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Natureview farm

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Natureview farm - Analysis
Natureview farm - Analysis
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Natureview farm

  1. 1. Case Analysis
  2. 2. Agenda • About Natureview Farm • Issues and Challenges • Market Trends • Options • Recommendations
  3. 3. About Natureview Farm • Founded in 1989 in Cabot, Vermont • Manufacturer and marketer of refrigerated cup organic yoghurt • Uses natural ingredients and special process
  4. 4. How is Natureview Farm different? Natureview Farm yoghurt is different from its other competitors: • Uses natural ingredients • Longer shelf life (50 days) • Reputation of high quality and great taste
  5. 5. Natureview is successful Because: • Strong brand • Effective, low-cost “Guerrilla Marketing” • National distribution in natural foods channels • Strong relationships with distributors
  6. 6. Issues and Challenges Venture Capital firm needs the cash out of investment, and thus Natureview Farm needs to increase its revenues by 50% by the end of 2001. Its current revenue is $13 million. It needs to reach $20 million. GOAL : To find another investor or position itself for acquisition, and increasing revenues.
  7. 7. Questions ! • Should Natureview expand into the supermarket channel to increase its revenue? • What marketing strategy should it use?
  8. 8. Market Trends 46% 25% 29% Supermarket Small health stores Natural Foods 97 3 Channel that customers tend Yoghurt Distribution Channel to buy Supermarket Natural Foods
  9. 9. Market Trends 26% 22% 25% 27% Northeast Midwest Southeast West 74% 9% 9% 8% Yoghurt Market Share by Yoghurt Distribution Channel Region 8 oz. cups and smaller 32 oz. cups Children's multipacks Others
  10. 10. Market Trends 33% 24% 23% 5% 15% Brand Supermarket Dannon Yoplait Others Columbo Private label 24% 15% 7% 19% 35% Yoghurt Market Share by Yoghurt Market Share by Brand Natural Foods Channel Horizon OrganicNatureview Farm White Wave Brown Cow Others
  11. 11. Manufacturer Natural Foods Wholesaler Natural Foods Distributor Retailer Customer Manufacturer Distributor Retailer Customer Supermarket Channel Natural Foods Channel
  12. 12. Option 1 Expand 6 SKUs of the 8-oz. product line into one or two selected supermarket channel regions
  13. 13. Option 1 Pros • 8-oz. cups represent largest dollar and unit share of market • Other natural food brands have successfully expanded to supermarkerts • Supermarkets may authorize only one organic yoghurt manufacturer • Advantage in being the first organic yoghurt to move to supermarket
  14. 14. Option 1 Cons • Highest level of competition amongst all the product lines of yogurt • Increase in advertising cost and SG&A expenses • Little experience in dealing with supermarket chains • High potential, but high risk and cost
  15. 15. Option 1 FinancialAnalysisSupermarket Channel Analysis 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 Retailor 27% $0.74*73% = $0.54 $0.74 Customer
  16. 16. Option 1 Year 2000 Year 2001 Unit Sales 35,000,000 35,000,000 * 1.2 = 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 Expense Advertisement 1,200,000 * 2 = 2,400,000 2,400,000 SG&A 320,000 640,000 Slotting Fee 6 * 10,000 * 20 = 1,200,000 Broker’s Fee $16,100,000 * 4% = $644,000 $19,320,000 * 4% = $772,800 Net Profit $686,000 $2,487,200
  17. 17. Option 2 Expand 4 SKUs of the 32-oz. size nationally
  18. 18. Option 2 Pros • 32-oz. cup generates an above-average gross profit margin (43.6% vs 36% for 8-oz. product line) • Fewer competitive offerings in this size • Competitive advantage due to longer shelf life • Lower promotional expenses
  19. 19. Option 2 Cons • Higher slotting fees due to national distribution • National distribution will be challenging within 12 months • Promotion and lower price at supermarkets may hurt the brand
  20. 20. Option 2 FinancialAnalysisSupermarket Channel Analysis 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 Retailor 27% $2.70*73% = $1.97 $2.70 Customer
  21. 21. Option 2 Year 2000 Year 2001 Unit Sales 5,500,000 5,500,000 Revenue $9,185,000 $9,185,000 Cost $5,445,000 $5,445,000 Gross Profit $3,740,000 $3,740,000 Expense Advertisement $480,000 $480,000 SG&A $160,000 $320,000 Slotting Fee $2,560,000 Broker’s Fee $367,400 $367,400 Net Profit $172,600 $2,572,600
  22. 22. Option 3 Introduce 2 SKUs of a children's multi- pack into the natural foods channel
  23. 23. Option 3 Pros • Strong relationships with leading natural foods channel retailers • Financially lucrative • High margins • Low sales and marketing expenses
  24. 24. Option 3 Cons • Have to prolong venturing into supermarkets • May not reach the target revenue of $20 million by 2001 • Competitors have already expanded to supermarkets
  25. 25. Option 3 Supermarket Channel Analysis Channel Margin Cost Price Selling Price Natureview ($1.84-$1.15)/$1.84 = 38% $1.15 $1.84 Natural Foods Wholesalers 7% %1.84 $1.98 Distributor 9% $1.98 $2.18 Retailor 35% $2.18 $3.35 Customer
  26. 26. Option 3 Year 2000 Year 2001 Unit Sales 1,800,000 2,070,000 Revenue $3,312,000 $3,808,800 Cost $2,070,000 $2,380,500 Gross Profit $1,242,000 $1,428,300 Expense Marketing $250,000 $250,000 Comp. Case $82,800 $95,220 Net Profit $909,200 $1,083,080
  27. 27. • Higher revenue generated • Lower Slotting Fee (only 2 supermarkets) • Transition to supermarkets • Advantage over competitors by expanding into supermarket
  28. 28. Recommended Adjustments Instead of just introducing 8-oz. cups, 32-oz, cups should also be introduced in supermarkets. • More shelf coverage • Better gross profit margin • No competition for 32-oz. cups Combining advantages of both the product lines.
  29. 29. Created by Prayag Mulay, NMIMS Mumbai, during a marketing management internship by Prof. Sameer Mathur, IIM Lucknow. Disclaimer

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