the deep pocketed supermarket
brand competitors
• The lack of organizational experience and / or abilities to
successfully service and market to this channel

Action Plan option 1 risk 1
• Promotion: Working with current channel partners to develop
consumer promotions that support the brand in the channel.
• Product: Price its yogurt a few cents higher in the supermarket
channel compared to the MSRP in the natural foods channel. This will
give supermarkets a larger margin and will reinforce the product’s
quality positioning. However, given the higher price point, there is a
risk that sales volume would drop.
• Natureview could research the other natural food brands that have
already successfully entered the supermarket channel and learn from
their successes.

• Positioning: Natureview must clearly position its brand as a “niche” brand to
attract consumers who embrace its natural and environmental mission. This will
reduce the brand’s direct competitiveness to the larger supermarket brands,
increasing Natureview’s likelihood of success and decreasing the likelihood of
triggering deep-pocket marketing wars;
• Merger/Acquisition: The Company could approach one of its supermarket brand
competitors about a potential merger or acquisition of the Natureview brand by
that competitor;
• Working Capital: The Company must ensure that it will have access to the
necessary working capital to finance required sales and marketing investment.

• Marketing Organization: Christine must immediately determine what
changes will be required to the marketing organization in order to
provide the necessary experience and expertise to market to the
supermarket channel partners and the supermarket consumers.
• Marketing Intermediaries: On a related note, Christine will need to
determine if she has the right team of marketing intermediaries (ad
agency, web site developer, etc.) to create and execute the marketing
tactics necessary to drive awareness and trial of the brand in the
supermarket channel, without negatively impacting the brand image
among its current natural foods consumer base.

• Option 2
• Key risks are
1. Alienating the company’s current channel partners
2. Attracting the attention of the deep pocket supermarket brand
competitors and
3. The lack of organizational experience and /or abilities to successfully
service and market to this channel
4. 32 oz size is merchandized n the bottom well of the refrigerated
yoghurt case, significantly affecting brand visibility

• Promotion: Working with current channel partners to develop
consumer promotions that support the brand in the channel
• Product: Price its yogurt a few cents higher in the supermarket
channel compared to the MSRP in the natural foods channel. This will
give supermarkets a larger margin and will reinforce the product’s
quality positioning. However, given the higher price point, there is a
risk that sales volume would drop.

• Positioning: Natureview must clearly position its brand as a “niche”
brand to attract consumers who resonate to its natural and
environmental mission. This will reduce the brand’s direct
competitiveness to the larger supermarket brands, increasing
Natureview’s likelihood of success and decreasing the likelihood of
triggering deep- pocket marketing wars
• Merger/Acquisition: The Company could approach one of its
supermarket brand competitors about a potential merger or acquisition
of the Natureview brand by that competitor;
• Working Capital: The Company must ensure that it will have access
to the necessary working capital to finance the necessary sales and
marketing investments.
• Marketing Organization: Christine must immediately determine
what changes will be required to the marketing organization in order
to provide the necessary experience and expertise to market to the
supermarket channel partners and the supermarket consumers
• Marketing Intermediaries: On a related note, Christine will need to
determine if she has the right team of marketing intermediaries (ad
agency, web site developer, etc.) to create and execute the marketing
tactics necessary to drive awareness and trial of the brand in the
supermarket channel without negatively impacting the brand image
among its current natural foods consumer base
• Placement: Work with the supermarket retailers to change placement
of the 32-oz. size in the yogurt case from the well to a lower shelf;
• Promotion: Utilize in-store promotional vehicles and programs to
target 32-oz. users (such as Catalina, which issues coupons to
consumers based on their purchases scanned at the retail checkout) and
Floor graphics (in-store posters placed on the floor of the retail aisle in
front of the sponsoring brand).

