This presentation has been created by Anshu Bhatia as a part of winter marketing internship under the guidance of Prof. Sameer Mathur, IIM Lucknow

1. HBS case study

4. 1989
Founded and Manufacturing in Cabot.
Entered the market with 8-ounce (oz.) and
32-oz. cup sizes of yogurt in two flavors—
plain and vanilla
1999
• Farm’s revenues had grown from less
than $100,000 to $13 million
• Low cost ‘guerilla’ marketing tactics
• Fruit on bottom yogurt
2000
produced 12 refrigerated yogurt flavors in 8-
oz. cups and 4 flavors in 32-oz. cups
• started exploring multipack yogurt
products (for children)

6. • 8 oz. size with 12 flavors
• 32 oz. size with 4 flavors
• Fruit on the bottom yogurt
• Multipack yogurts

7.  beautiful flavor
 Unique smooth and creamy texture
 Without artificial thickeners
 Natural milk from cows, no rGBH

8. Special process and
ingredients
The 8-oz. flavors were developed
by putting fruit puree into the
bottom of the cup and adding
plain yogurt on top
Longer shelf life
(approx 50 days)

11. o The organic foods market, worth $6.5 billion in 1999, was predicted to grow to $13.3
billion in 2003
o Generally, shoppers who purchased organic products, regardless of channel, tended
to have higher incomes, have more education, and live in the Northeast and West
o Forty-six percent of organic food consumers bought organic products at a
supermarket, 25% at a small health foods store, and 29% at a natural foods
supermarket
o Sixty-seven percent of U.S. households indicated that price was a barrier to their
purchase of organic products
o 58% expressed that they would buy more organic product if it were less expensive.
o Forty-four percent of consumers identified the need for a wider selection of organic
product in supermarkets.

12.  Supermarkets = 97 % of total sales (3 % annual growth)
 Natural Food Stores = 3 % total sales (20 % annual growth)
 Concentrated: 4 competitors control over 50 % share
 Factors affecting purchasing decisions:
• Ingredients
• Freshness
• Package type/size
• Flavor
• Price
• Organic

13. YOGURT MARKET SHARE BY PACKAGING
SEGMENT
8 oz. cup and smaller
children multipacks
32 oz. cups
others

14. 26%
22%25%
27%
YOGURT MARKET SHARE BY REGION
NORTH EAST
MID WEST
SOUTH EAST
WEST

15. 97%
3%
YOGURT DISTRIBUTION CHANNEL SHARE
SUPERMARKETS NATURAL FOOD STORES

16. Manufacturer
Distributor
Retailer
Customer
Customer
Retailer
Natural Foods Distributor
Natural Foods Wholesaler
Manufacturer
7%
9%
35%
15%
27%
The percentages indicate margins of respective stages of channel.

17. SUPERMARKET CHANNEL
DANNON
YOPLAIT
OTHERS
PRIVATE
LABEL
NATURAL FOODS CHANNEL
NATUREVIEW
FARM
BROWN
COW
HORIZON
ORGANIC
WHITE WAVE

18. 1 2 3
0 0 0
NATURAL CHANNEL 0.88 3.19 3.35
SUPERMARKET CHANNEL 0.74 2.7 2.85
MANUF. COST 0.31 0.99 1.15
0
0.5
1
1.5
2
2.5
3
3.5
4
DOLLARSPRICE
YOGURT PRODUCTION COSTS AND RETAIL PRICES BY CHANNELS

20. Quest to find a path to grow revenues by over 50%
before the end of 2001
VC firm now needed to cash out of its investment in
Natureview
Should Natureview Farm expand into Supermarket
region?

21. “We owe it to our customers, our suppliers, and our distribution
partners to make the right strategic choices regarding the
revenue growth objective before us.”

22. to expand six SKUs of the 8-oz. product line into one or two selected
supermarket channel regions
Walter Bellini, vice president of sales

23.  8 oz. cups had largest demand and unit share
 Increased revenue growth potential
 Other natural food brands gained a lot through such investment
 The first brand to enter the channel could therefore have a significant first-
mover advantage

24.  High risk and high marketing costs
 would require quarterly trade promotions and a meaningful marketing
budget
 Comprehensive advertising plan would cost $1.2 million per region per
year
 One time slotting fees to be paid
 SG&A expenses would increase by $320,000 annually

25. Channel Selling Price Margin Cost Price
Retailer $0.74 27% 0.74 X (1-0.27) = $0.54
Distributor $0.54 15% $0.54 X (1-0.15) = $0.46
Natureview Farm $0.46 ? $0.31
Margin of Natureview = 1- $0.31/$0.46 = 0.33

