REPORT ON NATUREVIEW FARM
By: Shashank Chauhan (S6052) Bipul Bibhakar (S6012) Barun Ghatury (S6011) Aditya Singh (S6002)
BACKGROUND:
Natureview Farm, a Vermont-based producer of organic yogurt with $13 million in revenues, is the leading national yogurt brand (24% market share) sold into natural foods stores. It has achieved this through its special yogurt manufacturing process and through cultivating personal relationships with dairy buyers in the natural foods channel. Set in 2000, when the company faces financial pressure to grow revenues to $20 million by the end of 2001 due to a planned exit by its venture capital investors. The immediate decision point that the protagonist, Natureview's vice president of marketing, faces is whether to achieve this revenue growth by expanding into the supermarket channel.
Nature View Farm Income Statement 1999 ($) 90,00,000 80,00,000 70,00,000 60,00,000 50,00,000 40,00,000 30,00,000 20,00,000 10,00,000 0
81,90,000
48,10,000
45,50,000 Nature View Farm Income Statement 1999 ($) 2,60,000
Cost of Gross Profit Goods Sold
Expenses
Net Income
Yogurt Market share by Packaging Segment ,1999 (Super market channel, in % U.S dollar)
4 3.5
3.35
3.19
3
2.7
2.85
2.5 Average Retail Price($) (Natural Food Channel)
2 1.5 1
0.88
Average Retail Price($) (Supermarket Channel)
0.74
0.5 0 8-oz. cup
32-oz. cup
4-oz. cup multipack
GOAL: “Uniquely positioned the product to capitalized on the growing trend in natural and organic foods in supermarket”
MARKET NEWS: “Bellini heard rumours that one of the Natureview’s major natural competitors would soon try to expand into the supermarket channel. ”
MARKET POTENTIAL :
Industry expert predicting unit volume growth of organic yogurt at supermarket of 20% per year from 2001 to 2006.
These prediction were relative to unit growth projections of 2% to 4% of yogurt category in the supermarket.
Number of Retailer in the Region
17
25 Northeast Midwest Southeast
33
West 30
COMPETITOR ANALYSIS:
DIRECT COMPETITORS SUPER MARKETS
CURRENT PERFORMANCE
NATUREVIEW
- 24% market (natural food store)
DANNON
YOPLAIT
STRENGTH & WEAKNESS
IMAGE PERSONALITY
- Longer shelf - Quality, life healthy, unique
- Build relationships - Grow revenue
- $13 million revenue
-Only in natural food stores
-Many products and flavours
-Market leader
-33% market share
-Artificial
-Something for everyone
-Many products and flavours
-Brand name
-Caring brand
-High visibility.
-Artificial
- 24% market share
COLOMBO
PAST/CURRENT STRATEGY
- 5% combined market share
-Follow consumer trends
-Make gains on dannon. -Differentiation
-National distribution
-good for you
-Maintain sales -Differentiation
OPTION ANALYSIS:
PROPOSED PLANS
OPTION 1.
OPTION 2.
- Advocated by : Walter Bellini, vice president sales
- Suggested by : Jack Gottlieb, vice president of operations.
- Expand 6 SKU‟s of the 8-oz. Product line into one or two selected supermarket channel regions.
- Expand 4 SKUs of the 32-oz.
- 8-oz cups represented the largest dollar & unit share of the refrigerated yogurt market, providing significant revenue potential.
- 32-oz generate an above – average gross profit margin for Natureview (43.6% vs 36.0% for the 8-oz line)
STRENGTHS - Other natural foods brands had successfully expanded theri distribution into the supermarket channel. Two brands:
- Fewer competition in the segment. Achieved 45% share of this size segment.
Silk
Soyamilk
Amy‟s Organic foods
Increased their revenue by 200% in 2 years.
- Proposed by: Walker‟s colleague Kelly Riley, the assistant marketing director. - Introduce 2 SKUs of a children multipack into the natural foods channel.
- 6 SKU‟s chosen were the best-selling SKU‟s of the 8-oz. Line.
OPTION 3.
- The management team assumed to sell approx. 5.5 million incremental unit in the first year.
- Natureview Farms‟s all-natural ingredients would provide the perfect positioning from which to launch its own multi pack product offering into their core channels. - Sales team was confident they could achieve distribution for two SKUs. - Financial potential was very attractive. - R&D and operation would need to develop the multipack product. Natureview would incur no additional SG&A cost to introduce multipack.
- Concept have high potential but High risk and cost.
THREATS
- Management team doubted that new user would readily “enter the brand” via a multi-use size.
- Supermarket retailers would likely authorize only one - Have to hire sales organic yogurt brand. person with experience for - The first brand to sophisticated enter the channel supermarket channel. could therefore have a significant first- Bellini concerned about his sales team mover advantage. ability to achieve full national distribution in 12 months.
- Customer demand is variable.
FINANCIAL DATA ANALYSIS: OPTION 1.
OPTION 2.
- Advertising team: advertising plan would cost $1.2 million per region per year. - Sales, general, & administrative (SG&A) expenses would increase by $320,000 annually, $200,000 would be incremental SG&A for additions to sales staff required to manage the supermarket brokers in two regions & $120,000 for additional marketing staff. - Could achieve 1.5% share of supermarket yogurt after 1 year with incremental annual sales of just over 35 million units.
OPTION 3.
- Slotting expenses will be higher, Promotional expenses will be lower as 32-oz. Is promoted only twice in a year.
- For 32-oz. Expansion, marketing expenses will be lower i.e. 10% projected for 8-oz. Size, representing $120,000 per year - Increase SG&A by $160,000. -Assume company could sell approx 5.5 million incremental units in the first year.
- Projected total revenue for two multipack SKU approx. 10% of the food channel category dollar sales. - Gross profitability would be 37.6%. - Sales and marketing channel will be lower. - The cost of complementary cases was estimated at 2.5% of the product line manufacture sales. - Marketing expenses were estimated to be $250,000.
Dollar Share (Supermarket (Supermarket channel, in % U.S dollars)
27%
26% Northeast
25%
22%
Midwest Southeast West
RECOMMENDATION STRATEGY:
EXPAND PRODUCT LINE TO INCLUDE YOGURT MULTI-PACKS:
Natureview Farm should expand its already successful organic yogurt product line to include two versions of a yogurt multi-pack priced at $3.35 each. This strategy will allow the company to reach their set revenue goal the quickest due to the fact that the annual growth rate of sales of yogurt multi-packs is 12.5%, versus only 3% for the 6 oz. size and 2% for 8%.
The profit margins from multi-packs are also significantly higher than those of single servings. Flavors will be chosen from the line‟s most successful flavors but will be given creative names that will will appeal to kids. The multi-packs will be positioned as the healthy snack alternative for kids.
PROMOTIONAL IDEAS:
Online presence - Web site targeted
- Add value through recipes, message board & special offers
In-store tastings
- Saturdays at natural foods retailers 4x yr. - Staffed by Natureview Farm sales reps
- Kid-friendly site easy recipes & science section - Extranet site facilitating sales/ distribution channel activities
Guerilla marketing - low-budget creative promotions in-store - schools promotion activity.
Social responsibility - Community involvement program. - Generate local „buzz‟ through press coverage
Point-of-purchase - Floor sticker displays instore to catch kids‟ attention - Attractive shapes like a animal or bird to attract.
