4. What are the strategic advantages and risks of each option?

What channel management and conflict issues are involved?

Option 1
Expand SIX Stock Keeping Units (SKUs) of 8 oz. cups into one or two selected supermarkets because:
8 oz. cup has the largest dollar and unit share of the refrigerated yogurt market Has Revenue potential Other brands have also expanded into Supermarkets Growing trend in natural and organic foods in Supermarket A competitor is also considering expansion into Supermarket and only one brand can do it so if NatureView does it. It will be a first movers advantage

Option 1
Critical Issues/Disadvantage:
Quarterly Promotion required by Supermarkets Will cost NatureView $1.2 million per region per year NatureViews Sales, General and Administrative Expenses (SG&A) will increase by $320,000 NatureView will have to take advantage of their relationships with top 11 Supermarkets in Northeast and top 9 Supermarket chains in West and occupy majority of shelf space

Option 2
Expand FOUR SKUs of 32 oz. cups nationally because: 32 oz. cups produce 43.6% gross profit margin for NatureView compared to 36% for 8 oz. cups Few competitors in this package size and NatureView has a longer shelf life so has a competitive advantage Slotting expenses will be higher but promotional expenses will be low because 32 oz. cups are promoted twice a year

Option 2
Critical Issues/Disadvantages
New users will not readily enter the brand and adopt a bigger sized product Achieving full national distribution within a year will be difficult Need to hire more sales personnel who had good relationships with sophisticated Supermarkets This will increase SG&A costs to $160,000 Dannon was rumored to be launched Bright Vista which will compete directly with NatureView Supermarkets were considering to launch their own private-label organic yogurt so 32 oz. pack will be less noticed in competition

Option 3
Introduce TWO SKUs of 4 oz. multipacks into Natural Foods Channel because:
NatureView had strong relationships with leading Natural Food Stores and expansion into Supermarket could hurt this relationship Distribution targets were achievable in two SKUs Gross profitability will be 37.6% and expenses will be lower which is very attractive This option might turn out to be the most profitable Natural Food Channel was growing 7 times faster than Supermarket channel R&D and Operations teams will have to work more however no additional SG&A prices were required Five Year unit growth CAGR for yogurt was estimated to be 15% according to research

Option 3
Critical issues/Conflicts Expanding into Supermarket also conflicts with the premium brand positioning for which Riley and Walker had worked hard to establish in Natural Food Stores

There were also fears that Natureviews marketing department was unprepared to handle the demands on resources and staffing that entering the supermarket channel would impose
Supermarket distributors were more demanding in logistics and technology than what Natureview was familiar with