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Natureview

Natureview

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Marketing Assignment
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Natureview Farms

Case Analysis
MBA 623 – Dr. Jaju
Choi, Pham, Neibyu, Shilawat, Teja, Winter

Agenda
• 5 C’s, Problem Definition – 5 min
• Market Analysis – 5 min
• Possible Marketing Strategies – 10 min
• Financials Summary with Sensitivities – 5 min
• Worst Case Scenarios - 5 min
• Conclusion – 5 min
• Q and A

– Feel free to ask your questions during presentation

1989 - Founded–
Revenue $100 K.
Yogurt products .
Introduced 2
Flavors
1996 – Jim
Wagner Hired
to steady
profits
1997 - CFO Jim
Wagner got VC
capital Infused
capital
Today Feb 2000.
Annual Revenue
was $13 million in
1999. Total 12
Flavors in 8 Oz and
4 Flavors 32 Oz
VC to cash out
at the end of
2001. Revenue
needs to grow
to 20 million
Company Background
• Emphasis on natural ingredients and its strong reputation
for quality and great taste
• No artificial thickeners and rGBH mixed milk
• Comparing to the other products’ 30 days shelf life,
Natureview’s yogurts will remain fresh for 50 days
• 8 Oz has 12 Flavors and 32 Oz 4 Flavors.
Product Profile
Customer
• Brand Sensitive
• Natural Foods Customer
• Taste savvy
• Less Price Sensitive
• Woman (Single and with
Kids) take 74% Market
Share
• Customer loves
Natureview Yogurt

Competition
• Main competitor
Horizon
• Recent IPO
• Flush with Cash
• Bigger than Natureview
• Already uses
supermarket channel


Customer and Competetion
Strengths
Major and trusted brand
in natural foods
Product Quality
Strong relationships in
natural food market
Channel leader
Relatively Rapid revenue
growth
Longer product s helf Life
Weakness
Owns Small portion of the
yogurt market
Not ventured into
supermarket channel
High dependence on
brokers for distribution
and promotion.
Inefficient nature foods
distribution channel
Opportunity
Supermarket channel
provides significant
potential of growth
Natural food’s sales
expected to grow by 20%
Opportunity for lowering
customer cost

Threats
Lack of Capital
Main competitor(Horizon) is
getting stronger
No expertise in supermarket
channel
Company may have to
reposition
Risk Inter Product
cannibalization
SWOT
Natureview Crisis – Feb 2000
VC to cash out at the
end of 2001
2001 –
Revenue
needs to rise
to $20 Million
1999 – Rev
$13 Million
Problem Definition
Natureviews problem is that
they have to make strategic
marketing decisions to grow
revenues to $20,000,000 from
their current $13,000,000
before the end of the 2001
fiscal year
8-oz. cups and
smaller
74%
Children’s
multipacks
9%
32-oz. cups
8%
Other
9%
The Yogurt Market
Market Topology
Supermarket
97%
Natural Foods
Channel
3%
Channel Market Share
Natureview Farm
24%
Brown Cow
15%
Horizon Organic
19%
White Wave
7%
Others
35%
Natural Foods Channel
Dannon
33%
Yoplait
24%
Others
23%
Private Label
15%
Columbo
5%
Supermarket Channel
Distribution Channels
Distribution Channels
Natural Foods Channel
Manufacturer
Wholesaler
Distributors
Retailer
Customer
Supermarket Channel
Manufacturer
Wholesaler
Retailer
Customer
Channel Margin Analysis
Natural Foods Supermarket
Unit Cost Margin Selling Price Margin % Mark-up Unit Cost Margin Selling Price Margin % Mark-up
8 Oz
Manufr. 0.31 36% 0.48 0.17 56% 0.31 33% 0.46 0.15 49%
Wholesalers 0.48 7% 0.52 0.04 8% 0.46 15% 0.54 0.08 18%
Distributor 0.52 9% 0.57 0.05 10% 0.54 0% 0.54 0.00 0%
Retailer 0.57 35% 0.88 0.31 54% 0.54 27% 0.74 0.20 37%
Customer 0.88 0.74
32 Oz
Manufr. 0.99 44% 1.75 0.76 77% 0.99 41% 1.68 0.69 69%
Wholesalers 1.75 7% 1.89 0.13 8% 1.68 15% 1.97 0.30 18%
Distributor 1.89 9% 2.07 0.19 10% 1.97 0% 1.97 0.00 0%
Retailer 2.07 35% 3.19 1.12 54% 1.97 27% 2.70 0.73 37%
Customer 3.19 2.70
Multipack
Manufr. 1.12 39% 1.84 0.72 64% 1.12 37% 1.77 0.65 57%
Wholesalers 1.84 7% 1.98 0.14 8% 1.77 15% 2.08 0.31 18%
Distributor 1.98 9% 2.18 0.20 10% 2.08 0% 2.08 0.00 0%
Retailer 2.18 35% 3.35 1.17 54% 2.08 27% 2.85 0.77 37%
Customer 3.35 2.85
OPTIONS for Resolving the crisis
Expand 6 SKUs of
the 8-oz. product
line into one or two
selected
supermarket
channel regions
Proposed by
Walter Bellini VP
Sales
Option 1



