Natureview Farm Solution

THE NATUREVIEW FARM

A HARVARD BUSINESS SCHOOL CASE

TARGET

INCREASE REVENUES BY 50%

COMPANY HISTORY :

Entered the market in the year 1989

JIM WANGLER the company CFO Hired in 1996 developed financial controls which brought steady profit to company

In 1997 company arranged funds from a VC firm to fund strategic investments

PROBLEM

THE VCs NEED TO CASH OUT THEIR INVESTMENT IN NV FARM.NV NEEDS TO FIND NEW INVESTORS OR BRACE ITSELF FOR A TAKEOVER AND INCREASED REVENUE SHALL HELP IN MAXIMUM POSSIBLE VALUATION

ADVANTAGES WITH NV PRODUCTS :

1.Average shelf life of 50 days compared to competitors 30 days

2.Cows untreated with RGBH and artificial and artificial growth Hormones

3.Due to larger shelf life there was less requirements of plants as larger time required to deliver the product to shelf from a far off plant can be afforded.

SUPERMARKETS NATURAL FOOD STORES

MARKET SHARE 97% 3%

GROWTH RATE 3% pa 20% pa

SHOPPER’S PROFILE

More Educated

High income group

Older

46% of organic product market

29% of organic product market

PRODUCTS1.Natural yogurt (organic)

•8oz size with 12 flavors

•32oz size with 4 flavors

PRICEAffordable according to the research by different channels

PLACE•Natural food channels•Wholesale club•National Retailer channel•Convenience and Drug store

PROMOTION•Low cost guerilla marketing•It’s natural flavor with high quality and great taste growth in national distribution and food channel

Sales

8oz32oz

86%

14%

Yogurt Market Share By Packing Segments:

Sales

8oz Smaller cupChildren Multipack32oz CupsOther

Yogurt Market Share By Regions:

Sales

NorthwestMidwest SouthwestWest

Channel to Market:

SUPERMARKET CHANNEL NATURAL FOOD CHANNEL

Manufacturer

Distributor

Retailer

Customer

15%

27%

Manufacturer

Natural Food wholesaler

Natural food distributer

Retailer

Customer

7%

9%

35%

Yogurt Sale By Brand:

Sales

Dannon

Yoplait

Private Label

Columbo

Others

Supermarket channel

Sales

Natureview FarmBrown CowHorizon OrganicWhite WaveOthers

Natural Food Channel

COST AND PROFIT ANALYSIS

NATURAL FOOD CHANNELS

SUPERMARKET FOOD CHANNELS

MANUFACTURING

8oz Cups $0.88 $0.74 $0.31

32oz Cups $3.19 $2.70 $0.99

4oz Cup Multipack $3.35 $2.85 $1.15

OPTIONS AVAILAIBLE

OPTION 1:

ADVISOR: Walter Bellini (VP SALES)

Expand 6 SKU (Stock Keeping Units) of 8oz Product Line into one or two selected Supermarkets

• 6 SKUs chosen are best selling of 8oz Line

• Provides enough Balance between having enough cups on shelf to provide good shelf presence while not incurring high slotting

expense

Reason For Advice:

•8 oz cups are the largest selling

• Same strategy has been used by other companies with success and

NV farm is in better position to exploit the idea

• Urgency due to rumors that another rival is about to expand

in supermarket and there is scope for only one expansion there.

• Higher Risk and cost due to high competition

• Advertisement: $1.2 million

• SG&A for sales staff:$200000

• SG&A for Marketing: $120000

•Requirement of One time slotting fee

• 1.5% Market Share by the end of 1st year if the broker could

exploit their contact well with top 11 chain of North East and

top 9 of West.

Profit and Loss Analysis:

Channel Selling Price Margin Cost Price

Retailer $0.74 27% $0.54

Distributor $0.54 15% $0.46

Nature view $0.46 33% $0.31

OPTION 2:

ADVISOR: Jack Gottileb ,VP Operations

Expand 4 SKUs of 32oz size nationally

REASONS:• Though smaller Market share but generates

above average profit for NV farm•Few competition due to longer shelf life .It is projected that company could sell 5.5 million units in 1st year ,it is required to expand in 64

supermarket chain.

•People may not enter the brand with 32oz cups• Sales team may fail to

achieve nationwide distribution in 12months• SG&A increases by

$160000

• Lack of Competition


Retailer $2.70 27% $1.97

Distributer $1.97 15% $1.67

Nature view $1.67 41% $0.99


OPTION 2:

Advisor: Kelly Riely (Assistant Marketing Director)

Expand 2 SKUs of Children Multipack in Natural Food Channels

Reason For Advice:

• Good relations with Natural Food Retailers could be exploited

•There are chances of damaging these relations in case of a supermarket expansion

• Lack of sufficient skill set to go ahead with supermarket expansion

• Sales team was confident of achieving distribution of 2SKUs in Limited time

• Attractive financial potential



Retailer $3.35 35% $2.18

Distributer $2.18 9% $1.98

Natural Food Wholesaler

$1.98 7% $1.84

Nature view $1.84 38% $1.15

OPTION 1 OPTION 2 OPTION 3

Gross Margin 33 41 38

Unit Sales 42000000 5500000 2070000

Revenue Projection $ 44080000 $ 27850000 $ 19934500

Cost $ 13020000 $ 5445000 $ 2380500

Gross Profit $ 31060000 $ 22405000 $ 17554000SG&A $ 640000 $ 160000 0

Marketing $ 2400000 $ 480000 $ 250000

Broker’s Fee 772800 367400 0

Complementary cases

0 0 0

Net Profit $ 27247200 $ 21397600 $ 17130637

Number Analysis:

DECISIONGo For Option 3:

Reasons:1. Does not damage the relations with Natural Chain Partners2. Net Profit, though lower than the other option remains a lucrative one

and completes the target3. The other options can be implemented a few years Later after proper

consultation with partners and sufficient planning4. Does not put undue pressure on the sales and marketing team 5. No Broker Fee involved6. No need of employing a new sales and marketing team7. A rather risk free option.

Disclaimer

These Slides Have Been prepared By Abhinav Pratyush of The Indian School of Mines ,Dhanbad during a marketing internship under Professor Sameer Mathur of IIM Lucknow

Natureview Farm Solution

Marketing

Transcript of Natureview Farm Solution