Master of Technology & Innovation Management

MMJT 1043
Marketing of Technology & Innovative Products

NATUREVIEW FARM
CASE STUDY
NUSAIBAH ROSLAN MMJ 141005
SHARIFAH RADHIAH SYED AZMAN MMJ 141003
SITI AISAH MUHAMMAD MMJ 141013
BACKGROUND
Founded and manufactured in Cabot, Vermont
First enter market 8-oz and 32-oz with plain and vanilla flavor
1989 Use natural ingredient with longer average shelf-life of 50 days

Company revenue growth from $ 100,000 to $13 million

Fruit on the bottom yogurt
1999

Expand to 12 yogurt flavors & multipack yogurt (for children)

2000
ISSUES

VC needed to cash out of its

investment

Need to find a path to grow

revenues by over 50% before
the end of 2001 ($20 mil)

Should Natureview Farm

expand into supermarket
channel?
THE 4PS

Natural Affordable Natural Its natural

PRODUCT

PROMOTION
PRICE

PLACE
yogurt according food flavor with
(organic) to its channel high quality
8 oz. size channel Wholesale and great
with 12 club taste
flavors National growth in
32-oz. size retailer the national
with 4 channel distribution
flavors and natural
Convenienc
food
e and drug
channel
store
Low-cost
guerilla
marketing
 PRODUCT
12 yogurt flavors in 8-oz
4 yogurt flavors in 32-oz
Revenues 2000

14%

8-oz
32-oz
Start exploring kid multipack
yogurt product (4-oz) 86%
SWOT ANALYSIS

STRENGTH WEAKNESS
Strong brand No alternative financing available
Low cost Lacks potential of taking higher
No artificial thickeners used risks and costs
Unique, smooth and creamy Doubt on sales teams ability
texture of yogurt
Usage of natural ingredients
Longer shelf life
OPPORTUNITY THREATS
Strong relationships with leading Accumulation of cash by Horizon
natural foods retailers from IPO
Being dropped out of traditional
channel
MARKET TREND FOR YOGURT
PRODUCT

Packaging
Taste Flavor
type/size

Price Freshness Ingredient

Organic or
not
YOGURT MARKET SHARE BY
PACKAGING SEGMENT
8-oz. cup smaller
9%
Children's multipacks
8% 32-oz. cups
Others
9%

74%
YOGURT MARKET SHARE BY
REGION

27% 26%
Northwest

Midwest

Southwest

22%
25%
West
YOGURT DISTRIBUTION CHANNEL

3%
Distribution Channel

Supermarkets
Natural food stores

97%
LENGTH OF CHANNEL TO MARKET

Supermarket Channel Natural Foods Channel

Manufacturer Manufacturer

Natural Foods
Distributor
Wholesaler
7%
15% Natural Foods
Distributor
9%
Retailer
Retailer
35%
27%
Customer
Customer
 YOGURT MARKET SHARE BY
BRAND
Supermarket Channel Natural Foods Channel

Columb
Private o Naturevi
Label 5% Dannon Others ew Farm
15% 33% 35% 24%

Brown
Others
Cow
23% White 15%
Wave Horizon
Yoplait 7% Organic
24% 19%
YOGURT PRODUCTION COSTS AND
RETAIL PRICES BY CHANNEL

Natural Food Supermarket Manufacturing

Channel Food Channel Cost
8-oz. cup $ 0.88 $ 0.74 $0.31

32-oz. cup $ 3.19 $ 2.70 $0.99

4-oz. cup multipack $ 3.35 $ 2.85 $1.15

OPTIONS & DILEMMA

OPTION 1 OPTION 2 OPTION 3

Expand in Expand in Stay in

Northeast supermarket natural food
and West nationally channel
supermarket Bring in the Introduce 2
region 4SKUs of the childrens
Bring in the 6 32-oz. size multipack
SKUs of the
8-oz. size
OPTION 1:
EXPAND 6 SKUS OF THE 8-OZ INTO EASTERN
AND WESTERN SUPERMARKET REGIONS

PROs CONs

8-oz have highest incremental

High risk & high cost (marketing)
demand
Require quarterly trade
High potential to increase revenue
promotions
First mover as organic yogurt
Advertising plan would cost $1.2
brand to enter supermarket
million per region per year
channel
SG&A expenses increase by
$320,000 annually

Need to pay one time slotting fee

SUPERMARKET CHANNEL MARGIN
ANALYSIS
Channel Selling Margin Cost price
price
Retailer $0.74 27% $0.74 x 73% = $0.54

Distributor $0.54 15% $0.54 x 85% = $0.46

Natureview $0.46 ($0.46/$0.31)/$0.46 $0.31

=33%
 PROJECTION INCOME STATEMENT
2000 2001
Unit Sales 35 000 000 35 000 000 x (1+20%) = 42 000 000

Revenue Growth $ 35 000 000 x $ 0.74 = $ 25 900 000 42 000 000 x 0.74 = $ 31 080 000

