Presentation on Analysis of Harvard Case: Natureview Farm
This was created by Pearl Gupta, PEC University of Technology during the course of a marketing internship under Prof. Sameer Mathur
3. Natureview Farm
1989
• Founded and manufactured in Cabot, Vermont
• First entered market 8-oz and 32-oz with plain and vanilla flavor
• Used natural ingredient with longer average shelf-life of 50 days
1999
• Company revenue growth from $ 100,000 to $13 million
• Fruit on the bottom yogurt
2000
• Expanded to 12 yogurt flavors & multipack yogurt (for
children)
4. Goal
To increase its revenue by over 50% within 23 months to attain highest possible
valuation of the company
5. Market Facts & Trends
• Organic foods market predicted to grow from $6.5 billion to $13.3 over 4
years.
• Generally organic products 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 of organic products.
• 44% of consumers would like a wider selection of organic products in
supermarkets.
• Supermarkets are moving toward attracting new customers by offering more
organic products.
• Concentrated – 4 competitors control over 50% share.
• Supermarkets = 97% of total sales (3% annual growth).
• Natural food stores = 3% total sales (20% annual growth)
• Factors in purchasing decisions:
– Package type/Size, flavor, price, freshness, ingredients, organic.
7. Option 1
PROS CONS
• 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
• High potential to increase revenue
• First mover as organic yogurt
brand to enter supermarket
channel
• Highest level of competitive trade
promotion and marketing spend
• Possible channel conflict between
supermarkets and natural food
stores
• Promotion and lower price at
supermarkets may hurt the brand
• Advertising plan would cost $1.2
million per region per year
• SG&A expenses increase by
$320,000 annually
• Need to pay one time slotting fee
Expand 6 SKU’s of the 8-oz product line into one or two selected supermarket channel
region.
8. Financials
Sale Price $0.78
Retail Margin $0.21
Price to retail $0.57
Distributor margin $0.09
Price to distributor $0.48
Mfc cost $0.31
Gross profit NV $0.17
9. Option 2
PROS CONS
• Fewer competitive offerings in this
size
• 32-oz cups generate an above-
average gross profit margin (43.6%
vs 36% for 8-oz line)
• Strong competitive advantage due
to long shelf life of product
• Lower promotional expenses than
option 1
• National distribution will be
challenging within 12 month
• Higher slotting fees due to national
distribution
• No guarantee that customer
awareness of the brand would
grow
• Promotion and lower price at
supermarkets may hurt the brand
Expand 4 SKU’s of the 32-oz product line nationally.
10. Financials
Sale Price $2.83
Retail Margin $0.76
Price to retail $2.07
Distributor margin $0.31
Price to distributor $1.76
Mfc cost $0.99
Gross profit NV $0.77
11. Option 3
PROS CONS
• High margins- 37.6%
• Natureview already has strong
relationships with leading natural
foods channel retailers
• More time to prepare the
company for moving into
supermarkets
• Financially-attractive
• Miss opportunity to enter
supermarkets before competitors
• Fast growth of natural foods
channel will lead to demands
equal to those of supermarkets
Expand 2 SKU’s of a children’s multi-pack into naturals food channel
12. Financials
Sale Price $3. 35
Retail Margin $1,17
Price to retail $2.18
Distributor margin $0.20
Price to distributor $1.98
Mfc cost $1.15
Gross profit NV $0.69
13. Recommendations
GO FOR OPTION 1
• Reach beyond the target objective of 20 million revenue by end of 2001 with projected of $31 060
000
• 8 –oz yogurt is the highest demand
• In supermarket, can expose to more range of customers
• Will have the first mover advantages of natural product to enter supermarket
• A bit risky but in a long term will generate revenues of 200% (as looking at two other competitors)
REQUIRED ADJUSTMENTS
• Channel partner Arrangements:
– Lower MSRP for natural food retailers to better compete with supermarkets
– Work with retailer, distributer, and wholesaler to reduce costs and maintain margins
– Ex: case-breaking, shelf stocking, paperwork
• Brand: will remain premium through joint promotions with other premium products such as
granola or organic fresh fruit
• Marketing mix: 8-oz, $0.78, located in-store with other major yogurt manufactures, in- store
promotions
• Sales: utilize more sophisticated technology to monitor sales trends