• Option 3
• Key risks are
• Missing the window of opportunity to enter the
supermarket channel due to competitive preemption,
potentially limiting Natureview’s long term revenue
growth potential

Action Plan
• Wait and See: Natureview can wait and see if any of its natural foods
competitors enter the supermarket channel, and if so, if they do so
successfully. Natureview might still have an opportunity to expand
into this channel in the future and/or determine that it made the best
decision not to enter the channel;
• Product: The Company could develop additional new products to
generate revenue in the channel;
• Merger/Acquisition: Natureview could merge with and/or acquire
other natural foods brands to increase its revenue performance in the
channel.
Summary
• Case illustrates:
• Challenges associated with developing a channel expansion
strategy and the interrelationships of a company’s products,
financial, and sales and marketing investments
• Attempting to increase the revenue via entry into a fundamentally
different retail distribution channel. Risk and Opportunities
inherent in the decision
• Changing skills required to adjust to new opportunities and
changing market conditions.

Summary
Decision Matrix
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
Adopted from Jaju et al., 2012

Analysis
Aligning Company, Customers, and Channel
Company
Product and Value
Proposition
Channel
Go to Market Synchronization
Strategies
Customers
Target Market

• Potential cost of misalignment
• Time, money, and morale
• ‘Fuzzy’ segmentation
• Stranded assets along the channel chain
• Dilution of value proposition and positioning
• Requirements for Effective Alignment
• Common vision of target segments
• Shared principles of channel management
• Effective channel partnerships
• The will and skill to change

Natureview Farm: HBS Case Explores Growth Strategies

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Natureview Farm

Harvard Business School Case

Prof. Prem P. Dewani, & Prof Sameer Mathur

Natureview Farm: HBS Case

Prof. Prem Prakash Dewani

Natureview Farm: HBS Case

Prof. Prem Prakash Dewani

Natureview Farm: HBS Case

Natureview Farm: HBS Case

Assume a unit sales growth of 20 % per annum for the

Prof. Prem Prakash Dewani

Prof. Prem Prakash Dewani

Prof. Prem Prakash Dewani

Prof. Prem Prakash Dewani

Immediate ‘GO / NO GO’ entry

Prof. Prem Prakash Dewani

1996 – Jim Wagner Hired to steady profits

1997 - CFO Jim Wagner got VC capital Infused

Naturefarm attempts to convert a commodity

What is the Positioning of the Product

Prof. Prem Prakash Dewani

Consumer behavior of the segment: willing to

Prof. Prem Prakash Dewani

Natureview Farm: HBS Case

Natureview Farm: HBS Case

Natureview Farm: HBS Case

The business where personal relationships, word

Prof. Prem Prakash Dewani

Prof. Prem Prakash Dewani

Natureview Farm: HBS Case

8-oz. cups and

Prof. Prem Prakash Dewani

Prof. Prem Prakash Dewani

NF has successfully grown from $ 100,000 to

Natureview Farm: HBS Case

This has been achieved by expanding the

Prof. Prem Prakash Dewani

With this growth rate, it is not possible….

What are additional options to come out of

Option 3 entails developing a new product for an existing

Prof. Prem Prakash Dewani

• Option 3 entails developing a new

Natureview Farm: HBS Case

Prof. Prem Prakash Dewani

Prof. Prem Prakash Dewani

Prof. Prem Prakash Dewani

Prof. Prem Prakash Dewani

• Lowest Sales / Market, Investment • Less long term $$ potential

Prof. Prem Prakash Dewani

Developing sales contacts and customer

Prof. Prem Prakash Dewani

Smaller marketing budget of NF than the larger

Dannon and Yuplait (Competitors) marketing

NF’s success depends on the service and

Prof. Prem Prakash Dewani

Natureview Farm: HBS Case 40

Natural Foods Channel 8-oz 32-oz Multipack

Natureview Farm: HBS Case

Total regreferated yoghurt market $ 1,800,000,000 100 3.5

Toral refregerated yoghurt market $ 1,800,000,000 100

Natureview Farm: HBS Case

Natureview Farm: HBS Case

Natureview Farm: HBS Case