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Farm
Group 4
Section A
l Chhabra | Abhishek Biswas | Chetan Dua | Diwaker Redhu | Kartikeya Bahl | Anubha
201001
|
150201002
| 150201029 | 150201035
| 150201041
| 150
Case
Overview
Natureview Farm
Timeline
1989: founded in Cabot, Vermount manufactured and
marketed refrigerated cup yoghurt with 2 flavors (plain and
Vanila)
Natureview Farm
Main Issues
An unplanned exit by its venture
capital investors
Natureview Farm
Market
Trend:
74%
67%
58%
44%
26%
Organic food market expected to grow from $6.5 billion(1999) to $ 13.3 billion in
worth in 2003
Characterstics of buyers:
High income
More educated
Live in northeast and west (majorly)
Natureview Farm
Market
Trend:
29%
46%
27%
25%
25%
supermarket
small health food store
narural food supermarket
Northeast
Southeast
26%
22%
Midwest
West
Natureview Farm
Market
Trend:
8%
12.50%
9%
9%
74%
3%
2%
Growth
8-oz cups and smaller
32-oz cups
childern's multipack
others
Natureview Farm
Market
Trend:
Distribution Channel
Sales
3%
Super
marke
t
Chann
el
Natur
al
foods
Chan
nel
97%
Natural foods
Supermarket
Natureview Farm
Length of
Channel
to Market
Natureview Farm
Competitor
s:
33%
7%
24%
Yoplait
Columbi
24%
35%
23%
Dannon
Private label
Others
15%
19%
Natureview Farm
Horizon Organic
Others
Brown Cow
White Wave
Natureview Farm
The
Challenge:
Income statement, 1999
Revenues
COGS
Gross Profit
Expenses
Administration/freight
Sales
Marketing
Research and development
Net Income
13000000
8190000
4810000
2210000
1560000
390000
390000
260000
Natureview Farm
The
Challenge:
8-Oz. Cups
86%
3%
1999
2000
2001
1118000
11515400 11860862
0
32-Oz. Cups
14%
2%
1820000
Total
Revenues
1856400
1893528
1300000
0
13371800 13754390
Natureview Farm
Growth
Strategies:
Current Product New Product
Current Market
New Market
Market
Penetration
Strategy
Product
Development
Strategy
Market
Development
Strategy
Diversificati
on
Natureview Farm
Options:
Natureview Farm
Option 1:
Mr. Walter Bellini, Vice President Of
sales
Expand 6 SKUs of the 8-oz Size into
eastern and western supermarket
Regions.
Natureview Farm
Option
2:
Mr. Jac
k
Operat Gottlieb, Vice
ions
Preside
nt Of
Expan
d 4 SK
Us of t
Nation
he 32ally int
oz Size
o supe
r marke
t Chan
nel.
Natureview Farm
Option 3:
Ms. Kelly Riley, the assistant
marketing Director
Introduce 2 Childrens
Multipack into Natural Foods
Channel
Natureview Farm
Natureview Farm
sales price
retailer margin(27%)
price to retail
distributor margin( 15%)
sales price for natureview
0.74
0.20
0.54
0.08
0.46
Number of regions
2
(Northeast and
west)
Retailers
20
Natureview Farm
Incremental
Income Statement
Expected sales in units
Price per unit
Revenue
Cost per unit
COGS
Advertising Expense
Advertising per region
Total
Trade Promotion
Cost per promotion per retailer(Northeast)
Number of retailers
Cost per promotion per retailer(west)
Number of retailers
Promotion periods per year
Total cost of promotions
Net Profit
Option 1
2000
35,000,000
0.46
16,100,000
0.31
10,850,000
1,200,000
2,400,000
120,000
200,000
644,000
964,000
6
10,000
20
1,200,000
7,500
11
15,000
9
4
870000
-184,000
2001
42,000,000
0.46
19,320,000
0.31
13,020,000
1,200,000
2,400,000
120,000
200,000
772,800
1,092,800
7,500
11
15,000
9
4
870000
1,937,200
Natureview
Farm
Natureview Farm
Natureview Farm
Fewer competition
Lower on average trade
promotion expense
Higher profit marginfor
32ozversus 8oz
Expected 1st year sales of 5.5
million units
High risk
sales price
retailer margin(27%)
price to retail
distributor margin( 15%)
sales price for natureview
Number 0f regions
Retailers
2.70
0.73
1.97
0.30
1.68
4
64
Natureview Farm
Incremental
Income
Expected sales in units
Price per unit
Revenue
Cost per unit
COGS
Advertising Expense
Advertising per region
Total
Trade Promotion
Option 2
2000
5,500,000
1.68
9,240,000
0.99
5,445,000
120,000
480,000
160,000
369,600
529,600
4
10,000
64
2,560,000
2001
5,500,000
1.68
9,240,000
0.99
5,445,000
120,000
480,000
160,000
369,600
529,600
Net Profit
8,000
64
2
1024000
-798,600
8,000
64
2
1024000
1,761,400
Natureview Farm
Natureview Farm
Natureview Farm
sales price
retailer margin(35%)
price to retail
distributor margin( 9%)
price to wholesaler
wholesaler margin( 7%)
Selling price for natureview
3.35
1.17
2.18
0.20
1.98
0.14
1.84
Natureview Farm
Incremental
Option 3
Income
2000
2001
1,800,000
2,070,000
1.84
1.84
Revenue
3,312,000
3,808,800
1.15
1.15
COGS
2,070,000
2,380,500
Marketing Staf
250,000
250,000
82,800
95,220
Total
332,800
345,220
Net Profit
909,200
1,083,080
Natureview Farm
Our
recommenda
tion:
Natureview Farm
First-Mover Advantage
Natureview Farm
Action
Plan:
Leverage the
relationship with
brokers to strike a deal
with supermarkets
Choose 6 SKUs to be
introduced in
supermarkets.
Partner with more than
one VC to minimize
risk.
Enter Super
Markets
Design Trade
promotions
Deploy maximum
resources to make
efective use of the
channel.
Have a sale and
marketing function
dedicated to
supermarket.
Try to maintain the
premium image of the
brand through unique
promotions
Diferential pricing
Incentivize retailers for
the perceived loss.
(Retailer Engagement
Schemes)
Work with retailers,
distributors and
wholesalers to reduce
cost, maintain margins &
decrease the price
diference.
Manage
Channel
Conflict
Natureview Farm
Any Questions?
Natureview Farm