NatureView Farms: Yogurt manufacturer Yogurt Package: Package 8 oz. cup 32 oz. cup 4 oz.

z. cup multipack Natural Food Store Price $0.88 $3.19 $3.35 Supermarket Price $0.74 $2.70 $2.85

Product available in Natural Food Stores Good Brand Image in Natural Food Store channel Current Revenue = $13 million Target Revenue = $20 million in 2 years Considering expanding into Supermarket channel and does not want to hurt loyal natural food store customers Has three options to launch business into Supermarket channel

Market Facts: Yogurt is consumed by 40% of the US population Among those 70% are women Organic dairy products are bought by 74% of heavy organic buyers and 29% of light organic buyers For natural food buyers, factors to see when buying yogurt are ingredients and whether it is organic or not Factors to check when deciding which yogurt to purchase are package, size, price, flavor, freshness, ingredients and whether it was organic or not Shoppers at Natural Food Stores are older, educated and have higher incomes 46% of organic food consumers bought at supermarkets 25% bought at a small health store 29% at natural foods supermarket 67% of US households said price was a barrier to their purchase of organic products 58% said they will buy more organic products if price was less 44% consumers said there was need for wider selection of organic products

Option 1: Expand SIX Stock Keeping Units (SKUs) of 8 oz. cups into one or two selected supermarkets because: 8 oz. cup has the largest dollar and unit share of the refrigerated yogurt market Has Revenue potential Other brands have also expanded into Supermarkets Growing trend in natural and organic foods in Supermarket A competitor is also considering expansion into Supermarket and only one brand can do it so if NatureView does it. It will be a first movers advantage Critical Issues/Disadvantage: Quarterly Promotion required by Supermarkets Will cost NatureView $1.2 million per region per year NatureViews Sales, General and Administrative Expenses (SG&A) will increase by $320,000 NatureView will have to take advantage of their relationships with top 11 Supermarkets in Northeast and top 9 Supermarket chains in West and occupy majority of shelf space

Option 2: Expand FOUR SKUs of 32 oz. cups nationally because: 32 oz. cups produce 43.6% gross profit margin for NatureView compared to 36% for 8 oz. cups Few competitors in this package size and NatureView has a longer shelf life so has a competitive advantage Slotting expenses will be higher but promotional expenses will be low because 32 oz. cups are promoted twice a year Critical Issues/Disadvantages New users will not readily enter the brand and adopt a bigger sized product Achieving full national distribution within a year will be difficult Need to hire more sales personnel who had good relationships with sophisticated Supermarkets This will increase SG&A costs to $160,000 Dannon was rumored to be launched Bright Vista which will compete directly with NatureView Supermarkets were considering to launch their own private-label organic yogurt so 32 oz. pack will be less noticed in competition

Option 3: Introduce TWO SKUs of 4 oz. multipacks into Natural Foods Channel because: NatureView had strong relationships with leading Natural Food Stores and expansion into Supermarket could hurt this relationship Distribution targets were achievable in two SKUs Gross profitability will be 37.6% and expenses will be lower which is very attractive This option might turn out to be the most profitable Natural Food Channel was growing 7 times faster than Supermarket channel R&D and Operations teams will have to work more however no additional SG&A prices were required Five Year unit growth CAGR for yogurt was estimated to be 15% according to research

Other Issues going against launch into Supermarkets: Expanding into Supermarket also conflicts with the premium brand positioning for which Riley and Walker had worked hard to establish in Natural Food Stores There were also fears that Natureviews marketing department was unprepared to handle the demands on resources and staffing that entering the supermarket channel would impose Supermarket distributors were more demanding in logistics and technology than what Natureview was familiar with

Conclusion: Going into Supermarket has positive and negative points But not going gives NatureView competitive disadvantage because competitors are also rumored to be expanding 97% of organic yogurt is are purchased through Supermarkets 46% of organic food consumers purchase from this channel Two natural food companies expanded into Supermarkets and increased their revenues by 200% First movers advantage is very crucial 58% of consumers can be hurt by wrong pricing of organic products Comprehensive pricing strategy is required to compete with non-organic yogurts SG&A expenses will also rise in Supermarkets Risky because existing customers might leave the brand Pricing will have to be less and brand value will be lost

Introduce multipacks for children. 8 oz. cups are cash cows so leave it that way Continue good relationships with natural food retailers with differentiating Continue to position it as a premium brand in natural food channel