Option II
Introduce 2 SKUs
of a Children’s
Multi-Pack into the
Natural Foods
Channel
Proposed by Kelly
Riley, the assistant
marketing director
Option III
Choices for Christine Walker, VP Marketing
Expand 4 SKUs of
the 32-oz. size
nationally
Proposed by Jack
Gottlieb, vice
president of
operations
Walter Bellini OPTION 2 OPTION 3
Benefits
1. Great Upside Potential
2. For supermarket adding these products would attract higher-income less
price-sensitive customers
3. Unit volume growth of organic yogurt at supermarkets of 20% per year from
2001 to 2006
4. This option also has the highest incremental demand

Risks
1. Supporting 8-oz cup size would require quarterly trade promotions and a
meaningful marketing budget
2. Advertising plan would cost $1.2 million per region per year in addition to the
promotional ads expenses
3. SG&A expenses would increase by $320,000 annually
4. This option creates direct competition with national yogurt brands
Option 1 - Expand 6 SKUs of the 8-oz. product line into one or two selected
supermarket channel regions

Option 1 – Income Forecast
Year 2000 Year 2001 Year 2002 Year 2003
Revenue
$ 29,070,950 $ 32,285,140 $ 36,142,168 $ 40,770,602
Costs of Good Sold
$ (19,040,000) $ (21,210,000) $ (23,814,000) $ (26,938,800)
Gross Profit
$ 10,030,950 $ 11,075,140 $ 12,328,168 $ 13,831,802
Admin / Freight
$ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)
Sales
$ (1,880,000) $ (1,880,000) $ (1,880,000) $ (1,880,000)
Marketing
$ (3,660,000) $ (3,660,000) $ (3,660,000) $ (3,660,000)
R&D
$ (390,000) $ (390,000) $ (390,000) $ (390,000)
One-Time Slotting
Fee
$ (1,200,000)

- - -
Brokers' Fee @ 4%
$ (642,838) $ (771,406) $ (925,687) $ (1,110,824)
Total Expense
$ (9,982,838) $ (8,911,406) $ (9,065,687) $ (9,250,824)
Net Income
$ 48,112 $ 2,163,734 $ 3,262,481 $ 4,580,978
Profit Margin 0.17% 6.70% 9.03% 11.24%
OPTION 1 OPTION 3
Benefits
1. Potentially give higher average gross profit margin than 8-oz size
2. It also has stronger competitive advantage like longer shelf life and lower
marketing expenses

