A case study analysis of Natureview Farm Inc. from Harvard Business School Case

2. BACKGROUND
1989
• Founded and manufactured in Cabot, Vermont
• Entered market with 8-oz and 32-oz with plain and vanilla flavor
• Used natural ingredient with longer average shelf-life of 50 days
1999
• Company revenue growth from $ 100,000 to $13 million
• Fruit on the bottom yogurt
• Low-cost “guerilla marketing” tactics
2000
• Expanded to 12 yogurt flavors in 8-oz. & 4 flavors in 32-oz.
• Exploring multipack yogurt products (for children)

3. ISSUES & GOALS
VC needed to cash out of its
investment
Need to find a path to grow
revenues by over 50% before
the end of 2001 ($20 million)
Should Natureview Farm
expand into supermarket
channel?

4. THE 4Ps
PRODUCT
• Natural
yogurt
(organic)
• 8 –oz. size
with 12
flavors
• 32-oz. size
with 4
flavors
PRICE
• Affordable
according to
it’s channel
PLACE
• Natural food
channel
• Warehouse
clubs
• Convenience
and drug
store
• Mass
merchandise
rs
PROMOTION
• It’s natural
flavor with
high quality
and great
taste growth
in the
national
distribution
and natural
food channel
• Low-cost
guerilla
marketing

5. PRODUCT
• 12 yogurt flavors in 8-oz.
• 4 yogurt flavors in 32-oz. yogurt flavors in 32-oz
86%
14%
Revenues 2000
8-oz
32-oz
Started exploring kid multipack
yogurt product (4-oz)

6. Factors Considered By Consumers
When Buying Yogurt Products
Packaging
type/size
Taste Flavor
Price Freshness Ingredient
Organic or
not

7. Yogurt Market Share by Packaging
Segment,1999
74%
9%
8%
9%
8-oz. cup smaller
Children's multipacks
32-oz. cups
Others

8. Yogurt Distribution
Channel,1999
97%
3%
Distribution Channel
Supermarkets
Natural food stores

9. Yogurt Market Share by
Region,1999
26%
22%
25%
27%
Northwest
Midwest
Southwest
West

10. Length of Channel to Market
Supermarket ChannelChannel Natural Foods Channel
Natural Foods ChannelManufacturer
Distributor
Retailer
Customer
Manufacturer
Natural Foods
Wholesaler
Natural Foods
Distributor
Retailer
Customer
15%
27%
35%
9%
7%

11. Yogurt Market Share by
Brand,1999
Dannon
33%
Yoplait
24%
Others
23%
Private
Label
15%
Columb
o
5%
Supermarket Channel
Naturevi
ew Farm
24%
Brown
Cow
15%
Horizon
Organic
19%
White
Wave
7%
Others
35%
Natural Foods Channel

12. Yogurt Production Costs and Retail
Prices by Channel
Natural Food
Channel
Supermarket
Food Channel
Manufacturing
Cost
8-oz. cup $ 0.88 $ 0.74 $0.31
32-oz. cup $ 3.19 $ 2.70 $0.99
4-oz. cup multipack $ 3.35 $ 2.85 $1.15

13. OPTIONS & DILEMMA
OPTION 1
• Expand in
Northeast
and West
supermarket
region
• Bring in top 6
SKUs of the
8-oz. size
OPTION 2
• Expand in
supermarket
nationally
• Bring in the
4SKUs of the
32-oz. size
OPTION 3
• Stay in
natural food
channel
• Introduce 2
children’s
multipack

14. OPTION 1:
Expand6SKUsofthe8-ozintoeasternandwestern
supermarketregions
PROs
8-oz have highest incremental
demand
Significant Revenue Potential
First organic yogurt brand to enter
supermarket has a first mover
advantage
CONs
High risk & high cost (marketing)
Require quarterly trade
promotions
Advertising plan would cost $1.2
million per region per year
SG&A expenses increase by
$320,000 annually
Need to pay one time slotting fee

15. OPTION 2:
Expand4SKUsofthe32-ozsizenationallyinto
supermarketregions
PROs
Generate higher gross profit margin
than 8-oz size(43.6% vs. 36% for 8-oz.
line)
Strong competitive advantage: longer
shelf life(45% share in Natural foods)
Lower promotion expenses :
promoted only twice a year
CONs
Doubt on claim of new users would
readily “enter the brand” via a multi-
use size
Doubt on sales team’s ability to
achieve full national distribution in 12
months
Needs to hire sales personnel and
establish relationships with
supermarket brokers
The 32-oz. expansion option would
increase SG&A expense by $160,000
OPTION 2:
Expand4 SKUsof the 32-oz.sizenationallyinto
supermarketchannel

16. PROs
The sales team was confident that they
could achieve distribution for the two
SKUs.
The financial potential was very
attractive (Gross profitability : 37.6%)
Lower marketing expenses; no
additional SG&A costs to introduce the
product
The natural foods channel was growing
almost seven times faster than the
supermarket.
CONs
There were many potential conflicts and
other uncertain factors that the
manager could not determine.
OPTION 3:
IntroducetwoSKUsofachildrenmultipackintothe
naturalfoodschannel
OPTION 3:
Introduce2 SKUsofa children’smulti-packintothe
naturalfoods channel
Perfect Positioning into their core
sales channel

17. Now which option to consider ?
Let’s see first “Qualitatively” by
examining PROs & CONs

18. • Strong relationships
• Perfect positioning
• Attractive financial potential
• Natural food channel is growing
7 times faster than supermarkets
Option
3

19. • Competitive advantage
– Strong relationship with natural foods
retailers ex: Whole Foods and Wild Oats.
– Sustainable competitive advantage
– Main profit comes from natural foods
channel.

20. • Power and conflict
– If stays with natural foods stores, there will
be no conflict.
– Option 1 and 2 could potentially create
conflict between the firm and natural foods
channel.
“…you can’t lose sight of
what has made this company
great.” –Barry Landers (CEO)

21. • Brand Image
– Organic yogurt
– Shoppers at natural foods stores earn more
income, more educated and not price
sensitive.
– Natural foods store shoppers are more
concern on health issue, not price.
– If expand to supermarket, its brand image
will be doubted by current consumers.

22. • Financial and Risk Analysis
– No extra slotting fees and advertising expense
– Option 1 and 2 creates more expense
– Lowest risk and cost if choose option 3
– Will not have to compete with two main
competitors in supermarket channel which are
Dannon and Yoplait

23. Let’s Analyze now by
“Financial” Point of View, if
Option 3 is feasible or not ?

24. Financial Statement
Year 2000 Financial Forecast

25. Option 1
Advertising Cost is abundance,
Natureview would have paid
4,800,000 on ads by year 2001

26. Option 2
The slotting fee is too much, Nature
view would have to enter 64
supermarkets

27. Option 3
No SG&A, Broker Fee, and Slotting
Fee 

28. Solution Financial Forecast’01

29. A Presentation by
ANMOL AGRAWAL , BIT Mesra
(Ranchi)
during an intern under
Prof. Sameer Mathur, IIM
Lucknow