CASE A

NALYSIS

YOGURT

MANUFACTURER

PEOPLE AT AFFAIRS

CHRISTINE WALKERVice President Of Marketing

BARRY LANDERSChief Executive Officer

CURRENT SCENARIO

Find new investor Since VC needs to cash outits investment

Need to grow its revenue by 50 percent13 million20 million

Dilemma in enteringsupermarket channelLeader in naturalfoods channel

YOGURT PACKAGING SEGMENT

8 oz cups; 74%

children multipacks; 9%

32 oz cups; 8%

others; 9%

YOGURT MARKET SHARE BY REGIONNortheast

26%

Midwest22%Southeast

25%

West27%

YOGURT DISTRIBUTION CHANNEL

SUPERMARKET97%

NATURAL FOOD STORES3%

SUPERMARKET NATURAL FOOD STORES

LENGTH OF CHANNEL MARKET

YOGURT MARKET SHARES

Donnan33%

Yoplait24%

Other23%

Private label15%

Columbo5%

SUPERMARKET CHANNEL

Natureview Farm24%

Brown Cow15%

Horizon Organic19%

White Wave7%

Others35%

NATURAL FOOD STORES

YOGURT COSTS AND PRICESTYPE SUPERMARKET CHANNEL NATURAL FOODS

CHANNELNATUREVIEW’S COSTS

8-Ounce cup $.074 $0.88 $0.31

32-oz cup $2.70 $3.19 $0.99

4-oz cup multipack $2.85 $3.35 $1.15

SALES PROJECTION

OPTIONS

OPTION 1To expand six SKU’s of 8-oz product line in supermarkets

Mainly in northeast and west supermarkets

PROS CONS

Largest unit share of Yogurt

High potential to increase revenue

Expense of slotting fee

Advertising plan of $1.2 million per region per year

SG&A would increase by $320,000

Risk factor is high

OPTION2Expand four SKU’s of 32-oz size

Expanding it nationally in all supermarkets

PROS CONS

Higher gross-profit margin

Longer shelf life

Promotion expenses lower since only two promotions a year

Doubt prevails whether users will enter the multi-use size

Should hire more sales personals

Increase of SG&A by $160,000

OPTION3Introduce two SKU’s of children’s multipack

Staying back in natural foods channel

PROS CONS

Strong establishment in natural foods channel

Growth rate of natural foods channel is faster as seven percent as supermarket channel

Distribution of two new products is easy

Target objective of $20 million is almost impossible to achieve

Many conflicts and undeterminable factors

Decision MAKINGOPTION 1Strength Best possible chance of achieving a revenue of $20 million. 8-oz has highest demand and more market share. Exposure to supermarkets increase revenue since it

contributes to 97% of Yogurt consumed. Long term revenue benefits. It has the highest anticipated incremental sales in the

projection. First mover advantage.

WEAKNESS Risk of losing their natural food store distribution

channel. Increased expense on advertising and SG&A.

SUPERMARKET CHANNEL ANALYSISChannel Selling Price Margin Cost price

Retailer $0.74 27% $0.74*73%=$0.54

Distributor $0.54 15% $0.54*85%=$0.46

Nature view $0.46 ($0.46-$0.31)/$0.46=33%

$0.31

PROJECTED INCOME ANALYSIS2001

Unit Sales 35 000 000*(1*20%)=42 000 000

Revenue GrowthProjected Revenue

42 000 000*0.74= $31 080 000$13 000 000+$31 080 000=$44 080 000

Cost 42 000 000*0.31=$13 020 000

Gross Profit $31 060 000

Expenses

Advertisement $2,400 000

SG&A $640 000

Slotting Fee 0 (since second year after introduction)

Broker’s Fee $ 19 320 000*0.04=$772 800

Net Profit $ 27,247,200