natureview project_group5_section a.pptx

8/14/2019 Natureview Project_Group5_Section A.pptx

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NATUREVIEW FARM

– SECTION A

2013

Name Roll No Ashish PGP29009 Diana PGP29004 Chandan PGP29017 Ram Moorthy

PGP29023

Saurav PGP29015 Praveen PGP28187 Nidhi PGP29011



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 foodsstores.

• 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.2



PROBLEM STATEMENT

• Natureview Farm needs to choose between

3 distribution models and product choices toincrease its revenues to $20million before

the end of 2001 from $13 million reported in

1999.

3



SWOT ANALYSIS

4

SWOT

Long product shelf life

Reputation of high quality,taste and natural ingredients

Strong relationship withnatural store retailers

Strong reputation for high

quality and great taste. Shared leadership in the

natural food channel ofyoghurt

WEAKNESS

ES

STRENGTH

S Small manufacturer, low

funds and revenue

Relies on brokers that maynot be adequate forsupermarket channel

Current marketing strategybased only on natural storechannel



SWOT ANALYSIS

5

SWOT

Organic food market

expected to growto $13.3billion in 2003

Natural store channel salesup 20%

12.5% growth in 4

oz multipack

Increase in consumerinterest in organic food

THREATSOPPORTUNITI

ES

Competition(both in

regular yogurt and organicyogurt)

Increasing natural storechannel demands on logisticsor technology

Increasingly price sensitiveconsumers in the organicmarket



LENGTH OF CHANNELS TO

MARKET

6

Distributor Natural FoodsWholesaler

Manufacturer Manufacturer

Natural FoodsDistributor

Retailer Retailer

Customer Customer

Supermarket Channel Natural Foods Channel



CHANNELSSupermarket 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 broker’s 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 forevery 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%

7

Other Channels Warehouse Clubs

Convenience Stores

Drug Stores

Mass Merchandisers



OPTION 1 - EXPAND 6 SKUS OF THE8 OZ PRODUCT LINE INTO 1 OR 2

SELECTED SUPERMARKET CHANNELREGIONS

Pros Cons

8 oz. cups represent largest dollar and unitshare of market

Highest level of competitive tradepromotion and marketing spend

Supermarkets fear losing market share tonatural food competitors

Possible channel conflict betweensupermarkets and natural food stores

Other natural foods brands havesuccessfully expanded to supermarkets

Promotion and lower price at supermarketsmay hurt the brand

First-Mover Advantage Little experience in dealing with

supermarket chainsSupermarkets may only authorize oneorganic yoghurt manufacturer

Balance between shelf presence andslotting expense

8



OPTION 2EXPAND 4 SKUS OF THE 32 OZPRODUCT LINE NATIONALLY

Pros Cons

32-oz cups generate an above averagegross profit margin (43.6% versus 36% for8-oz line)

Higher slotting fees due to nationaldistribution

Fewer competitive offerings in this size National distribution will be challengingwithin 12 months

Competitive advantage due to long shelflife of product

No guarantee that customer awareness ofthe brand would grow

Lower promotional expenses than Option-1 Possible channel conflict betweensupermarkets and natural food store

Promotion and lower price at supermarketsmay hurt the brand

9



OPTION 3 – EXPAND 2 SKUS OF ACHILDREN'S MULTIPACKS INTO THENATURAL FOODS CHANNEL

Pros Cons

Natureview already has strong

relationships with leading natural foodschannel retailer

Miss opportunity to enter supermarkets

before competitors

More time to prepare the company formoving into the supermarkets

Natureview Product positioning is ideal fora children’s multipack product launch

Financially attractive

High margin – 37.6%

Low sales and marketing expenses

10



OPTION 1- RATE 3%

11

Sl No 2000 2001 2002 1 No. of Units 35,000,000 36,050,000 38,213,000 2 Retailer's Selling Price 0.74 0.74 0.74 3 Natureview's Selling Price 0.51 0.51 0.51 4 Manufacturing Cost Per

Unit 0.31 0.31 0.31 5 Sales (1*2) 17,850,000 18,385,500 19,488,630 6 Brokerage Fee (0.4*5) 714,000 735,420 779,545 7 Slotting Cost 1,200,000 - -

8 SG & A 320,000 320,000 320,000 9 Advertising 2,400,000 2,400,000 2,400,000 10 Trade Promotion 90,000 90,000 90,000 11 Manufacturing Cost (4*1) 10,850,000 11,175,500 11,846,030 12 Total Cost (6`11) 15,574,000 14,720,920 15,435,575 13 Profit (5-12) 2,276,000 3,664,580 4,053,055



OPTION 2 - RATE 2%

12

2000 2001 2002 No. of Units 5,500,000 56,10,000.00 58,34,400.00Retailer's Selling Price 2.7 2.7 2.7 Natureview Selling Price 1.84 1.84 1.84 Manufacturing Cost Per Unit 0.99 0.99 0.99 Sales 10,120,000 10,322,400 10,735,296

Brokerage Fee 404,800 412,896 429,412

Slotting Cost 2,560,000 - -

SG&A 160,000 160,000 160,000

Advertising 1,024,000 1,024,000 1,024,000

Trade Promotion 480,000 480,000 480,000

Manufacturing Cost 5,445,000 5,553,900 5,776,056

Total Cost 10,073,800 7,630,796 7,869,468

Profit 46,200 2,691,604 2,865,828



OPTION 3

13

2001 2002 2003 2004 No. of Units Sold 1,800,000 2,070,000 2,380,500 2,737,575

Retailer's SP 3.35 3.35 3.35 3.35 Natureview's SP 1.84 1.84 1.84 1.84 Manufacturing Cost PerUnit 1.15 1.15 1.15 1.15 Total Sales 3,312,000 3,808,800 4,380,120 5,037,138



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 mover’s advantage

and also position itself in the 8 oz category.

14



15

THANK YOU

natureview project_group5_section a.pptx

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