Natureview farm

Natureview Farm
Harvard Business School Case

Brief synopsis of Natureview Farm
Natureview Farm, established in 1989, is a manufacturer and marketer of
refrigerated cup yogurt.
It was reported as
a $13 million company in 1999.
The yogurt is made up of natural
ingredients and with unique,
smooth and creamy texture.

Key Persons
• Barry Landers - CEO
• Jim Wagner – CFO
• Walter Bellini – VP Sales
• Jack Gottlieb – VP Operations
• Kelly Riley – Assistant Marketing Director
• Christine Walker – VP Marketing

Situation Analysis
Natureview Farm is a well established yogurt
company.
It aims to increase its revenue to over 50% by
the end of 2001
A proper path and action plan needs to be
devised by Christine Walker – VP Marketing

Numerous Points of view have been discussed in a meeting
with the executive personals.
The final decision of picking one of the three options
needs to be formulated.
All possible aspects including the consumers, the suppliers
and the distributors’ interests needs to be kept in mind.

Key Objectives
To increase the revenue by 50% within 22 months
Consider if Natureview should expand into the
supermarket channel
Decide on one of the 3 suggested options – 2 of which
include expansion to the supermarket.
Keep the channels of production in mind and ensure
minimum damage by any decision.
Formulate a coherent point of view and an action plan

Option 1
To expand six SKUs of 8 oz. product line to
1 or 2 selected supermarket channel
regions.

Option 1
Basis:
Eight-ounce cups represented the largest dollar and unit share of the
refrigerated yogurt market, providing significant revenue potential.
Substantiation:
(1/3)

Option 1
Basis:
Natureview, the leading natural foods brand of refrigerated yogurt, was
uniquely positioned to capitalize on the growing trend in natural and
organic foods in supermarkets.
Substantiation: Other similar brands had been successful.
Two such brands—Silk Soymilk and Amy’s
Organic Foods—had increased revenues by over
200% within two years of entering
supermarkets.
(2/3)

Option 1
Basis:
Supermarket retailers would likely authorize only one organic yogurt
brand. The first brand to enter the channel could therefore have a
significant first-mover advantage. Natureview’s competitors are soon to
expand in the supermarket channel.
Substantiation: Industry experts were predicting unit volume
growth of organic yogurt at supermarkets of
20% per year from 2001 to 2006.
(3/3)

Option 1
Risks:
Highest level of competitive trade promotion, quaternary
promotions and marketing spending on 8oz. Size.
•Expenses sum up to $12,640,000
20% increase in yogurt sales in supermarket from 2001
but we need before it
•Is this the correct step for this objective.
Is Natureview ready for this big step??

Expenditure Calculations
Field Expenses ($ Annually)
Comprehensive advertising plan 12,000,000
SG&A 320,000
Incremental SG&A 200,000
Additional marketing staff 120,000
Total 12,640,000

Expected Income Statement
Expected Units produced 3,50,00,000
Average retail price per unit 0.74
Expected revenue 25900000
% increase of revenue 99.23
Expenses 12640000
Cost of production 16317000
Total Expenses 28957000
Total Expected Income -3,057,000LOSS!

Option 2
Expand four SKUs of the 32-oz. size
nationally

Option 2
Basis:
32-oz. cups currently generated an above-average gross profit margin for
Natureview
Substantiation: Stated 43.6% margin vs. 36.0% for the 8-oz.
line
(1/3)

Option 2
Basis:
Less competition in this size. Advantage of longer shelf life.
Substantiation: Natureview’s brand had achieved a 45% share
of this size segment in the natural foods
channel. The management team felt that the
company could sell approximately 5.5 million
incremental units in the first year.
(2/3)

Option 2
Basis:
Promotional expenses would be lower—the 32-oz. size was promoted only
twice a year. However the slotting prices are high
Substantiation: For a 32-oz. expansion, marketing expenses
would be significantly lower as well—only 10%
of what was projected for the 8-oz. size in each
region, representing $120,000 per region per
year i.e. $12,000.
(3/3)

Option 1
Risks:
The management team doubted that new users would readily
“enter the brand” via a multi-use size.
•Expansion option would increase SG&A by $160,000 plus slotting costs.
Concern about the sales team’s ability to achieve full national
distribution in just 12 months.
•Competition with Dannon’s Bright Vista and the organic yogurt of the
Supermarkets.
Is Natureview ready for this big step??

