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NATUREVIEW FARM

SECTION A
Name
Ashish Diana Chandan Ram Moorthy

Roll No
PGP29009 PGP29004 PGP29017 PGP29023

Saurav
Praveen Nidhi

PGP29015
PGP28187 PGP29011

2013

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.

In 2000, the company faces financial pressure to grow


revenues to $20 million by the end of 2001 from $13 million due to a planned exit by its venture capital investors.
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PROBLEM STATEMENT
Natureview Farm needs to choose between
3 distribution models and product choices to increase its revenues to $20million before the end of 2001 from $13 million reported in 1999.

SWOT

SWOT ANALYSIS
STRENGTH S

Long product shelf life

Reputation of high quality, taste and natural ingredients


Strong relationship with natural store retailers

Small manufacturer, low funds and revenue

WEAKNESS ES

Relies on brokers that may not be adequate for supermarket channel

Strong reputation for high quality and great taste.


Shared leadership in the natural food channel of yoghurt

Current marketing strategy based only on natural store channel

SWOT

SWOT ANALYSIS
OPPORTUNITI ES

THREATS

Organic food market expected to grow to $13.3billion in 2003 Natural store channel sales up 20% 12.5% growth in 4 oz multipack Increase in consumer interest in organic food

Competition(both in regular yogurt and organic yogurt) Increasing natural store channel demands on logistics or technology Increasingly price sensitive consumers in the organic market
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LENGTH OF CHANNELS TO MARKET Supermarket Channel Natural Foods Channel


Manufacturer Manufacturer Natural Foods Wholesaler Natural Foods Distributor Retailer Retailer

Distributor

Customer

Customer

CHANNELS
Supermarket Channel
Charged lower retail price $0.74 per cup

One-time slotting fee for each SKU charged only in the first year it was introduced Requires trade promotions Involves 3 parties in the distribution channel Heavily dependent on brokers knowledge Distribution margin- 15% Retailer margin-27%

Natural Foods stores


Charged higher retail price $0.88 per cup
Lower price sensitivity Requires a one-time allotment of one free case of product for every new SKU authorized for distribution in its first year Involves 4 parties in the distribution channel Distribution margin- 9% Wholesaler margin- 7% Retailer margin-35%

Other Channels

Warehouse Clubs Convenience Stores Drug Stores Mass Merchandisers

OPTION 1 - EXPAND 6 SKUS OF THE


8 OZ PRODUCT LINE INTO 1 OR 2 SELECTED SUPERMARKET CHANNEL REGIONS
Pros
8 oz. cups represent largest dollar and unit share of market Supermarkets fear losing market share to natural food competitors

Cons
Highest level of competitive trade promotion and marketing spend Possible channel conflict between supermarkets and natural food stores

Other natural foods brands have successfully expanded to supermarkets


First-Mover Advantage Supermarkets may only authorize one organic yoghurt manufacturer

Promotion and lower price at supermarkets may hurt the brand


Little experience in dealing with supermarket chains Balance between shelf presence and slotting expense

OPTION 2
EXPAND 4 SKUS OF THE 32 OZ PRODUCT LINE NATIONALLY
Pros
32-oz cups generate an above average gross profit margin (43.6% versus 36% for 8-oz line) Fewer competitive offerings in this size Competitive advantage due to long shelf life of product

Cons
Higher slotting fees due to national distribution National distribution will be challenging within 12 months No guarantee that customer awareness of the brand would grow

Lower promotional expenses than Option-1 Possible channel conflict between supermarkets and natural food store Promotion and lower price at supermarkets may hurt the brand
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OPTION 3 EXPAND 2 SKUS OF A


CHILDREN'S MULTIPACKS INTO THE NATURAL FOODS CHANNEL
Pros
Natureview already has strong relationships with leading natural foods channel retailer

Cons
Miss opportunity to enter supermarkets before competitors

More time to prepare the company for moving into the supermarkets
Natureview Product positioning is ideal for a childrens multipack product launch Financially attractive High margin 37.6% Low sales and marketing expenses
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OPTION 1- RATE 3%
Sl No
1 2 3 4 5 6 7 8 9 10 11 12 13 No. of Units Retailer's Selling Price Natureview's Selling Price Manufacturing Cost Per Unit Sales (1*2) Brokerage Fee (0.4*5) Slotting Cost SG & A Advertising Trade Promotion Manufacturing Cost (4*1) Total Cost (6`11) Profit (5-12)
2000 2001 2002

35,000,000 0.74 0.51 0.31 17,850,000 714,000 1,200,000 320,000 2,400,000 90,000 10,850,000 15,574,000 2,276,000

36,050,000 0.74 0.51 0.31 18,385,500 735,420 320,000 2,400,000 90,000 11,175,500 14,720,920 3,664,580

38,213,000 0.74 0.51 0.31 19,488,630 779,545 320,000 2,400,000 90,000 11,846,030 15,435,575 4,053,055

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OPTION 2 - RATE 2%
2000 2001 2002

No. of Units Retailer's Selling Price Natureview Selling Price Manufacturing Cost Per Unit Sales Brokerage Fee Slotting Cost SG&A Advertising Trade Promotion Manufacturing Cost

5,500,000 2.7 1.84 0.99 10,120,000 404,800 2,560,000 160,000 1,024,000 480,000 5,445,000

56,10,000.00 2.7 1.84 0.99 10,322,400 412,896 160,000 1,024,000 480,000 5,553,900

58,34,400.00 2.7 1.84 0.99 10,735,296 429,412 160,000 1,024,000 480,000 5,776,056

Total Cost
Profit

10,073,800
46,200

7,630,796
2,691,604

7,869,468
2,865,828
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OPTION 3
2001 2002 2003 2004

No. of Units Sold Retailer's SP Natureview's SP Manufacturing Cost Per Unit Total Sales

1,800,000 3.35 1.84 1.15 3,312,000

2,070,000 3.35 1.84 1.15 3,808,800

2,380,500 3.35 1.84 1.15 4,380,120

2,737,575 3.35 1.84 1.15 5,037,138

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RECOMMENDATION OPTION 1
Option 1 & 2 achieve the nearest dollars
expectations whereas Option 3 does not.

We suggest option 1 as it provides Natureview into


the new channel, secure a first movers advantage and also position itself in the 8 oz category.

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THANK YOU

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