Natureview Farm

Background & Problem Definition Natureview Farm is a small yogurt manufacturer with annual revenues of $13 million. It produces three different size cups 8 oz. cup 3! oz. and " oz. cup multipac#. $owever Natureview%s goal is to increase its annual revenue to $!& million in two years. 'ith a solid relationship with its current successful strategy in the natural foods channel it is considering e(panding into the supermar#et channel. )onversely it does not want to hurt the company *rand it has created as a premium yogurt *rand in the natural foods mar#et and *etray those loyal natural foods customers who made their *usiness what it is today. Alternatives In the case Natureview is considering three options to e(pand its operations to reach its $!& million annual goal+ 1. ,(pand si( -./s of the 80oz. product line into one or two selected supermar#ets. 1he reasons *ehind this option are+ a. ,ight0ounce cups represent the largest dollar and unit share of the refrigerated yogurt mar#et providing significant revenue potential. *. 2ther natural food *rands had successfully e(panded their distri*ution into the supermar#et channel. 3s a leading natural foods *rand for yogurt they can capitalize on the growing trend in natural and organic foods in supermar#ets. c. 3 ma4or Natureview competitor plans to e(pand into the supermar#et channel. -upermar#et retailers would li#ely only have one organic yogurt *rand. 1herefore there is a first0mover advantage.

!. ,(pand four -./s of the 3!0oz. size nationally. 1he reasons *ehind this option are+ a. )urrently generated an a*ove0average gross profit margin for Natureview 5"3.67 vs. 36.&7 for the 80oz. line8. *. Fewer competitive offerings in this size and Natureview had a strong competitive advantage in their product%s longer shelf life. c. 3lthough slotting e(penses would *e higher promotional e(penses would *e lower since the 3!0oz. size was promoted only twice a year. 3. Introduce two -./s of a children%s multi0pac# into natural foods channel. 1he reasons *ehind this option are+ a. )ompany had strong relationships with leading natural food channel retailers and e(pansion into supermar#et channel could potentially 4eopardize the relationship. *. 9istri*ution targets were very achieva*le for the two -./s. c. :ross profita*ility of the line would *e 3;.67 while e(penses would *e lower< =uite attractive. 1his option may even yield the strongest profit contri*ution of all strategies ta#en into consideration. d. Natural foods channel was growing seven times faster than the supermar#et channel. Critical Issues For each of the alternatives provided a*ove these are the issues that need to *e encountered respectively+ 1. It has the highest level of competitive trading promotion and mar#eting spending. It would re=uire =uarterly trade promotions and a meaning mar#eting *udget. It would also cost Natureview $1.! > per region per year.

Its -:3 would also increase *y $3!& &&& annually. 1herefore it would *e a costly approach. 3lso to achieve its target Natureview needed to ta#e advantage of its relationships with the top 11 supermar#et retail chains in the Northeast and the top ? chains in the 'est and occupy ma4ority of the retail space. !. 1he difficulty was that new users would not readily @enter the *randA and adopt a multi0size product. Furthermore to achieve full national distri*ution within 1! months it would *e a difficult tas# in of itself. Natureview would need to hire more sales personnel who had e(perience selling to more sophisticated supermar#et channels and esta*lish relationships with the supermar#et *ro#ers. 1his would increase -:3 e(pense costs *y $16& &&&. 1o add to the comple(ity of the decision a competitor was rumoured to *e launching a line called Bright Cista which would directly compete with Natureview. >oreover supermar#ets were considering launching their own private0la*el versions of organic yogurt. 1herefore launching the 3!0oz. has its issues of *eing less noticed in a myriad of different products availa*le. 3. Introducing the multi0pac#s re=uires DE9 and 2perations costs. It also conflicts with the premium *rand positioning it had wor#ed hard to esta*lish due to supermar#ets% emphasis on sales promotions and inconsistent prices. 1here were also fears that Natureview%s mar#eting department was unprepared to handle the demands on resources and staffing that entering the supermar#et channel would impose. -upermar#et distri*utors were more demanding in logistics and technology than what Natureview was familiar with. $owever it is thought that soon natural foods channel would em*ar# on similar demands.

Conclusion 3fter reviewing all the alternatives and its issues and *enefits I found that moving into supermar#ets could have *oth positive and negative repercussions. Defraining to e(pand into supermar#ets could put Natureview at a competitive disadvantage considering there are rumours of Natureview%s competitors e(panding into supermar#et channels. -upermar#ets are potentially a huge mar#et for organic yogurt considering ?;7 of all yogurts were purchased through this channel and "67 of organic food consumers shop at supermar#ets. 1wo natural food companies have already entered supermar#ets and in doing so have increased their revenues *y over !&&7. ,(ecuting a first mover strategy would *e crucial if this plan were to *e implemented in order to gain *rand e=uity from new consumers who are transitioning into the organic food mar#et. Furthermore *ecause price inhi*its F87 of consumers from *uying organic products Natureview would have to e(ecute a competitive pricing strategy against non0organic yogurts. $owever the e(penses associated with it 5i.e. the trade promotions and -:3s8 are =uite e(pensive to ta#e in. 1he goal is to o*tain an increase in revenues *y at least $;>. )osts incurred would *e at least $!.;> annually 4ust e(panding into two regions. 1herefore if Natureview would e(pand to all four regions they would incur $F.!> in 4ust mar#eting and -:3s. It is =uite an e(pensive approach especially since there is the fear that your current customers may disown your *rand and loo# for others. Gou%ll *e charging less per unit and you lose the distinctive *rand value that%s associated with your *rand which is a premium yogurt manufacturer. 3lternatively my recommendation would *e to introduce the multi0pac#s for children. Gour current 80oz. product is a cash cow< leave it that way. 1he method to

e(pand would *e to enter a product development strategy and use the same channels for distri*ution. Gou%ve *uilt a strong relationship with natural food retailers< continue it *y product differentiating. Implement the multi0pac#s as an option for consumers in the natural food retailers and continue to #eep the premium price *rand positioning. 1he last thing you want to do is enter a price war< therefore #eep the same channel distri*ution you are using *ut instead introduce new products through product differentiation.

MG C!" #eek $ %eflections 'hat I learned from the Invisalign case in our class discussion is that there are many issues that a company needs to ta#e into consideration such as their sales and distri*ution strategy. )ustomizing your sales strategy to get the most out of your clients *y providing incentives contingent on their performance after the sale is critical to a sales force%s longevity. 1he de*ate over whether to go with incentivizing the traditional dentists to implement this system or #eep it with orthodontists was an interesting one. >y view on this would *e that orthodontists and dentists wor# hand0in0hand together for when there are patients within that target mar#et that fit the criteria to receive the Invisalign. Incentivize the dentists *y providing them a referral fee and reduce the sales force staff. 3 great point made in the discussion 5I *elieve -hirley made this point8 is that Invisalign should focus on its orthodontist%s list of those who are in the middle *etween avid users and others who don%t use it at all. 1his is where you can develop the orthodontist to readily promote the use of Invisalign. It%s really a case of figuring out how to get the *est value out of the relationship *etween the dentists and orthodontists. 1heir commitment to ma#ing this wor# will generate more sales for Invisalign. >y contri*ution to the class discussion was that I summarized the case. I also wanted to mention that implementing the system to dentists would *e a very poor decision as it firstly alienates your current orthodontists who use the system already. It does eliminate one sta#eholder in the production chain 5the orthodontists8 which is not a positive situation you have developed with your orthodontists who have adopted this system.