Expenditure Calculations
SG&A 1,60,000
Marketing 12000
Administration/Freight 22,10,000
Sales 15,60,000
Research & Development 3,90,000
Slotting cost 12,80,000
Advertising 7,50,000
Expenses 63,62,000

Expected income statement
Expected Units produced 55,00,000
Average retail price per unit 2.7
Expected revenue 14850000
Total revenue 27850000
% increase of revenue 14.23
Expenses 63,62,000
Cost of production 17545500
Total Expenses 2,39,07,500
Total Expected Income 39,42,500
50%
required

Option 3
To introduce two SKUs of a children’s multi-
pack into the natural foods channel

Option 3
Basis:
Yogurt was an important product to natural foods retailers from both a
revenue and a profit standpoint.
Substantiation: The company already had strong relationships
with the leading natural foods channel
retailers, and expansion into the supermarket
channel could potentially affect these
relationships.
(1/5)

Option 2
Basis:
Fear that Natureview does not have the necessary resources or skill-set to
sell effectively to and through supermarkets.
Substantiation: Recent conversations with reliable Natureview’s
brokers
(2/5)

Option 2
Basis:
Natureview Farm’s all-natural ingredients would provide the perfect
positioning from which to launch its own children’s multi-pack product
offering into their core sales channel.
Substantiation: The sales team was confident that they could
achieve distribution for the two SKUs plus good
sales.
(3/5)

Option 2
Basis:
The natural foods channel was growing almost seven times faster than the
supermarket channel, and Natureview was developing several new
products that could further boost sales performance in this highly
successful channel.
Substantiation: The five-year projected unit growth CAGR of
yogurt in the natural foods channel was
projected to be 15%, according to industry
market research
(4/5)

Option 2
Basis:
Stronger Profit Contributions and most attractive finances.
Substantiation: Total projected yearly revenue could be 10% of
natural food channel category dollar sales.
Gross profitably would be 37.6%. Sales and
marketing costs were lower. Potential
incremental unit volume at 1.8 million.
(5/5)

Option 3
Risks:
R&D and Operations would need to develop the
multipack product
•This could cause delay
Retailers were likely to demand more and more as they
grew, much like those that feared from supermarkets.
•But this would happen after a while.

Why Option 3?
The leadership of Natureview was the result of its strong brand
value.
The emphasis on natural ingredients and its strong reputation
for high quality and great taste was the reason it grew.
Consumers were increasingly interested in natural and organic
foods, well-managed natural foods retailers were thriving.
Yogurt was important to retailers as stores earned a higher
margin on yogurt than on any other dairy product revenues.

Yogurt sales through supermarkets had grown an average of 3% per
year, while sales through natural food stores had grown 20% per year.
Natureview Farm had developed strong relationships with leading
natural foods retailers
The organic foods market, worth $6.5 billion in 1999, was predicted
to grow to $13.3 billion in 2003.
There is sever competition from well-established giants in supermarket
channel.

The per year sales of multipacks are growing at +12.5%
are high in demand
There is still a lot of scope for expansion in the natural
foods channel.
Natureview can try to cover the remaining 76% of the
yogurt market share.

Expansion in the supermarket channel where we have no experience will not be
best suited to increase the revenue 50% in a short period of 22 months.
No additional SG&A costs to introduce the multipack product
supermarkets’ emphasis on sales promotion and price was inconsistent with the
premium brand positioning
Fear that Natureview’s marketing department was unprepared to handle the
demands on resources, staffing that entering the supermarket channel would
impose and the distribution.

Expected Income Statement
Expenses: Amount
Total expected revenue $ 19,030,000
Cost of goods sold $ 11,988,900
Cost of the complimentary cases 2.5% of the product line’s manufacturer sales
= 0.025 * $6,030,000
= $150,750
Marketing expenses $250,000 + $390,000
= $640000
Administration/Freight $ 2,210,000
Sales $ 1,560,000
Research & Development $ 400,000
Net Income $2,080,350

How Objective 3 helps achieve target
Current Revenue 13000000
Revenue by incremented sales 6030000
Total Expected Revenue 19030000
% Increase in first 12 months 46.38461538
Gross Profitability of the line 37.60%
Profit 7155280
% Sales increment of multipacks per year 12.5
Slaes in next 10 months 753750
Revenue by incremented sales 6783750
Total Expected Revenue by end of 2011 19783750
% Increase revenue by 2011 end 52.18269231
(% Sale increment per year of yogurt in natural store is 20% which can also

Conclusion
Option 3 not only helps achieve our target but also helps keep up our
core brand values which are – high quality, great taste & natural
ingredients.
We are rightly directed towards the target consumers who are the
sufficiently earning groups.
The demand for healthy foods and products with natural ingredients is
booming.

Created by Rutvi Choksi, NIT Surat, during
a marketing internship under
Prof. Sameer Mathur, IIM Lucknow.

Natureview farm

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