natureview farm harvard business review case analysis

NAT U R E V I E W FA R M C A S E S T U DY AN ALY S I S O N

W H AT I S T H E

C A S E ?

N AT U R E V I EW FA R MFO U NDE D 1 9 89

MANUFACTURER OF REFRIGERATED CUP YOGURT

NEEDS TO INCREASE REVENUES BY 50% IN 2 YEARS

NAT U R E V I EW FA R M YOG U RT

SMOOTH, CREAMY TEXTURE WITHOUT ARTIFICIAL THICKENERS AS OPPOSED TO COMPETITORS

NATUREVIEW FARM’S YOGURT’S AVERAGE SHELF LIFE WAS 50 DAYS COMPARED TO COMPETITORS’ 30 DAYS

1 9 8 9 -2 0 0 0

T H E Y E A R S O F GR O W T H

REVENUES FROM LESS THAN $100,000 TO $13 MILLION

OFFERS TWO SIZES OF YOGURT- 8 & 32 OUNCES

VANILLA AND PLAIN FLAVOURS TO 12 OTHERS

P R E S E N T S C E N A R I

O

GREW TO NATIONAL DISTRIBUTION

SHARED LEADERSHIP IN THE NATURAL FOODS CHANNEL

REVENUES CAME 86% FROM 8oz. PACKAGES AND 14% FROM 32oz. PACKAGES

R E F R I G E RAT E D YO G URT C AT E G O RY

TOTAL SALES $1.8 BILLIONYOGURT MARKET BY SHARE AND

REGION MARKET SHARE

R E F R I G E RAT E D YO G URT C AT E G O RY

97%

3%

yogurt sales

Supermarkets Natural Food Stores

46%

29%

25%

ORGANIC YOGURT MARKET

Supermaret Natural Food Stores Small Health Stores

S A L E S & D I S T R I BU T I ON CH A NNE L S

SU PE R M A R K E T C H A N N E L

MANU FACT UR ER

D IS TR I BU T OR

RETA I LER

CU ST OME R

15%

27%

DISTRIBUTION MARGINS

SLOTTING FEE- $10000 PER SKU PER RETAIL

CHAIN

ADVERTISEMENT COSTS-

NORT H E A S T, M ID W E S T , SO U T H EA S T

$75 00

WEST $80 00

N AT U RA L F O O D S C H A N N E LMANU FACT UR ER

WH OL ES ALER

D IS TR I BU T OR

RETA I LER

7%

9% DISTRIBUTION MARGINS

CU ST OME R

35%

NO SLOTTING FEE

MINIMAL ADVERTISEMENT

COSTS

SALES WITH SUPERMARKET CHANNELS MAY ALIENATE THE NATURAL FOODS CHANNEL

3 OP T I ONS T O R E ACH

T H E TA R G E T

OPT I ON 1

EXPAND SIX SKUs OF THE 8oz. PRODUCT LINE INTO ONE OR TWO SELECTED SUPERMARKET

CHANNEL REGIONS

WH Y ?

• 8oz. REPRESENTS LARGEST DOLLAR SHARE OF REFRIGERATED YOGURT

• COMPETITORS WERE SUCCESSFUL IN SUPERMARKETS

• FIRST MOVER ADVANTAGE

STRENGTH

• Organic high quality natural yogurt

• First mover in the supermarkets with organic yogurt

WEAKNESS

• High marketing costs

• High slotting fee

OPPORTUNITY

• Huge potential in the supermarket chain

• High demand for 8oz. yogurt

THREAT

• Various competitors

• New entrants in the organic yogurt

S WOT A NA LY S I S

CURRENT ASSETS 2000 2001

Units US$ 3,50,00,000.00 US$ 3,60,50,000.00

Price Per Unit US$ 0.74 US$ 0.74

Revenues From Natural US$ 1,30,00,000.00 US$ 1,30,00,000.00

REVENUE US$ 3,89,00,000.00 US$ 3,96,77,000.00

F I NA NC I AL V I AB I L I TY

THIS PROPOSAL IS FINANCIALLY VIABLE

OPT I ON 2

EXPAND FOUR SKUs OF THE 32oz. PRODUCT LINE NATIONALLY IN SUPERMARKETS

WH Y ?

• PROFIT MARGINS OF 32oz.(43.6%) ARE HIGHER THAN THAT OF 8oz.(36%).

• COMPETITIVE ADVANTAGE IN THE SEGMENT

• LOWER MARKETING EXPENSES

STRENGTH

• High Gross Profit Margins on 32oz. yogurt

• Lower marketing costs as compared to 8oz. yogurt

WEAKNESS

• High slotting fee

• Higher marketing costs than natural foods channel

OPPORTUNITY

• Low prevailing size offering in the sector

• Increasing health conscious consumers

THREAT

• May damage existing relationship with natural foods chain retailers

• New entrants in the organic yogurt

S WOT A NA LY S I S

CURRENT ASSETS 2000 2001

Units US$ 55,00,000.00 US$ 56,65,000.00

Price Per Unit US$ 2.70 US$ 2.70

Revenues From Natural US$ 1,30,00,000.00 US$ 1,30,00,000.00

REVENUE US$ 2,78,50,000.00 US$ 2,82,95,500.00

F I NA NC I AL V I AB I L I TY

THIS PROPOSAL IS FINANCIALLY VIABLE

OPT I ON 3

INTRODUCE TWO SKUs OF THE CHILDREN’S MULTI-PACK PRODUCT LINE INTO NATURAL FOODS

CHANNEL

WH Y ?

• HIGH FINANCIAL POTENTIAL

• LACK OF EXPERTISE FOR SUPERMARKETS

• BEST PRODUCT POSITIONING

STRENGTH

• Low marketing costs

• Efficacy in handling natural foods chain

WEAKNESS

• Natural Foods Channel accounts for just 3% of yogurt sales

OPPORTUNITY

• Fast growing(12.5%) sector for yogurt

• Increasing health conscious consumers

• Already has a high market share, and can increase it even further

THREAT

• Various competitors

• New entrants in the organic yogurt

S WOT A NA LY S I S

CURRENT ASSETS 2000 2001

Units US$ 18,00,000.00 US$ 20,70,000.00

Price Per Unit US$ 3.35 US$ 3.35

Revenues From Natural US$ 1,30,00,000.00 US$ 1,30,00,000.00

REVENUE US$ 1,90,30,000.00 US$ 1,99,34,500.00

F I NA NC I AL V I AB I L I TY

THIS PROPOSAL IS FINANCIALLY UNVIABLE

• ACCORDING TO THE ANALYSIS, OPTION 1 SHOULD BE FOLLOWED FOR IT LEADS TO THE HIGHEST REVENUES, AND CONSEQUENTLY, PROFITS

CO N CLU S I O N