Risks
1. Doubt on claim of new users would readily “enter the brand” via a multi-use
size
2. Doubt on sales team’s ability to achieve full national distribution in 12 months
3. Needs to hire sales personnel and establish relationships with supermarket
brokers
4. The 32-oz. expansion option would increase SG&A expense by $160,000
Option 2 – Expand 4 SKUs of the 32-oz. size nationally
Jack Gottleib
Option 2 – Income Forecast
Year 2000 Year 2001 Year 2002 Year 2003
Revenue
$ 22,214,425 $ 24,057,310 $ 26,268,772 $ 28,922,526
Costs of Good Sold
$ (13,635,000) $ (14,724,000) $ (16,030,800) $ (17,598,960)
Gross Profit
$ 8,579,425 $ 9,333,310 $ 10,237,972 $ 11,323,566
Admin / Freight
$ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)
Sales
$ (1,720,000) $ (1,720,000) $ (1,720,000) $ (1,720,000)
Marketing
$ (1,894,000) $ (1,894,000) $ (1,894,000) $ (1,894,000)
R&D
$ (390,000) $ (390,000) $ (390,000) $ (390,000)
One-Time Slotting
Fee
$ (2,560,000) - - -
Brokers' Fee @ 4%
$ (368,577) $ (442,292) $ (530,751) $ (636,901)
Total Expense
$ (9,142,577) $ (6,656,292) $ (6,744,751) $ (6,850,901)
Net Income
$ (563,152) $ 2,677,018 $ 3,493,221 $ 4,472,665
Profit Margin -2.54% 11.13% 13.30% 15.46%
OPTION 1 OPTION 3
Benefits
1. Established leader in this channel
2. Perfect positioning for new multi-pack product
3. Long term the financial potential was very attractive

Risks
1. Established leader in this channel
2. Perfect positioning for new multi-pack product
3. Long term the financial potential was very attractive
Option 3 – Introduce 2 SKUs of a Children’s Multi-Pack into the
Natural Foods Channel

Kelly Riley
Option 3 – Income Forecast
Year 2000 Year 2001 Year 2002 Year 2003
Revenue
$ 16,317,073 $ 16,383,414 $ 16,451,083 $ 16,520,104
Costs of Good Sold
$ (10,260,000) $ (10,007,640) $ (10,043,993) $ (10,081,073)
Gross Profit
$ 6,057,073 $ 6,375,774 $ 6,407,090 $ 6,439,032
Admin / Freight
$ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)
Sales
$ (1,560,000) $ (1,560,000) $ (1,560,000) $ (1,560,000)
Marketing
$ (640,000) $ (640,000) $ (640,000) $ (640,000)
R&D
$ (390,000) $ (390,000) $ (390,000) $ (390,000)
One-Time Slotting
Fee
$ (82,927) - - -
Brokers' Fee @ 4%
$ (132,683) $ (135,337) $ (138,043) $ (140,804)
Total Expense
$ (5,015,610) $ (4,935,337) $ (4,938,043) $ (4,940,804)
Net Income
$ 1,041,463 $ 1,440,438 $ 1,469,046 $ 1,498,227
Profit Margin 6.38% 8.79% 8.93% 9.07%
Financials Summary
2000 2001 2002 2003 2004
OPTION 1
Revenue $ 29,070,950.00 $ 32,285,140.00 $ 36,142,168.00 $ 40,770,601.60 $ 46,324,721.92
Gross Profit $ 10,030,950.00 $ 11,075,140.00 $ 12,328,168.00 $ 13,831,801.60 $ 15,636,161.92
Net Income $ 48,112.00 $ 2,163,734.40 $ 3,262,481.28 $ 4,580,977.54 $ 6,163,173.04
Profit Margin 0% 7% 9% 11% 13%
Profit Growth 0% 4397% 51% 40% 35%
OPTION 2
Revenue $ 22,214,425.00 $ 24,057,310.00 $ 26,268,772.00 $ 28,922,526.40 $ 32,107,031.68
Gross Profit $ 8,579,425.00 $ 9,333,310.00 $ 10,237,972.00 $ 11,323,566.40 $ 12,626,279.68
Net Income $ (563,152.00) $ 2,677,017.60 $ 3,493,222.12 $ 4,472,667.34 $ 5,648,001.41
Profit Margin -3% 11% 13% 15% 18%
Profit Growth 0% 575% 30% 28% 26%
OPTION 3
Revenue $ 16,317,072.85 $ 16,814,633.78 $ 17,386,828.84 $ 18,044,853.17 $ 18,801,581.15
Gross Profit $ 6,057,072.85 $ 6,575,333.78 $ 6,840,133.84 $ 7,144,653.92 $ 7,494,852.01
Net Income $ 1,041,463.11 $ 1,622,748.43 $ 1,864,660.69 $ 2,142,859.79 $ 2,462,788.76
Profit Margin 6% 10% 11% 12% 13%
Profit Growth 0% 56% 15% 15% 15%
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
$50,000,000
2000 2001 2002 2003 2004
Option 1
Option 2
Option 3
Revenue
Profits
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
2000 2001 2002 2003 2004
Option 1
Option 2
Option 2
Demand Sensitivity for 2001
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
100% 95% 90% 85% 80% 75% 70% 65% 60% 55%
Option 1
Option 2
Option 3
Growth Sensitivity for 2001
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
20% 18% 16% 14% 12% 10% 8% 6% 4% 2%
Option 1
Option 2
Option 3
• There will be a horizontal channel conflict with
supermarkets
• It is possible the current channel partners may be
alienated
• This may end up having 3 way impact
– We discussed Product Demand, Revenue Growth
– Now we need to test Product Cannibalization
– All forecasts need to be stress tested for sensitivity

