Natureview Farm is a yogurt manufacturer that needs to increase revenues over 50% by 2001. It is considering three expansion options: 1) introducing 6 SKUs of 8-oz cups in eastern and western supermarket regions, 2) expanding 4 SKUs of 32-oz cups nationally in supermarkets, or 3) introducing 2 children's multipacks in natural food stores. Option 1 is projected to produce the required $20 million revenue by 2001 with lower costs and a first-mover advantage for 8-oz cups in supermarkets. While Options 2 and 3 have potential, they face greater challenges from competition or uncertainty that make them less viable to meet the revenue goal.

1. CASE STUDY :
HBR Natureview
Farm

2. EARLY YEARS
1989
•Founded and manufactured refrigerated cup yogurt.
•Production facility in Vermont.
•Use of natural ingredients, special processes and
unadulterated milk made the average shelf life of yogurt
to be 50 days, in comparison to competitors' 30 days.
1999
2000
•Revenues grow from $100,000 to 1$3 million.
•Started with 8-oz. and 32-oz. Cup sizes in vanilla and
plain flavours.
•Expanded into 12 flavours and multipacks
for children.

3. WHAT IS THE SITUATION ?
VC needs to cash out of its
investment in Natureview.
Natureview needs to find a
path to grow revenues by over
50% before the end of 2001.

4. WHAT IS THE QUESTION ?
Should Natureview
expand into the
supermarket
channel to meet its
revenue goal ?

5. REVENUES OR THE YEAR 2000
8-oz. Cups
32-oz. Cups
PRODUCT DETAILS
•12 flavours in 8-
oz.cups.
•4 flavours in 32-
oz.cups.
•Expansion in
multipack yogurt
products for
children.

6. YOGURT MARKET SHARE BY PACKAGING
SEGMENT, 1999
0%
10%
20%
30%
40%
50%
60%
70%
80%
8-OZ. CUPS
AND SMALLER
CHILDREN'S
MULTIPAKCS
32-OZ.CUPS OTHER
CATEGORY
CATEGORY

7. YOGURT MARKET SHARE BY REGION, 1999
0%
5%
10%
15%
20%
25%
30%
NORTHEAST MIDWEST SOURTHEAST WEST
REGION
REGION

8. YOGURT DISTRIBUTION CHANNEL
DISTRIBUTION CHANNEL
SUPERMARKETS
NATURAL FOODS
CHANNEL

9. MANUFACTURER
DISTRIBUTOR
RETAILER
CUSTOMER
MANUFACTURER
RETAILER
CUSTOMER
NATURAL FOODS
DISTRIBUTOR
NATURAL FOODS
WHOLESALER
LENGHT OF CHANNEL TO MARKET
S
U
P
E
R
M
A
R
K
E
T
C
H
A
N
N
E
L
N
A
T
U
R
A
L
F
O
O
D
S
C
H
A
N
N
E
L

10. SUPERMARKET CHANNEL
DANNON
YOPLAIT
OTHERS
PRIVATE
LABEL
COLUMBO
33%
24%
23
15%
5%
YOGURT MARKET SHARE BY BRAND, 1999
NATURE FOODS CHANNEL
NATUREVIE
W FARM
BROWN
COW
HORIZON
ORGANIC
OTHERS
24%
15%
19%
35%
7%

11. SPECIFICATION
S OF YOGURT
SUPERMARKET
CHANNEL
NATURAL
FOODS
CHANNEL
NATUREVIEW’S
MANUFACTURI
NG COST
8-OUNCE (OZ.) CUP $0.74 $0.88 $0.31
32-0Z. CUP $2.70 $3.19 $2.70
4-OZ. CUP
MULTIPACK
$2.85 $3.35 $2.85
YOGURT PRODUCTION COSTS AND RETAIL
PRICES BY CHANNEL

12. WHAT IS THE DILEMMA ?
WHAT ARE THE OPTIONS ?
• 6 SKUs of 8-oz.cups
• Expansion in eastern and western
supermarket regions.
OPTION 1
• 4 SKUs of 32-oz.cups
• National expansion into
supermarket channel
OPTION 2
• Introducing 2 children’s multipacks
• Expansion in natural foods channelOPTION 3

13. LET US EVALUATE !!
NOTE:
1)All the calculations done bellow are in terms of
dollar ($).
2)For all the options initial SG&A has not been
considered for the ease of calculation, as the
initial SG&A is same for all three options.
3)The R&D costs have also been ignored, for the
ease of calculation as they will be same, for all
the three options.

14. OPTION 1.
EXPAND 6 SKUs OF
THE 8-oz. Size into
eastern and western
supermarket regions

15. OPTION #1
PROS:
•6 SKUs provides good shelf
presence and less slotting
expense.
•8-oz. Cups have the largest
market share and significant
revenue potential.
•It’s competitors are also
planning to enter
supermarket, therefore is
should gain a significant first
mover advantage.
CONS:
•8-oz. Cups face high
competition in the market.
•Needs quarterly trade
promotions.
•Advertising expenses are
too high, i.e. $1.2 million.
•Total annual SG&A will
increase by 320,000.

