Natureview Farm, a yogurt manufacturer faces a challenging situation. The management team should come up with the right verdict for the company to thrive in the future.

1. Harvard Case Study
Pawan Prasad K
IIT Madras

2. Background
•Founded in 1989.
•Manufactured and marketed refrigerated cup yogurts.
•$100,000 to $13,000,000 revenue growth in ten years.
•First entered the market with 8-oz and 32-oz cup sizes of yogurt in two
flavours-plain and vanilla.

3. Organic Market Trends
•Predicted to grow from $6.5 Billion to $13.3 Billion over 4 years.
•Supermarkets are attracting new customers by offering more
organic products.
•Organic dairy products - 74% of heavy organic food buyers and
29% of light organic food buyers.

4. The Consumer Market
•Generally organic food customers tend to be more educated, earn
higher incomes, be older and live in the Northeast and West.
•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. Sales
Supermarkets
(46%)
Small health
stores(25%)
Natural Food
stores(29%)
25%
46%29%

5. Yogurt Market Trends
•Top 4 Competitors control over 50% market share
•Supermarkets – 97% of total sales and 3% annual growth
•Natural food stores – 3% of total sales 20% annual growth

6. The 4 Ps
•Natural yogurt
(organic)
•8 –oz. size in
12 flavours
•32-oz. size in
•4 flavours
•Affordable by its
target segment,
will be cheaper in
supermarkets
than in food
stores
•Wholesale club
•National retailer
channel
•Natural Food
Channel
•Convenience
and drug store
•Low -cost guerilla
marketing
•High quality and
great taste
•Established
distributers and
retailers
Product Price Place Promotion

7. Product
•Family recipe- natural ingredients
•Simple, smooth, creamy texture
•No artificial thickeners
•No artificial growth hormones for cows
•50 days shelf life
•High quality and taste

8. Product
•Twelve refrigerated yogurt flavours in 8-oz. cups (86% revenues)
•Four flavours in 32-oz. cups (14% revenues).
•children’s 4-oz. cups
•yogurt packaged in tubes.

9. Purchase Criteria
•Package
•Type/size,
•Flavour,
•Price,
•Freshness,
•Ingredients,
•Organic/Inorganic

10. Yogurt market share by packaging
segment
Sales
8/6-oz. cup
32-oz
Children's
multipacks
Others
9
%9
%
8%
74%

11. Yogurt Market Share by Region
25%
33 Retailers
27%
17 Retailers
25 Retailers
26%
22%
30 Retailers

12. Distribution System

13. Management team
•Christine Walker, Vice president of marketing
•Jim Wagner, Chief financial officer (CFO)
•Barry Landers ,Chief Executive Officer (CEO)
•Walter Bellini, Vice president of sales.
•Jack Gottlieb, Vice president of operations
•Kelly Riley, the assistant marketing director

14. The Challenge
•Identify path to grow revenue by over 50% from $13 Million in
1999 to $20 Million at the end of 2001
•Attain highest possible valuation in order to secure new investors
or position itself for acquisition

15. Hypothesis 1
Expand 6 SKUs of the 8-oz product line into
one or two selected supermarket channel
regions.
-Advocated by Walter Bellini

16. Evaluation- PROS
•8-oz 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.
•First brand to sell organic yogurt

17. Evaluation- CONS
•Highest level of competitive trade
•High cost of promotion and marketing spend
•Possible channel conflict between supermarkets and natural food
stores
•Little experience in dealing with supermarket chains

18. Channel Margin Cost Price Selling Price
Retailer 27% 73% * $0.74 =
$0.54
$0.74
Distributor 15% 85% * $0.54 =
$0.46
$0.54
Natureview
(Supplier)
($0.46 -
$0.31)/
0.46$*100 =
33%
$0.31 $0.46
Cost and Selling Price

19. Year >>> 2000 2001
Incremental Sales
Unit
35,000,000 35,000,000 *
(120%) =
42,000,000
Revenue 35,000,000 * $0.46
=
$16,100,000
42,000,000 * $0.46
=
$19,320,000
Cost 35,000,000 * $0.31
=
$10,850,000
42,000,000 * $0.31
=
13,020,000
Gross Profit $5,250,000 $6,300,000
Revenue

