- Natureview Farm is a yogurt manufacturer seeking to increase revenue from $13 million to $20 million by 2001 to satisfy investors. - Three options were considered: 1) Expand 8oz cups into supermarkets, 2) Expand 32oz cups nationally, or 3) Expand children's multipacks in natural food stores. - Option 1 was chosen as it had the highest projected revenue potential through expanding the highest demand 8oz cups into supermarkets, satisfying investors' revenue goal and giving the brand high exposure and growth.

1. Natureview Farm Case Study

2. • Founded and manufactured in Cabot, Vermont
• Entered market with 8-oz and 32-oz with plain and vanilla flavour
• Differentiator : All natural and long shelf life
1989
• Company revenue grows from $ 100,000 to $13 million
• New Product : Fruit on the bottom yogurt1999
• Expand to 12 yogurt flavours & multipack yogurt (for children)2000

3. Organic Market Trends
• Organic Food market is predicted to grow from $6.5 Billion to $13.3 Billion over
4 years.
• 67% of households consider price as a barrier to purchase organic food
products. 44% of customers would like a wider selection of organic products in
supermarket.
• Supermarkets are moving toward attracting new customers by offering more
organic products.

4. Yogurt Market Trend
97%
3%
Market Shares
Supermarkets Natural Food Stores
Package Type
Flavour
Price
Freshness
Ingredients
Organic
Factors in purchasing
decision

5. Length of Channel to market

6. Issue : VC needs to cash out of its investment
Goal : Attain highest possible valuation in order to secure
new investors or position itself for acquisition
Challenge : Identify path to grow revenue by over 50% from
$13 Million in 1999 to $20 Million at the end of 2001
Decision: Should Natureview Farm expand into supermarket
channel?

7. Option 1 :Expand 6 SKUs of the 8oz product line into
one or two selected supermarket channel regions.
• 8oz cups represent largest dollar and
unit share of market.
• Supermarkets fear losing market share
to natural food competitors.
• Other natural food brands have
successfully expanded to
supermarkets.
Pros Cons
• Highest level of competitive trade
promotion and marketing spend.
• Possible channel conflict between
supermarkets and natural food stores.
• Little experience in dealing with
supermarket chains.

8. Option 1 Calculations
Channel Margin Cost Price Selling Price
Natureview ($0.46-$0.31)/$0.46 = 33% $0.31 $0.46
Distributor 15% $0.54*85% = $0.46 $0.54
Retailer 27% $0.74*73% = $0.54 $0.74
Year 2000 Year 2001
Unit Sales 35,000,000 units 35,000,000*(1+20%) = 42,000,000
Revenue 35,000,000*$0.46 = $16,100,000 42,000,000*$0.46 = $19,320,000
Cost 42,000,000*$0.31 = $13,020,000 42,000,000*$0.31 = $13,020,000
Gross Profit $5,250,000 $6,300,000
Advertisement 1,200,000*2 Regions =$2,400,000 $2,400,000
SG&A $320,000 $640,000
Slotting Fees 10,000*6*20 retails = $1,200,000 -
Broker’s Fee 16,100,000*4% = $644,000 19,320,000*4% = $772,800

9. Option 2 : Expand 4 SKUs of the 32oz product line
nationally
• 32oz cups generate an above average
gross profit margin.
• Fewer competitive offering in this size.
• Lower promotional expense than
Option 1.
Pros Cons
• Higher slotting fees due to national
distribution.
• Doubt on claim of new users would
readily “accept the brand” via a
multiuse size
• National distribution will be
challenging within 12 months.
• Possible channel conflict between
supermarkets and natural food stores.

10. Option 2 Calculations
Channel Margin Cost Price Selling Price
Natureview ($1.67-$0.99)/$1.67 = 41% $0.99 $1.67
Distributor 15% $1.97*85% = $1.67 $1.97
Retailer 27% $2.70*73% = $1.97 $2.70
Year 2000 Year 2001
Unit Sales 5,500,000 units 5,500,000
Revenue 5,500,000*$1.67 = $9,185,000 $9,185,000
Cost 5,500,000*$0.99 = $5,445,000 $5,445,000
Gross Profit $3,740,000 $3,740,000
Marketing 120,000*4 Regions = $480,000 $480,000
SG&A $160,000 $320,000
Slotting Fees 10,000*4*64 retails = $2,560,000 -
Broker’s Fee 9,185,000*4% = $367,400 $367,400

11. Option 3 : Expand 2 SKUs of the children’s multi pack
into the natural food channel
• Natureview has strong relationship
with leading natural food channel
retailers.
• Financially attractive.
• More time to prepare the company for
moving into supermarket channel.
Pros Cons
• Fast growth of natural food channel
will lead to demands equal to those of
supermarkets sometime in future.
• Miss opportunity to enter supermarket
channel before competitors.

12. Option 3 Calculations
Channel Margin Cost Price Selling Price
Natureview ($1.84-$1.15)/$1.84 = 38% $1.15 $1.84
Natural Food
Wholesalers
7% $1.98&93% = $1.84 $1.98
Distributor 9% $2.18*91% = $1.98 $2.18
Retailer 35% $3.35*73% = $2.18 $3.35
Year 2000 Year 2001
Unit Sales 1,800,000 units 1,800,000*(1+15%) = 2,070,000
Revenue 1,800,000*$1.84 = $3,312,000 2,070,000*$1.84 = $3,808,800
Cost 1,800,000*$1.15 = $2,070,000 2,070,000*$1.15 = $2,380,500
Gross Profit $1,242,000 $1,428,300
Marketing $250,000 $250,000
Comp. Case 3,312,000*2.% = $82,800 3,808,800*2.5% = $95,220
Net Profit $909,200 $1,083,080

13. Decision Time
The best answer to the 20 million $ question would be Option 1.
• 8oz yogurt has the highest demand.
• Highest Revenue among all the Options – Easy to attain the revenue goal by 2001.
• Higher Investor’s confidence.
• High growth rate and exposure : Supermarket will be selling these multi packs
relatively cheap .

14. Presentation by
Ashwani Kumar
IIT Patna
During marketing internship under
Prof. Sameer Mathur
IIM Lucknow