16. PRICING ANALYSIS
CHANNEL SELLING PRICE MARGIN COST PRICE
Retailer 0.74 27% 0.74*73% = 0.54
Distributor 0.54 15% 0.54*85% = 0.46
Natureview Farm 0.46 ((0.46-0.31)/0.46)=
33%
0.31
Natureview Farm’s profit per unit of 8-oz. Cups =
0.46-0.31= $0.15

17. 2000 2001
UNIT SALES 35,000,000 35,000,000 * (20 /100+1) =
42,000,000
INCREASE IN REVENUE 35,000,000* 0.74 = 25,900,000 42,000,000 * 0.74 =
31,080,000
TOTAL REVENUE 13,000,000 + 25,900,000 =
38,900,000
13,000,000 + 31,080,000 =
44,080,000
PRODUCTION COSTS 35,000,000 * 0.31 = 10,850,000 42,000,000 * 0.31 =
13,020,000
GROSS PROFIT 38,900,000-10,850,000 =
28,050,000
44,080,000 – 13,020,000 =
31,060,000
EXPENSES:
ADVERTISEMENTS 1.2 million * 2 Region =
2,400,000
2,400,000
SG&A 320,000 640,000
SLOTTING FEE 6 * 10,000 * (11+9) = 1,200,000 --
NET PROFIT 24,130,000 28,020,000

18. OPTION 2.
EXPAND 4 SKUs OF
THE 32-oz. Size
nationally into
supermarket channel

19. OPTION #2
PROS:
•32-oz. Cups have better
gross profit margin.
•Fewer competitors in this
offering.
•Low promoting expense,
since these are promoted only
twice a year.
CONS:
•Less market share for 32-
oz. Cups.
•More slotting expense than
8-oz.
•It is risky and doubtful
whether users would enter
the brand via a multi-use
size.
•Total annual SG&A will
increase by 160,000.

20. CHANNEL SELLING PRICE MARGIN COST PRICE
Retailer 2.70 27% 2.70*73% = 1.971
Distributor 1.97 15% 1.97*85% = 1.675
Natureview Farm 1.67 ((1.67-0.99)/1.67)=
40.71%
0.99
PRICING ANALYSIS
Natureview Farm’s profit per unit of 32-oz. Cups
= 1.67 – 0.99 = 0.68

21. 2000 2001
UNIT SALES 5,500,000 5,500,000
INCREASE IN REVENUE 5,500,000* 2.70 = 14,850,000 5,500,000* 2.70 = 14,850,000
TOTAL REVENUE 13,000,000 + 14,850,000 =
27,850,000
13,000,000 + 14,850,000 =
27,850,000
PRODUCTION COSTS 5,500,000 * 0.99 = 5,445,000 5,500,000 * 0.99 = 5,445,000
GROSS PROFIT 27,850,000 - 5,445,000 =
22,405,000
27,850,000 - 5,445,000 =
22,405,000
EXPENSES:
ADVERTISEMENTS 120,000 * 4 Region = 480,000 120,000 * 4 Region = 480,000
SG&A 160,000 160,000
SLOTTING FEE 4 * 10,000 * (64) = 2,560,000 --
NET PROFIT 19,205,000 21,765,000

22. Introduce 2 children’s
multipacks into natural
foods channel
OPTION 3.

23. OPTION #3
CONS:
•There are many potential
conflicts and other
uncertain factors that the
managers could not
determine.
•Retailers in the natural
foods channels might
demand more as they grow.
PROS:
•Helps maintain strong
relations with brokers and
natural foods channel
retailers.
•Natureview would incur no
additional SG&A expenses to
introduce multipack products,
this is within the capabilities
of current functional
resources.
•It would yield the strongest
profit contribution.

24. CHANNEL SELLING
PRICE
MARGIN COST PRICE
Retailer 3.35 35% 3.35*65% = 2.1775
Distributor 2.18 9% 2.18*91% = 1.98
Wholesaler 1.98 7% 1.98 * 93% = 1.84
Natureview Farm 1.84 ((1.84-1.15)/1.84)=
37.5
1.15
Natureview Farm’s profit per unit of multipack =
3.35 – 1.15 = 2.2
PRICING ANALYSIS

25. 2000 2001
UNIT SALES 1,800,000 1,800,000 * (1 + 0.15) =
2,070,000
INCREASE IN REVENUE 1,800,000* 3.35 = 6,030,000 2,070,000* 3.35 = 6,934,500
TOTAL REVENUE 13,000,000 + 6,030,000 =
19,030,000
13,000,000 + 6,934,500 =
19,934,500
PRODUCTION COSTS 1,800,000 * 1.15 = 2,070,000 2,070,000 * 1.15 = 2,380,500
GROSS PROFIT 19,030,000-2,070,000 =
16,960,000
19,934,500 – 2,380,500 =
17,554,000
EXPENSES:
ADVERTISEMENTS 250,000 250,000
COMPLIMENTARY
CASES
2.5% * 6,030,000 = 150,750 2.5% * 6,934,500 = 173,362.5
NET PROFIT 16,559,250 17,130,637.5

26. WHAT IS THE DECISON?
Clearly, it is evident that option 1 has better outcome and
produces the require outcome of 20 million $ a year early.
Also the 8-oz.cup have a better demand and market share
than others, so exposing the consumers to this will be a wise
decision.
The company will also have the “first mover advantage” of
natural yogurt in the supermarkets.
This strategy can eventually also help produce revenue out of
200% as others competitors have achieved.

27. THANK YOU !! :)
This presentation was created
by Anushree Ghurka, under
the able guidance of Prof.
SAMEER MATHUR, IIM L .