Projected Revenue $ 13 000 000 + 25 900 000 = $ 38, 900 $ 13 000 000 + 31 080 000 = $ 44,
000 080 000
Cost 35 000 000 x $ 0.31 = $ 10 850 000 42 000 000 x 0.31 = $ 13 020 000

Gross Profit $ 28, 050 000 $ 31, 060 000

Expenses
Advertisement $ 1 200 000 x 2 region = $ 2,400 000 $ 2,400 000

SG&A $ 320 000 $ 640 000

Slotting Fee 6 x $ 10 000 x 20 retails = 1200 000

Brokers Fee $ 16 100 000 x 0.04 = $ 644 000 $ 19 320 000 x 0.04 = $ 772 800
Net Profit $ 23, 486 000 $ 27, 247 200
OPTION 2:
EXPAND 4 SKUS OF THE 32-OZ SIZE NATIONALLY
INTO SUPERMARKET REGIONS

PROs CONs

Generate higher profit margin than 8-oz Doubt on claim of new users would readily
size enter the brand via a multi-use size

Strong competitive advantage: longer Doubt on sales teams ability to achieve

shelf life full national distribution in 12 months
Needs to hire sales personnel and
Lower promotion expenses establish relationships with supermarket
brokers
The 32-oz. expansion option would
increase SG&A expense by $160,000
SUPERMARKET CHANNEL MARGIN
ANALYSIS
Channel Selling Margin Cost price
price
Retailer $2.70 27% $2.70 x 73% = $0.1.97

Distributor $1.97 15% $0.54 x 85% = $1.67

Natureview $1.67 ($1.67/$0..99)/$1.67 $0.99

=41%
 PROJECTION INCOME STATEMENT
2000 2001
Unit sales 5,500,000 5,500,000
Revenues growth 550000 x 2.70 = 14,850,000 14,850,000

Projected revenue 14850000 + 13000000 = 27,850,000

27,850,000
Cost 5500000 x 0.99 = 5445000 5445000
Gross profit 9,405,000 22,405,000
Expense:
Slotting fee 4 x 10000 x 64 = 2,560,000 0

SG & A 160,000 160,000

Marketing 120000 x 4 = 480000 480,000
Broker's fee (4% revenues) 367,400 367,400

Net profit 18,837,600 21,397,600

OPTION 3:
INTRODUCE TWO SKUS OF A CHILDREN MULTIPACK
INTO THE NATURAL FOODS CHANNEL

PROs CONs

The sales team was confident that they There were many potential conflicts and
could achieve distribution for the two other uncertain factors that the
SKUs. manager could not determine.
The financial potential was very Can not achieve the target objective of
attractive. Natureview farm
It would yield the strongest profit
contribution of all the strategies under
consideration.
The natural foods channel was growing
almost seven times faster than the
supermarket.
NATURE FOOD CHANNEL MARGIN
ANALYSIS

channel Selling Margin Cost Price

Price
Retailer $3.35 35% $3.35 x 65% = $2.18
Distributor $2.18 9% $2.18 x 91% = $1.98
Nature foods $1.98 7% $1.98 x 93% = $1.84
wholesalers
Natureview $1.84 ($1.84 - $1.15) / $1.84 $1.15
=38%
 PROJECTION INCOME STATEMENT

2000 2001
Unit sales 1,800,000 1,800,000 x 1.15 =
2,070,000

Revenue growth 1,800,000 x 3.35 = 6,030,000 2,070,000 x 3.35 =

6,934,500
Revenue projection 6,030,000 + 13,000,000 = 6,934,500 + 13,000,000 =
19,030,000 19,934,500
Cost 1,800,000 x 1.15 = 2,070,000 2,070,000 x 1.15 =
2,380,500
Gross profit 16,960,000 17,554,000
Expense:
Marketing 250,000 250,000
Complementary cases 6,030,000 x 2.5% = 150,750 6,934,500 x 2.5% = 173,363
Net profit 16,559,250 17,130,637
WHICH ONE TO CHOOSE?
 COMPARISON OF OPTIONS FOR
YEAR 2001
Option Option 1 Option 2 Option 3
Gross Margin 33% 41% 38%
Unit sales 42, 000 000 5,500,000 2,070,000
Revenue projection 44, 080 000 27,850,000 19,934,500
Cost $ 13 020 000 $ 5 445 000 $ 2,380,500
Gross profit $ 31, 060 000 22,405,000 17,554,000
Expense:
SG & A $ 640, 000 160,000 0
Marketing $ 2, 400, 000 480,000 250,000
Broker's fee (4% $ 772, 800 367,400 0
revenues)
Complementary cases 0 0 173,363
Net profit $ 27, 247, 200 $ 21,397,600 $ 17,130,637
 DECISION
Go for option 1
Reach beyond the target objective of 20 million revenue by
end of 2001 with projected of
$31 060 000
8 oz yogurt is the highest demand
In supermarket, can expose to more range of customers
Will have the first mover advantages of natural product to
enter supermarket
A bit risky but in a long term will generate revenues of 200%
(as looking at two other competitors)
THANK YOU