natureview farm : case review hbr

NATUREVIEW FARMCASE STUDY

HARVARD BUSINESS SCHOOL CASE

What Is NATUREVIEW?Nature View

Inc., is a small yogurt manufacturing company

that was started in

1989.

Company Background

1989

•Company was founded in Vermont.

•Manufactured and marketed yogurt.

1999

•Company profits grew to $13million.

•Fruit on the bottom yogurt.

2000

•Expand to multi pack yogurt(for children).

•Expand to 12 flavors for 8-oz. packing.

•Developed strong relation with natural food retailer chains.

PERSON OF INTEREST

• Vice President : Christine Walker

• Chief Financial Officer : Jim Wagner

• Chief Executive Officer : Barry Landers

• Vice President, Sales : Walter Bellini

• Vice Presi., Operations : Jack Gottlieb

• Asst. Marketing Director : Kelly Riley

EARLYDAYS

IN

1989 Entered

market with 8oz and 32 oz cups.

VARI

ETY Initially had only 2 flavours: plain and vanilla

Started as $100,000 million company in 1989.

PROGRESSFlavored yogurt

production led to brand extension. New equipments

were needed eventually.

National distribution and

shared leadership in natural foods

channel.

Aided by low cost “guerilla

marketing” tactics, they grew int $13

million company in 2000.

Strengths:1. Strong brand2.Low cost3.No artificial thickeners4. Longer shelf life

Weakness:1. No alternative

financing available 2. doubts sales

team ability

Opportunity:Strong relation with leading nature food retailers. Threats:1. Accumulation of

cash by horizon from IPO.

2. Being dropped out of traditional

channelNatureView FarmANALYSI

S

ISSUE

VC needed to cash out of its

investment.

Need to make company revenue $20 million

before 2001 end.

They need another investor or position itself

for acquisition hence, need highest possible

valuation.

THE BIG QUESTION ..!!!

Should NatureView expand Into

SUPERMARKET Channel?

THE BIG QUESTION ..!!!

How to RETAIN its traditional channel

Retailers, Customers and Suppliers if it enters

Supermarket Channel..??

NV Income Statement,1999

MAJOR PROBLEMS

How to reach

$20million target by 2001

end?

Supermarket

Channels vs.

Natural Food

Stores

Analysis of senior managem

ent team’s three

options.

• Increase product sale.• Increase product line and quality.• Adopt more efficient techniques to maximize revenue.• Increase shelf life further to expand market to farther places.

HOW to reach $20 million Mark…???

INCREASE MANUFACTURING

ADD MORE NUMBER OF PACKS IN A CASE

ENTER SUPERMARKET CHANNEL

EXPLORE OTHER SUCH CHANNELS

INTRODUCE MORE FLAVORS

SALES BOOSTING STRATEGIES

YOGURTSALES

DISTRIBUTION

CHANNELS

• Supermarket

• Natural food retail stores

DOMINANT

• Warehouse clubs

• Drug stores

• Mass merchandiser

Minor

Where do people buy

Organic products from?

Factors affectingYOGURT CHOICE…!!

Package size/shape Flavours Price

Freshness Ingredients Organic or not

Yogurt Market Share by Packaging

Segment, 1999

NATURAL

FoodCHANNEL

MANUFACTURER

NATURAL FOODS WHOLESALER (margin 7%)

NATURAL FOODS DISTRIBUTOR (margin 9%)

RETAILER (margin 35%)

CONSUMER

SUPER-MARKE

TCHANNEL • OVERALL COST IS LESS.

MANUFACTURER

DISTRIBUTOR (15% margin)

RETAILER (27% margin)

CONSUMER

Yogurt production cost and retail

prices by channel

3 OPTIONS proposed by

SENIORMARKETINGTEAM

OPTIONS and DILEMMA

OPTION 1By

WALTER BELLINI,VICE PRESIDENT,SALES

PROS

8-oz have highest incremental demand

High potential to increase revenue.

First mover as organic yogurt brand to enter supermarket channel.

CONSHigh risk and high cost (marketing)

Require quarterly trade promotions.

Advertising will cost $1.2 million per region per year.

SG&A expenses increase by $320,000 per annum.

Need to pay one time slotting fee.

OPTION 2By

JACK GOTTLEIB,VICE PRESIDENT,OPERATIONS

PROS

Generate higher profit margins than 8-oz. size.

Strong competitive advantage : longer shelf life

Lower promotion expenses.

CONS

Doubt if new user will accept the brand via multi use size.

Doubt on sales team capability to achieve full nation distribution in just 12 months.

Needs to hire sales personnel and develop relations with supermarket brokers.

The supermarket expansion will increase the SG&A expense by $160,000.

OPTION 3By

KELLY RILEY,ASSISTANT MARKETING

DIRECTOR

PROS

Sales team was confident that they could achieve distribution for two SKUs.

The financial potential was very attractive.

It would yield the strongest profit contribution among all the proposal

under consideration.The natural foods channel was growing

almost seven times faster than the supermarket channel.

CONS

There were many potential conflicts and other uncertain

factors that the manager could not determine.

Cannot achieve the target objective of NatureView

farm.

ANALYSINGthe

THREE OPTIONS

SALES PROJECTIONS

of NatureView’s options

COST ANALYSIS

Total Fixed cost for all the three options remains same.

Total cost= Total Fixed cost + Advertising cost + Promotion Cost + SKU cost

DIFFERENCE BETWEEN 3 OPTIONS

INFERENCES

drawn..

I. •As per cost analysis , option 3 seems to be the best option.

II.•Taking other factors into consideration

like distributor , retailer etc, option 3 has no risk of loss.

III. •However, sales team capabilities remain a big question In this option.

IV. •Still the overall risk factors are minimum in this case.

RECAP

• What is NatureView?• Brief company Background and key

personnel• Early days and progress of company• Major issues addressed in the case• How to increase sales and revenue• Survey exhibits & factors affecting

yogurt choice• Supermarket Channels vs. Natural

Channels• Analysis of 3 proposed options• Difference between options• Inference

DISCLAIMERDISCLAIMERCreated by Anusha A. Sharma, VNIT

Nagpur, during Marketing Management Internship under Prof.

Sameer Mathur .