20. Year >>> 2000 2001
Advertisement $1,200,000 * 2
regions =
$ 2,400,000
$1,200,000 * 2
regions =
$ 2,400,000
SG&A $320,000 $640,000
Slotting Fees $10000 * 6SKU’s*
20 retails =
$1,200,000
None
Broker’s Fee $16,100,000 * 4% =
$644,000
$19,320,000 * 4%=
$772800
Net Expenses $4,564,000 $3,812,800
Expenses

21. Year >>> 2000 2001
Gross Profit $5,250,000 $6,300,000
Net expenses $4,564,000 $3,812,800
Net Profit $686000 $2,487,200
Profit

22. Hypothesis 2
Expand 4 SKUs of the 32-oz product line
nationally
-Supported by Jack Gottlieb

23. Evaluation- PROS
• 32-oz cups generate an above average gross profit margin.
•Fewer competitive offering in this size.
•Lower promotional expense than in the case of Option 1.

24. Evaluation- CONS
•Higher slotting fees due to national distribution.
•National distribution will be challenging within 12 months.
•Possible channel conflict between supermarkets and natural food
stores.

25. Channel Margin Cost Price Selling Price
Retailer 27% 73% * $2.70=
$1.971
$2.70
Distributor 15% 85% * $1.971
= $1.67
$1.971
Natureview
(Supplier)
($1.67 -
$0.99)/
$1.67*100 =
41%
$0.99 $1.67
Cost and Selling Price

26. Year >>> 2000 2001
Incremental Sales
Unit
5,500,000 5,500,000
Revenue 5,500,000 * $1.67 =
$9,185,000
5,500,000 * $1.67 =
$9,185,000
Cost 5,500,000 * $0.99 =
$5,445,000
5,500,000 * $0.99 =
$5,445,000
Gross Profit $3,740,000 $3,740,000
Revenue

27. Year >>> 2000 2001
Advertisement $120,000 * 4
regions =
$ 480,000
$120,000 * 4
regions =
$ 480,000
SG&A $160,000 $320,000
Slotting Fees $10000 * 4SKU’s*
64 retails =
$2,560,000
None
Broker’s Fee $9,185,000 * 4% =
$367,400
$9,185,000 * 4% =
$367,400
Net Expenses $3,567,400 $1,167,400
Expenses

28. Year >>> 2000 2001
Gross Profit $3,740,000 $3,740,000
Net expenses $3,567,400 $1,167,400
Net Profit $172,600 $2,572,600
Profit

29. Hypothesis 3
Expand 2 SKUs of the children’s multi pack into
the natural food channel
-Recommended by Kelly Riley

30. Evaluation- PROS
•Natureview has strong relationship with leading natural food
channel retailers.
•Financially attractive.
•Company’s all-natural ingredients provides the perfect positioning
to launch the product into their core sales channel.
•Product will resonate with high growth of natural foods channel.

31. Evaluation- CONS
• Fast growth of natural food channel will lead to demands similar to
those of supermarkets.
• Miss opportunity to enter supermarket channel before competitors.

32. Channel Margin Cost Price Selling Price
Retailer 35% 65% * $3.35 =
$2.18
$3.35
Distributor 9% 91% * $2.18 =
$1.98
$2.18
Wholesalers 7% 93% * $1.98=
$1.84
$1.98
Natureview
(Supplier)
($1.84 -
$1.15)/ $1.84
* 100 = 37.6%
$1.15 $1.84
Cost and Selling Price

33. Year >>> 2000 2001
Incremental Sales
Unit
1,800,000 1,800,000 * 115% =
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
Revenue

34. Year >>> 2000 2001
Marketing
expenses
$250,000 $250,000
Comp. Cases 2.5% * $3,312,000
=
$82,800
2.5% * $3,808,800
=
$95,220
Net Expenses $332,800 $345,220
Expenses

35. Year >>> 2000 2001
Gross Profit $1,242,000 $1,428,300
Net expenses $332,800 $345,220
Net Profit $909,200 $1,083,080
Profit

36. The Final Verdict…
Walker should go for Option 1 !
• Revenue grows well beyond the target $20million to
$32,320,000 ($13million + $19,320,000) by the end of 2001
•This in turn increases brand value.

37. Plan of Action
•Introduce the 6 most popular variants into the supermarket
channel
•Hire agents well versed with the supermarket chain.
•Innovative campaign to enhance consumer reach via
supermarkets

38. Disclaimer
Created by Pawan Prasad K, IIT Madras, during a marketing
Internship by prof. Sameer Mathur, IIM Lucknow.