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Natureview Case Study

Natureview Farm's goal is to increase revenue by 50% but must decide which product line to promote. Option 1 is recommended: expand 6 SKUs of the popular 8-oz yogurt cups into 1-2 supermarket regions. This option is expected to increase revenue the most above the $20M target, gives a first-mover advantage in supermarkets as an organic brand, and capitalizes on high demand for 8-oz cups. There are short-term risks like high promotion costs but the long-term revenue gain outweighs these.

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Sheetal Rani
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143 views3 pages

Natureview Case Study

Natureview Farm's goal is to increase revenue by 50% but must decide which product line to promote. Option 1 is recommended: expand 6 SKUs of the popular 8-oz yogurt cups into 1-2 supermarket regions. This option is expected to increase revenue the most above the $20M target, gives a first-mover advantage in supermarkets as an organic brand, and capitalizes on high demand for 8-oz cups. There are short-term risks like high promotion costs but the long-term revenue gain outweighs these.

Uploaded by

Sheetal Rani
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
Download as pdf or txt
Download as pdf or txt
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Decision Sheet

Name: Sheetal Rani

Register number: 2128151

Date: 5th September 2022

Case analysis

Problem statement

Natureview Farm’s revenues had grown from a 100 thousand dollars to 13 million dollars. Now the main
problem is the company wants to increase its revenues by 50% but the confusion is to promote which
product line in order to achieve the target.

SWOT Analysis

Strengths Weaknesses

• No artificial, natural ingredients • Highly dependent on brokers


• Market leader with 24% share in Natural Foods • Only in natural food channel/not supermarket
Channel • Still a small share in the full yogurt market
• Highest shelf-life products
• Strong Channel Partner Relationships

Opportunities Threats

• 12.5% growth rate with multi-packaged • Not sufficient capital and financing options
products for children • No experience with supermarket channel
• Supermarket channel • Competition intensifying; Horizon Organic with
19% market share
• Cannibalization of sales

Option 1

Expand 6 SKUs of the 8-oz. product line into one or two selected supermarket channel regions.

Pros:

• 8-oz. cups have the largest dollar and unit share of market, along with highest incremental
demand
• First-mover advantage as an organic yogurt brand to enter the supermarket channel
• Other natural brands have successfully expanded to supermarkets

Cons:

• High level of competitive trade promotion and marketing spend


• Possible conflict of interests between supermarkets and natural foods stores
• Lack of sales experience in dealing with supermarket channels

Option 2

Expand 4 SKUs of the 32-oz. product line nationally through supermarket channel

Pros:

• 32-oz. cups have a higher profit margin than 8-oz. cups


• Fewer competitive offerings in this size
• Strong competitive advantage in terms of shelf-life
• Lower promotion expenses

Cons:

• Higher slotting fees due to nation-wide distribution


• Possible conflict of interests between supermarkets and natural foods stores
• Doubtful of new users would readily enter the brand via multi-use products.
• Doubtful if existing sales team can achieve nation-wide distribution in 12 months.

Option 3

Expand 2 SKUs of the children’s multi pack into the Natural Foods channel

Pros:

• Existing strong relationships with leading natural food channel retailers


• The sales team was experienced in this distribution channel
• Financially attractive – the natural foods channel was growing 7 times faster than the
supermarket channel

Cons:

• Rapid growth of Natureview Farms in the natural food channel might lead to bigger demands
from retailers, similar to the case of supermarket channel
• Missing out on the opportunity to become the first-mover in the supermarket channel

Recommendation: Option 1

Channel Selling Price Cost Price Margin


Retailer $0.74 0.73 * $0.74 = $0.54 27%
Distributor $0.54 0.85 *$0.54 = $0.46 15%
Supplier (Natureview) $0.46 $0.31 33%

Year 2000 2001


Incremental Unit Sales 35000000 35000000 * 1.2 = 42000000
Revenue 35000000 * $0.46 = $16100000 42000000 * $0.46 = $19320000
Cost of Production 35000000 * $0.31 = $10850000 42000000 * $0.31 = $13020000
Gross Profit $5250000 $6300000
Advertising Cost $1200000 * 2 (regions) = $2400000 $1200000 * 2 (regions) = $2400000
SG&A $320000 $640000
Slotting Fees $10000 * 6 SKUs * 20 retailers = NA
$1200000
Broker Fees $16100000 * 0.04 = $644000 $19320000 * 0.04 = $772800
Net Expense $4564000 $3812800
Net Profit $686000 $2487200

Option 1 should be pursued for the following reasons


• Returns the highest expected increase in revenue among the three options.
• Total revenue by 2001 is $32,320,000, which is well above the target $20 million
• First-mover advantage of organic yogurt manufacturer to the supermarket channel.
• Exposure to a larger range of customers
• 8 oz. yogurt cups have the maximum demand
• Short-term risk is compensated by large long-term revenue increase

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