GROUP 10 SECTION B

CASE STUDY ON NATUREVIEW

FARM
NISHANT PROSOON
SUBMITTED TO:
PROF. VIBHAVA
SRIVASTAVA
PROFESSOR MARKETING,
MDI, GURGAON

(NMP56)
ROCHIKA SHARMA
(NMP68)
ANIL KARDAM
(NMP78)
SWARAJ KUMAR DHAR
(NMP87)
PRADEEP VARSHNEY
(NMP93)

BACKGROUND

YEAR1989

Founded and manufactured in Cabot, Vermont

First enter market 8-oz and 32-oz with plain and vanilla flavor

Use natural ingredient with longer average shelf-life of 50 days

YEAR1999

Company revenue growth from $ 100,000 to $13 million

Fruit on the bottom yogurt

YEAR 2000

Expand to 12 yogurt flavors & multipack yogurt (for children)

PROBLEM

1)Venture capitalist needed to cash out of its

investment

2)Need to find a path to grow revenues by over 50%

before the end of 2001 ($20 mil) from their current
$13million

3)Should Nature view Farm expand into supermarket

channel?

Analyzing Market Mix Concept

PRODUCT
NATURAL YOGURT (ORGANIC)
8 OZ. SIZE WITH 12 FLAVORS
32-OZ. SIZE WITH 4 FLAVORS

PRICE
AFFORDABLE ACCORDING TO ITS CHANNEL

PLACE
NATURAL FOOD CHANNEL
WHOLESALE CLUB
NATIONAL RETAILER CHANNEL
CONVENIENCE AND DRUG STORE

PROMOTION
ITS NATURAL FLAVOR WITH HIGH QUALITY AND GREAT TASTE GROWTH IN
THE NATIONAL DISTRIBUTION AND NATURAL FOOD CHANNEL
LOW-COST GUERILLA MARKETING

SITUATION ANALYSES
Strength

Long product shelf life

Strong brand of high quality, taste and natural ingredients

Strong relationship with nature store retailers

Low cost

Weaknesses

Small manufacture, low funds and revenue

Relies on brokers that may not be adequate for supermarket

channel

Current marketing strategy based only on nature store channel

SITUATION ANALYSES CONTD..

Opportunities

Organic food market expected to grow to $13.3 billion in 2003

Nature store channel sales up 20%

12.5% growth in 4oz multipack

Increase in consumer interest in organic foods

Threats

Competition(both in regular yogurt and organic yogurt)

Increasing nature store channel demands on logistics or

technology

Increasingly price sensitive consumers due to economical

slowdown

Options For Decision Making :

OPTION 1
EXPAND INTO THE SUPERMARKET CHANNEL WITH 6 SKUS OF 8OZ
YOGURT IN TWO REGIONS( IN NORTHEAST AND WEST SUPERMARKET
REGION)
OPTION 2
EXPAND IN SUPERMARKET NATIONALLY
BRING IN THE 4SKUS OF THE 32-OZ. SIZE
OPTION 3
STAY IN NATURAL FOOD CHANNEL
INTRODUCE 2 CHILDRENS MULTIPACK

Quantitative Analysis of All Option

Quantitative
Attributes

Cumulative
Projected
Projected
Incremental Income Income
Statement
Statement
(Option wise)
With Option

Revenues

$ 25,900,000

$ 38,900,000

Net Income

$ 6,614,000

$ 6,874,000

Revenues

$ 14,850,000

$ 27,850,000

Net Income

$ 1,875,000

$ 2,135,000

Revenues

$6,030,000

$19,030,000

Net Income

$3,318,050

$ 3,578,050

Option 1

Option 2

Option 3

Financial Analysis of Option 1

Revenues
Cost of Goods Sold
Gross Profit
Expenses
Advertising/ Freight
Sales
Marketing
Research & Development
SKU's Slotting Fee
Trade Promotions
Broker Fee
Net Income

Projected
Incremental
Income
Statement

Cumulative Projected
Income Statement

$ 25,900,000 $ 38,900,000
$ 10,850,000 $ 19,040,000
$ 15,050,000 $ 19,860,000
$ 2,400,000
$ 200,000
$ 120,000
$$ 1,200,000
$ 3,480,000
$ 1,036,000
$ 6,614,000

$ 4,610,000
$ 1,760,000
$ 510,000
$ 390,000
$ 1,200,000
$ 3,480,000
$ 1,036,000
$ 6,874,000

Option 1 Financial Information

Region Information
Number of Regions
2
Region 1(# of
Retailers)
Northeast(11)
Region 2(# of
Retailers)
West(9)

Income Information
Expected unit sales
3,50,00,000
Price per Unit
$ 0.74
Expected Revenue
$ 25,900,000
Unit Cost
$ 0.31
COGS
$ 10,850,000

Slotting Fee
Information

Number of SKUs
6
Single SKU Slotting Fee
Per Chain
$ 10,000
Total Slotting Fee Per
Chain
$ 60,000
Number of Retail
Chains
20
Total Slotting Fee

$ 1,200,000

Expense Information
Advertising Per Region

$ 1,200,000

Total Advertising

$ 2,400,000

Broker Fee(4% of sales)

Sales, General & Administrative

Sales Force
Marketing Staf
Trade Promotion Information
Cost Per Promotion Region 1 Per Retailer
Number of Retailers In Region 1
Cost Per Promotion Region 2 Per Retailer

