NATUREVIEW

OBJECTIVE: 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.
CUSTOMER TARGET: 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, flavour,
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
Supermarket
Channel
Columbo
Dannon
Other
Private Label
Yoplait

(1999)
5%
33%
23%
15%
24%

Natural Foods
Channel
Other
Nature view Farm
Horizon Wave
White Wave
Brown Cow

(1999)
35%
24%
19%
7%
15%

OBJECTIVE: Natural Foods Customer is Brand Sensitive, Taste savvy and Less Price
Sensitive so they charged higher Retail prices.
COMPETITIVE ADVANTAGE:
HORIZON ORGANIC:
It flushes with cash from a recent IPO. It definitely produces a full range of organic
dairy. It is also known as a National Brand
BROWN COW:
Strong regional presence on the West coast
WEAKNESS:
Brown Cows yogurt was all natural but not organic. Horizons was organic but it had
a shorter shelf life than Natureviews product
GROWTH STRATEGY:
Its growth has involved high Gross Profit margin ( 37%)
In 1999, 100% Revenue generated from sales of refrigerated yogurt to
natural foods stores.
High market capture with 8-oz

Choices for Christine Walker, VP Marketing

Option 1: Expand 6 SKUs of the 8-oz. product line into one or two
selected supermarket channel regions as Proposed by Walter Bellini VP
Sales
Option 2: Expand 4 SKUs of the 32-oz. size nationally as Proposed by
Jack Gottlieb, vice president of operations
Option 3: Introduce 2 SKUs of a Childrens Multi-Pack into the Natural
Foods Channel
Proposed by Kelly Riley, the assistant marketing director
Option 1 analysis
Option 1 - Expand 6 SKUs of the 8-oz product line into one or two selected
supermarket channel regions
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
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
Brokers' Fee
@ 4%

$
(1,200,000)
$
(642,838)
$
Total Expense
(9,982,838)
$
Net Income
48,112
Profit Margin 0.17%

$
(771,406)
$
(8,911,406)
$
2,163,734
6.70%

$
(925,687)
$
(9,065,687)
$
3,262,481
9.03%

$
(1,110,824)
$
(9,250,824)
$
4,580,978
11.24%

Option 2 Expand 4 SKUs of the 32-oz. size nationally

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 teams 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
Forecast

Year 2000
Revenue
Costs of
Good Sold
Gross Profit
Admin /
Freight
Sales
Marketing
R&D

$
22,214,425
$
(13,635,000)
$
8,579,425
$
(2,210,000)
$
(1,720,000)
$
(1,894,000)
$
(390,000)

Year 2001
$
24,057,310
$
(14,724,000)
$
9,333,310
$
(2,210,000)
$
(1,720,000)
$
(1,894,000)
$
(390,000)

Year 2002
$
26,268,772
$
(16,030,800)
$
10,237,972
$
(2,210,000)
$
(1,720,000)
$
(1,894,000)
$
(390,000)

Year 2003
$
28,922,526
$
(17,598,960)
$
11,323,566
$
(2,210,000)
$
(1,720,000)
$
(1,894,000)
$
(390,000)

One-Time
Slotting Fee

$
(2,560,000)
Brokers' Fee $
@ 4%
(368,577)
Total
$
Expense
(9,142,577)
$
Net Income
(563,152)
Profit Margin -2.54%

$
(442,292)
$
(6,656,292)
$
2,677,018

$
(530,751)
$
(6,744,751)
$
3,493,221

$
(636,901)
$
(6,850,901)
$
4,472,665

11.13%

13.30%

15.46%

Option 3 Introduce 2 SKUs of a Childrens Multi-Pack into the

Natural Foods Channel
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
Forecast
Year 2000
$
16,317,073
Costs of
$
Good Sold
(10,260,000)
$
Gross Profit
6,057,073
Admin /
$
Freight
(2,210,000)
$
Sales
(1,560,000)
$
Marketing
(640,000)
$
R&D
(390,000)
Revenue

Year 2001

Year 2002

Year 2003

$
16,383,414
$
(10,007,640)
$
6,375,774
$
(2,210,000)
$
(1,560,000)
$
(640,000)
$
(390,000)

$
16,451,083
$
(10,043,993)
$
6,407,090
$
(2,210,000)
$
(1,560,000)
$
(640,000)
$
(390,000)

$
16,520,104
$
(10,081,073)
$
6,439,032
$
(2,210,000)
$
(1,560,000)
$
(640,000)
$
(390,000)

One-Time
$
Slotting Fee (82,927)
Brokers' Fee $
@ 4%
(132,683)
Total
$
Expense
(5,015,610)
$
Net Income
1,041,463
Profit
6.38%
Margin

$
(135,337)
$
(4,935,337)
$
1,440,438

$
(138,043)
$
(4,938,043)
$
1,469,046

$
(140,804)
$
(4,940,804)
$
1,498,227

8.79%

8.93%

9.07%

SUMMARY

2000

2001

2002

2003

2004

$
32,285,140.0
0
$
11,075,140.0
0
$
2,163,734.40

$
36,142,168.0
0
$
12,328,168.0
0
$
3,262,481.28

$
40,770,601.6
0
$
13,831,801.6
0
$
4,580,977.54

$
46,324,721.9
2
$
15,636,161.9
2
$
6,163,173.04

7%

9%

11%

13%

4397%

51%

40%

35%

$
28,922,526.4
0
$
11,323,566.4
0
$
4,472,667.34

$
32,107,031.6
8
$
12,626,279.6
8
$
5,648,001.41

15%

18%

OPTION
1
$
29,070,950.0
Revenue 0
$
Gross 10,030,950.0
Profit
0
Net
$
Income 48,112.00
Profit
Margin 0%
Profit
Growth 0%
OPTION
2
$
$
$
22,214,425.0 24,057,310.0 26,268,772.0
Revenue 0
0
0
$
Gross
$
$
10,237,972.0
Profit
8,579,425.00 9,333,310.00 0
Net
$
$
$
Income (563,152.00) 2,677,017.60 3,493,222.12
Profit
Margin -3%
11%
13%

Profit
Growth 0%

575%

30%

28%

26%

$
16,814,633.7
8
$
6,575,333.78
$
1,622,748.43

$
17,386,828.8
4
$
6,840,133.84
$
1,864,660.69

$
18,044,853.1
7
$
7,144,653.92
$
2,142,859.79

$
18,801,581.1
5
$
7,494,852.01
$
2,462,788.76

10%

11%

12%

13%

56%

15%

15%

15%

OPTION
3
$
16,317,072.8
Revenue 5
Gross
$
Profit
6,057,072.85
Net
$
Income 1,041,463.11
Profit
Margin 6%
Profit
Growth 0%

Decision Matrix

Possible Conclusion

If we really hard press to answer the $20 million question, then its fairly
simple answer. Go with
option 1.
We recommend Nature view to expand the multi pack into supermarket
channel in Northeast and West

The benefits would include the follow:

High growth (more than 12% from last year)

Minimized channel conflicts : Through this expansion, Nature view can make
its revenue goal by 2001

No cannibalization or alienation
New target customers : Supermarket will be selling these multi packs
relatively cheap
Higher expected annual demand.