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Nature view farm
- 1. Case Study
- 2. Lets start
- 3. About the company 1989 Founded and manufactured in Cabot, Vermont First enter market 8-oz and 32-oz with plain and vanilla flavor Use 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 Expand to 12 yogurt flavors & multipack yogurt (for children)
- 4. The 4PS Natural yogurt (organic) 8 oz. size with 12 flavors 32-oz. size with 4 flavors Affordable according to its channel Product Price Place Promotion Natural food channel Wholesale club National retailer channel Convenience and drug store Its natural flavor with high quality and great taste growth in the national distribution and natural food channel Low-cost guerilla marketing
- 5. MARKET SHARE BY PACKAGING SEGMENT 74% 9% 8% 9% 8-oz. cup smaller Children's multipacks 32-oz. cups Others
- 6. MARKET SHARE BY REGION 26% 22% 25% 27% Northwest Midwest Southwest West
- 7. Dannon 33% Yoplait 24% Others 23% Private Label 15% Columb o 5% Naturevi ew Farm 24% Brown Cow 15% Horizon Organic 19% White Wave 7% Others 35% MARKET SHARE BY BRAND Supermarket Natural Market
- 9. Strength Strong brand No artificial thickeners used Unique, smooth and creamy texture of yogurt Usage of natural ingredients Longer shelf life and low cost
- 10. Weakness No alternative financing available Lacks potential of taking higher risks and costs Doubt on sales teams ability
- 11. Strong relationships with leading natural foods retailers Opportunity
- 12. Accumulation of cash by Horizon from IPO Being dropped out of traditional channel Threats
- 13. Natural Food Channel Supermarket Food Channel Manufacturing Cost 8-oz. cup $ 0.88 $ 0.74 $0.31 32-oz. cup $ 3.19 $ 2.70 $0.99 4-oz. cup multipack $ 3.35 $ 2.85 $1.15 Retail Prices By channel
- 14. Which one to choose??
- 15. OPTION 1: Expand 6 SKUs of the 8-oz into eastern and western supermarket regions PROS: 8-oz have highest incremental demand High potential to increase revenue First mover as organic yogurt brand to enter supermarket channel CONS: 8-oz have highest incremental demand High potential to increase revenue First mover as organic yogurt brand to enter supermarket channel
- 16. Supermarket channel margin analysis Channel Selling price Margin Cost price Retailer $0.74 27% $0.74 x 73% = $0.54 Distributor $0.54 15% $0.54 x 85% = $0.46 Natureview $0.46 ($0.46/$0.31)/$0.46 =33% $0.31
- 17. Projection income statement 2000 2001 Unit Sales 35 000 000 35 000 000 x (1+20%) = 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 Advertisement $ 1 200 000 x 2 region = $ 2,400 000 $ 2,400 000 SG&A $ 320 000 $ 640 000 Slotting Fee 6 x $ 10 000 x 20 retails = 1200 000 Brokers Fee $ 16 100 000 x 0.04 = $ 644 000 $ 19 320 000 x 0.04 = $ 772 800 Net Profit $ 23, 486 000 $ 27, 247 200
- 18. OPTION 2: Expand 4 SKUs of the 32-oz size nationally into supermarket regions PROS: Generate higher profit margin than 8-oz size Strong competitive advantage: longer shelf life Lower promotion expenses CONS: Doubt on claim of new users would readily enter the brand via a multi-use size Doubt on sales teams ability to achieve full national distribution in 12 months The 32-oz. expansion option would increase SG&A expense by $160,000
- 19. Channel Selling price Margin Cost price Retailer $2.70 27% $2.70 x 73% = $0.1.97 Distributor $1.97 15% $0.54 x 85% = $1.67 Natureview $1.67 ($1.67/$0..99)/$1.67 =41% $0.99 Supermarket channel margin analysis
- 20. 2000 2001 Unit sales 5,500,000 5,500,000 Revenues growth 550000 x 2.70 = 14,850,000 14,850,000 Projected revenue 14850000 + 13000000 = 27,850,000 27,850,000 Cost 5500000 x 0.99 = 5445000 5445000 Gross profit 9,405,000 22,405,000 Expense: Slotting fee 4 x 10000 x 64 = 2,560,000 0 SG & A 160,000 160,000 Marketing 120000 x 4 = 480000 480,000 Broker's fee (4% revenues) 367,400 367,400 Net profit 18,837,600 21,397,600 Projection income statement
- 21. OPTION 3: Introduce two SKUs of a children multipack into the natural foods channel PROS: The sales team was confident that they could achieve distribution for the two SKUs. The financial potential was very attractive. The natural foods channel was growing almost seven times faster than the supermarket. CONS: There were many potential conflicts and other uncertain factors that the manager could not determine Can not achieve the target objective of Natureview farm
- 22. Nature Food Channel Margin Analysis Channel Selling Price Margin Cost Price Retailer $3.35 35% $3.35 x 65% = $2.18 Distributor $2.18 9% $2.18 x 91% = $1.98 Nature foods wholesalers $1.98 7% $1.98 x 93% = $1.84 Natureview $1.84 ($1.84 - $1.15) / $1.84 =38% $1.15
- 23. Projection income statement 2000 2001 Unit sales 1,800,000 1,800,000 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 Revenue projection 6,030,000 + 13,000,000 = 19,030,000 6,934,500 + 13,000,000 = 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 Expense: Marketing 250,000 250,000 Complementary cases 6,030,000 x 2.5% = 150,750 6,934,500 x 2.5% = 173,363 Net profit 16,559,250 17,130,637
- 24. Comparison Of Options for year 2001 Option Option 1 Option 2 Option 3 Gross Margin 33% 41% 38% Unit sales 42, 000 000 5,500,000 2,070,000 Revenue projection 44, 080 000 27,850,000 19,934,500 Cost $ 13 020 000 $ 5 445 000 $ 2,380,500 Gross profit $ 31, 060 000 22,405,000 17,554,000 Expense: SG & A $ 640, 000 160,000 0 Marketing $ 2, 400, 000 480,000 250,000 Broker's fee (4% revenues) $ 772, 800 367,400 0 Complementary cases 0 0 173,363 Net profit $ 27, 247, 200 $ 21,397,600 $ 17,130,637
- 25. Decision Matrix Option 1 Option 2 Option 3 Exceeds Exceeds Falls Short No No Gain High High Low Highly Alienating Alienating Enhancing Very Risky Risky Low High Very High Low Possible Possible No Low Low High Decision Parameter Revenue Objective Short Term Profits Long Term Profits Channel Partners Competitive Response Cost to Induce Trial Brand Equity Dilution Organizational capabilities
- 26. FINAL DECISION 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% OPTION 1!!!
- 28. Credits Websites www.google.com www.hbr.org www.youtube.com
- 29. Disclaimer This presentation was made by Pranjal Dixit IIT Kanpur during a marketing intern under Prof. Sameer Mathur IIM Lucknow. (See www.IIMInternship.com)