26. 2000 2001
Unit Sales 35,000,000 35,000,000 X 1.2 = 42,000,000
Revenue Growth 35,000,000 X 0.74 =
$25,900,000
$42,000,000 X 0.74 =
$31,080,000
Projected Revenue $13,000,000+$25,900,000=
$38,900,000
$13,000,000+$31,080,000=
$44,080,000
Cost 35,000,000 X 0.31 =
10,850,000
42,000,000 X 0.31 =
$13,020,000
Gross Profit $28,050,000 $31,060,000
EXPENSES
SG&A $320,000 $640,000
Ads $1,200,000 X 2 region =
$2,400,000
$1,200,000 X 2 region =
$2,400,000
Broker’s fee $16,100,000 X 0.04 =
$644,000
$19,320,000 X 0.04 =
$772,800
Slotting fee 6 X $10,000 X 20 retails =
$1,200,000
NET PROFIT $23,486,000 $27,247,200

27. To expand 4 SKUs of the 32 oz. size nationally into supermarket regions
Jack Gottlieb, vice president of operations

28.  Positioning as a product of longer shelf life
 Lower promotion expenses
 Higher profit margins than 8 oz. cups

29.  Doubt that new users would readily ‘enter the brand’ via a multi-use size
 Doubt whether the sales team would be able to achieve full national
distribution in just 12 months
 would need to hire sales personnel who had experience selling to the
more sophisticated supermarket channel
 would need to establish relationships with supermarket brokers. Additions
to sales headcount for the 32-oz. expansion option would increase SG&A
by $160,000.

30. Channel Selling Price Margin Cost Price
Retailer $2.70 27% 2.70 X (1-0.27) = $1.97
Distributor $1.97 15% $1.97 X (1-0.15) = $1.67
Natureview Farm $1.67 ? $0.99
Margin of Natureview = 1- $0.99/$1.67 = 41

31. 2000
Unit Sales 5,500,000
Revenue Growth 5,500,000 X 2.70 =
$14,850,000
Projected Revenue $13,000,000+$14,850,000=
$27,850,000
Cost 5,500,000 X 0.99 =
$5,445,000
Gross Profit $22,405,000
EXPENSES
SG&A $160,000
Marketing $1,200,000 X 4 region =
$4,800,000
Broker’s fee (4% revenue) $367,400
Slotting fee 4 X $10,000 X 64 retails =
$2,560,000
NET PROFIT $14,517,600

32. To introduce 2 SKUs of a children multipack into the natural foods channel
Kelly Riley, the assistant marketing director

33.  The sales team confident to achieve distribution for 2 SKUs
 Good financial potential
 Would yield the largest profit contribution out of all the options
 The natural food channel growing 7 times faster than supermarket

34.  Missed opportunity to establish in the supermarket channel before
competitors
 The company won’t see a major expansion in the 8 oz. products, which
have the highest demand.

35. Channel Selling Price Margin Cost Price
Retailer $3.35 35%% $3.35 X (1-0.35) = $2.18
Distributor $2.18 9% $2.18 X (1-0.09) = $1.98
Natural food
wholesalers
$1.98 7% $1.98 X (1-0.07) = $1.84
Natureview Farm $1.84 ? $1.15
Margin of Natureview = 1- $1.15/$1.84 = 0.375

36. 2000 2001
Unit Sales 1,800,000 1,80,000 X 1.15 = 2,070,000
Revenue Growth 1,800,000 X 3.35 = 6,030,000 $2,070,000 X 3.35 =
$6,934,500
Projected Revenue $13,000,000+$6,030,000=
$19,030,000
$13,000,000+$6,934,500=
$19,934,500
Cost 1,800,000 X 1.15 =
2,070,000
2,070,000 X 1.15 =
$2,380,500
Gross Profit $16,960,000 $17,554,000
EXPENSES
Marketing $250,000 $250,000
Complimentary cases 6,030,000 x 0.025 = 150,750 6,934,500 X 0.025 = 173,363
NET PROFIT $16,559,250 $17,130,637

39. Yep.

40.  Financial success
 Concentration on a region instead of national,
making implementation easier
 Missing the chance to establish in supermarket
region would be a risk for the business in the
future
 More visibility of the product

41.  CHOOSING 6 BEST FLAVORS THAT WERE SOLD THROUGH NATURAL FOODS
 HIRING TALENT KNOWLEDGEABLE OF SUPERMARKET CHANNEL
 START TO DEVELOP RELATIONSHIPS WITH SUPERMARKET DISTRIBUTORS