Natureview case study analysis

Natureview Farm

Case study

• Founded in 1989

• Manufacturer and marketer

of refrigerated cup yogurt

• Key differentiators Natural ingredients

Longer shelf life

Reputation of high quality and great

taste

Natural/organic market trends

• Organic foods market predicted

to grow from $6.5 billion to $13.3

billion over 4 years.

• 67% households consider price as

a barrier to purchase organic

products

• 44% of consumers would like a

wider selection of organic

products in supermarkets

Yogurt market trends

• Concentrated – 4 competitors control over

50% share

• Supermarkets – 97% of sales (3% growth)

• Natural Food Stores- 3% total sales (20%

growth)

• Factors in purchasing decisions:

– Package type/size, flavour, price , freshness,

ingredients, organic.

Natureview

• Challenge : Identify path to grow revenues by

over 50% within 23 months

• Goal : Attain highest possible valutaion in

order to new investors or position itself for

acquisition.

3 Options to achieve

goal

1. Expand 6 SKU’s to the 8-oz

product line into one or

two selected supermarket

channel regions

2. Expand 4 SKU’s of the 32-

oz product line

3. Expand 2 SKU’s of a

children’s multi pack into

the natural foods channel

OPTION 1

SUPERMARKET CHANNEL

ENTRY ANALYSIS – (8-oz)

Pros

• 8-oz cups represent largest dollar and unit share of market

• Supermarkets fear losing market share to natural food competitors.

• First-mover advantage

• Supermarkets may only authorize one organic yogurt manufacturer

Cons

• Highest level of competitive trade promotion and marketing spend

• Possible channel conflict b/w supermarkets and natural food stores.

• Promotion and lower price at supermarkets may hurt the brand

• Little experience in dealing with supermarket chains

Analysis Calculations

Option 1 supermarket analysis

Chain level Margin Cost price Selling Price

Retailer 27%

$0.74 x 73% =

$0.54 $0.74

Distributor 15%

$0.54 x 85% =

$0.46 $0.54

Natureview

($0.46-

$0.31)/$0.46

= 33% $0.31 $0.46

Year 2000 Year 2001

Unit sales 3,50,00,000

35,000,000 x (1+20%) =

42,000,000

Revenue

35,000,000 x $0.46 =

$16,100,000

42,000,000 x $0.46 =

$19,320,000

Cost

35,000,000 x $0.31 = $10,

850,000

42,000,000 x $0.31 =

13,020,000

Gross profit

52,50,000

63,00,000

Expenses

Advertiseme

nt

1,200,000 x 2 regions =

2,400,000 24,00,000

SG&A 3,20,000 3,20,000

slotting fee

6 x 10000 x 20 retails =

1,200,000

Brokers's fee

$16,100,000 x 4% =

$644,000 $19,320,000 x 4% = $772,000

Net profit $686,000 $2,847,200


OPTION 2

SUPERMARKET CHANNEL

ENTRY ANALYSIS – (32-oz)

Pros

• 32-oz cups generate an

above average gross profit

margin (43.6% )

• Fewer competitive

offerings in this size

• Competitive advantage

due to long shelf life of

product

• Lower promotional

expenses than option 1

Cons

• Higher slotting fees for

wider supermarkets

• Such a larger distribution

over 12 months is difficult.

• Possible channel conflict

• Promotion and lower

prices at supermarket may

hurt the brand.

Option 2 supermarket analysis


Retailer 27%

$2.70 x 73%

= $1.97 $2.70

Distributor 15%

$1.97 x 85%

= $1.67 $1.97

Natureview

($1.67-

$0.99)/$1.6

7 = 41% $0.99 $1.67


Year 2000 Year 2001

Unit sales $5,500,000 $5,500,000

Revenue

5,500,000 x $1.67 = $

9,185,000 91,85,000

Cost

5,500,000 x $0.99 = $

5,445,000 54,45,000

Gross profit $3,740,000 $3,740,000

Expenses

Marketing

1,20,000 x 4 regions =

480,000 4,80,000

SG&A 1,60,000 3,20,000

slotting fee

4 x 10,000 x 64 retails =

2,560,000

Brokers's

fee $9,185,000 x 4% = $367,400 $367,400

Net profit $172,600 $2,572,600


OPTION 3

MULTIPACK-NATURAL

FOODS CHANNEL

Pros

• Strong relationships

with natural foods

channel retailers

• Financially attractive

due to high margins-

37.6%

• Low sales and

marketing expenses

Cons

• Fast growth of natural

foods channel leading to

high demands

• Miss opportunity to

enter supermarkets

before competitors

Option 3 natural foodchain analysis


Retailer 35%

$3.35 x 65% =

$2.18 $3.35

Distributor 9%

$2.18 x 91% =

$1.98 $2.18

Wholesaler 7%

$1.98 x 93% =

$1.84 $1.98

Natureview

($1.84-

$1.15)/$1.84

= 38% $1.15 $1.84


Year 2000 Year 2001

Unit sales 18,00,000

1,800,000 x (1+15%) =

2,070,000

Revenue

1,800,000 x $1.84 =

$3,312,000

2,070,000 x $1.84 =

$3,808,000

Cost

1,800,000 x $1.15 =

$2,070,000

2,070,000 x $1.15 =

$2,380,500

Gross profit $1,242,000 $1,428,300

Expenses

Marketing 2,50,000 2,50,000

Complement

ary case 3,312,000 x 2.5% = 82,800 3,808,000 x 2.5% = 95,220

Net profit $909,200 $1,083,080


Recommendations

• Option 1 is financially good

• Only regional wise distribution rather than

national making it to implement easily

• First mover advantage and market

penetration

• High slotting fees, but more visibility of

product

Implementation adjustments

• Introduce mix of best flavors that were sold in Natural Foods channel

• Monitor sales trends and change accordingly

• Develop relationships with supermarket distributors

• Maintain relationships with natural foods channel by reducing manufacturer selling cost.

• Work with each chain level to reduce costs and maintain margins.

Thank You!

DISCLAIMER

Created by Deeban Babu, IIT Madras, during a

marketing Internship by Prof. Sameer Mathur,

IIM Lucknow.

Natureview case study analysis

Marketing

Transcript of Natureview case study analysis