$ 1,036,000

$ 200,000
$ 120,000

$ 7,500
11
$ 15,000

Number of Retailers In Region 2

Total cost per promotion Region 1&2

9
$ 217,500

Promotions Per Period

Promotions Periods Required Per Year

Total Promotions

16
$
3,480,000

Total Cost of Promotions

Financial Analysis Option 2

Projected
Incremental
Income
Statement

Cumulative
Projected
Income Statement

With Option
$
$
14,850,00
27,850,00
Revenues
0
100% 0
100%
$
$
Cost of Goods Sold
5,445,000
37% 13,635,000
49%
$
$
Gross Profit
9,405,000
63% 14,215,000
51%
Expenses

$
Advertising/ Freight
$0% 2,210,000
8%
1.10 $
Sales
$ 160,000
% 1,720,000
6%
0.80
Marketing
$ 120,000
%$ 510,000
2%
Research & Development $ 0%$ 390,000
1%
$
$
SKU's Slotting Fee
2,560,000
17% 2,560,000
9%

Option 2 Financial Information

Region Information

Number of Regions
4
Income Information

$
Expected unit sales
5,500,000
Price per Unit
Expected Revenue
Unit Cost

Expense Information
Advertising Per Region
Total Advertising

$$-

Broker Fee(4% of sales)

Sales, General &
Administrative

$ 594,0

$ 2.70
$
14,850,00
0
Sales Force

$
160,000
$
120,000

$ 0.99
Marketing Staf
$
COGS
5,445,000 Trade Promotion Information
Ave. Cost Per Promotion Per
Slotting Fee Information
Retailer
$ 8,000
Number of SKUs
4
Number of Retailers
64
Single SKU Slotting Fee Per
$
Chain
$ 10,000 Total Cost Per Promotion
512,000
Total Slotting Fee Per Chain $ 40,000 Promotions Per Period
4
Number of Retail Chains
Promotions Periods Required Per
64
Year
2
$

Financial Analysis Option 3

Projected Incremental
Income Statement

Revenues

$6,030,000

Cost of Goods Sold

$2,070,000

Gross Profit
Expenses

$3,960,000

Advertising/ Freight

$-

Sales
Marketing
Research & Development
Cost Of Complementary
Cases
Broker Fee

$$ 250,000
$$ 150,750
$ 241,200

Cummulative
Projected
Income
Statement
With Option

$19,030,0
100% 00
$10,260,00
34%
0
$
66%
8,770,000

$
0%
2,210,000
$
0%
1,560,000
4.10% $ 640,000
0%
$ 390,000

100
%
54%
46%

12%
8%
3%
2%

2.50% $ 150,750 1%
4%
$ 241,200 1%
$

Income Information

Expense Information

Expected Revenue

18,00,0
00
$ 3.35
$
6,030,0
00

Unit Cost

$ 1.15

Slotting Fee Information

Number Of SKUs

Marketing Staf
2

$
150,75
0

Expected unit sales

Price per Unit

Total Cost Of
Complementary Cases

Total Advertising

$-

Broker Fee(4% of
sales)

$
241,200
$
2,070,0
00

COGS
Sales, General &
Administrative
Sales Force

$$
250,000

QUALITATIVE ANALYSIS OF OPTIONS

Option 1: Expand into the supermarket channel with 6
SKUs of 8oz yogurt in two regions
Pros
High potential for increased revenue
Consumers in NE and W region are most likely to purchase organic
Expected 1.5% market share after 1st year (35 million unit sales)
Cons
High risk
High advertising cost of $1.2 million per region per year($2.4 million
total)
Expenses will increase by $320,000 ($200,000 for sales staf,
$120,000 for marketing staf)
Direct competition with national brands(Dannon, Yoplait)

ALTERNATIVES/OPTIONS CONTD..
Option 2: Expand into the supermarket channel with 4
SKUs of 32oz yogurt in all regions
Pros

Fewer competition

Lower on average trade promotion expense

Higher profit margin for 32oz versus 8oz

Expected 1st year sales of 5.5 million units

Cons

High risk

New users may not want to purchase large 32oz quantity of

product

Very difficult to achieve full national distribution within one year

ALTERNATIVES/OPTIONS CONTD..
Option 3: Introduce 2 SKU of children multi pack into
natural foods channel
Pros

Take advantage of current relationships within nature foods

channel

Low risk factors

Nature view positioned nicely for option

Low cost

Take advantage of growing natural foods channel

Cons

Low expected revenue

Requires R&D to develop product

RECOMMENDATION

It is recommended that Nature view Farms chooses the third option.

The reason why this option was chosen was because it ofered very few
risk and had a vide variety of known variables.

It also took advantage of the growing nature food channel and the
multipack market segment.

This option also did not require an entire marketing strategy change.
It used the same distributors, retailers and consumers.

However, because this option ends up being $1 million short of the

objective, it is highly encouraged that Nature view Farms invest more funds
in marketing the launch of childrens multipack.

Nature view must ensure that they can increase the expected revenues by
$1 million or more in order to meet or beat the objective of $20 million.
Perhaps a more intensive concentrated promotion plan would yield
$1million or more in extra revenue.

If this option is followed with the suggested revisions, it has the potential to
increase Nature views success tremendously.

Thank You