Channel Conflict and Cannibalization
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
100% 200% 300% 400% 500% 600% 700%
Option 1
Option 2
Option 3
Cannibalization Sensitivity for 2001
WORST Case Scenarios
$-
$5,000,000.00
$10,000,000.00
$15,000,000.00
$20,000,000.00
$25,000,000.00
$30,000,000.00
$35,000,000.00
0,100 0,90 0,80 5,100 5,90 5,80 10,100 10,90 10,80
R
e
v
e
n
u
e

Cannabalization, Demand
Option 1 - Scenarios
Growth 20%
Growth 15%
Growth 10%
Growth 5%
Growth 0%
WORST Case Scenarios
$-
$5,000,000.00
$10,000,000.00
$15,000,000.00
$20,000,000.00
$25,000,000.00
$30,000,000.00
0,100 0,90 0,80 5,100 5,90 5,80 10,100 10,90 10,80
R
e
v
e
n
u
e

Cannabalization, Demand
Option 2 - Scenarios
Growth 20%
Growth 15%
Growth 10%
Growth 5%
Growth 0%
WORST Case Scenarios
$-
$2,000,000.00
$4,000,000.00
$6,000,000.00
$8,000,000.00
$10,000,000.00
$12,000,000.00
$14,000,000.00
$16,000,000.00
$18,000,000.00
0,100 0,90 0,80
R
e
v
e
n
u
e

Cannabalization, Demand
Option 3 - Scenarios
Growth 15%
Growth 10%
Growth 5%
Growth 0%
Decision Matrix
Decision Parameter Option 1 Option 2 Option 3
Revenue Objective Exceeds Exceeds Falls Short
Short Term Profits No No Gain
Long Term Profits High High Low
Channel Partners Highly Alienating Alienating Enhancing
Competitive Response Very Risky Risky Low
Cost to Induce Trial High Very High Low
Brand Equity Dilution Possible Possible No
Organizational capabilities Low Low High

Decision ???
Possible Conclusion
• If we really hard pressed to answer the $20 Million question, then it
is fairly simple answer. Go with option 1.

• We recommend Natureview to Expand the multi-pack into
supermarket channel in Northeast and West

• The benefits of this decision will include the follow.
– High growth (12% changes from last year):
– Minimized channel conflicts: Through this expansion, Natureview can
make its revenue goal by 2001
• no cannibalization/alienation
– New target customers: Supermarket will be selling these multi-packs
relatively cheap.
– Higher expected annual demand

Agenda • • • • • • • 5 C’s, Problem Definition – 5 min Market Analysis – 5 min Possible Marketing Strategies – 10 min Financials Summary with Sensitivities – 5 min Worst Case Scenarios - 5 min Conclusion – 5 min Q and A
– Feel free to ask your questions during presentation

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