Natureview Farm

Case Presentation

Lucy Edmonds, Kathleen Fee, Morgan Hicks, Theresa Murphy

 ● Background and Case
Information
● Problem and Solution
Identification

Agenda ● Company and Value Chain

Analysis
● Competition Analysis
● Recommendation and
Implementation Plan
Company Background
Product Info & Competitive Advantage
● 12 flavors in 8-oz cups
● 4 flavors in 32-oz cups
● Considering a child’s size 4-oz cup sold in a 6 pack format as well as 8 2-oz
tubes sold

● Family recipe
● Natural ingredients
● 20 day longer shelf-life than competitors
Objectives
● Maintain consistent profitability
● Find a new investor or acquisition opportunity
● Increase revenues from $13,000,000 to $20,000,000 in less than two years
Problems
Current
● need to find new funding
● must rely heavily on sales
brokers
● must keep their value chain
happy after having good
relationships for so long
Anticipated
● main competitors are rumored
to be expanding into
supermarket chains
● The brokers were unhappy with
the chain and could leave them
Option 1
enter 6 flavors of 8oz into supermarket chains to one or two select regions

Strengths Weaknesses

● expansion into greater market ● high cost

● 8oz = largest dollar/unit share ● highest level of competition of all sizes
● other natural brands = 200% revenue ○ quarterly promotions & bigger
increase marketing budget
● unique positioning
● rumors about top competitor moving
into supermarkets
Option 2
enter 4 flavors 32oz into supermarket chains nationally

Strengths Weaknesses

● above average gross profit margin ● greater slotting expenses

● less competition ● doubts of the success of this size
● less promotion expenses ● difficulty reaching national distribution
in one year
● must hire experienced sales personnel
Option 3
enter 2 flavors of children’s multipacks into natural food stores

Strengths Weaknesses

● already established relationships ● additional R&D costs

● would not have the same impact on ● natural food stores do not reach a large
marketing, sales, brand, and channel portion of the end consumer
arrangements
● established ingredients work well for
end consumer
● high financial potential
● natural foods channel growing at much
higher rate
Revenue and Cost analysis for each option
option 1 option 2 option 3
expected sales $35,000,000.00 $5,500,000.00 $1,800,000.00
revenue per unit $0.40 $1.46 $1.51
total revenue $14,000,000.00 $8,030,000.00 $2,718,000.00

manufacturing
costs $10,850,000.00 $5,445,000.00 $2,070,000.00
SKUs $1,200,000.00 $2,560,000.00 $0.00
marketing $2,400,000.00 $7,680,000.00 $250,000.00
trade promotions $217,500.00 $512,000.00 $0.00
additional SGA $320,000.00 $160,000.00 $0.00
R&D $0.00 $0.00 $390,000.00
free cases $67,950.00

total costs $14,987,500.00 $16,357,000.00 $2,777,950.00

profit for 1 year -$987,500.00 -$8,327,000.00 -$59,950.00

Additional growth
Growth Option 1 Option 2 Option 3

Year 2 revenue $14,420,000.00 $8,270,900.00 $3,261,600.00

Year 2 cost $11,175,500.00 $5,608,350.00 $2,484,000.00

● Growth in Year 2 profits $307,000.00 -$5,689,450.00 $527,600.00

Total profits after 2
supermarket years -$680,500.00 -$14,016,450.00 $467,650.00

chains is
Year 3 revenue $14,852,600.00 $8,519,027.00 $3,913,920.00
expected to be Year 3 costs $11,510,765.00 $5,776,600.50 $2,980,800.00
3% Year 3 profits $404,335.00 -$5,609,573.50 $683,120.00
Total profits after 3
● Natural Food years -$276,165.00 -$19,626,023.50 $1,150,770.00
store growth is
expected to be Year 4 revenue
Year 4 costs
$15,298,178.00
$11,856,087.95
$8,774,597.81
$5,949,898.52
$4,696,704.00
$3,576,960.00
20% Year 4 profits $504,590.05 -$5,527,300.71 $869,744.00
Total profits after 4
years $228,425.05 -$25,153,324.21 $2,020,514.00
Target Audience - End Consumer
Educated, middle-aged women with
General Natural Yogurt medium to high family income that
Consumer shop at natural food stores

8oz General user (Women)

32oz “Heavy” consumer

Multipack Children (and their mothers)

 SWOT
STRENGTHS:
● Product differentiation
● Owns manufacturing plant
● Relationship brokers have
OPPORTUNITIES:
● Chance to get a huge investor or
acquisition
● Haven’t yet tapped into
supermarket chains
WEAKNESSES:
● Can’t maintain consistent
profitability
● Minimal percentage of the
market share in the refrigerated
yogurt industry.
THREATS:
● Dannon and Yoplait have 57% of
market share
● Dannon’s new organic product
● High level of competitors in
supermarkets
Value Chain
Supermarkets Natural Food Stores
Manufacturer Manufacturer

Distributor Natural Foods

Wholesaler

Natural Foods
Distributor

Retailer Retailer

Customer Customer
 Revenue taken by each level of Value Chain
option 1 option 2 option 3

supermarket (8oz) supermarket (32oz) natural (6pk)

manufacturer (NVF) $0.40 $1.46 $1.51

broker (4%) $0.03 $0.11 $0.13
NF wholesaler (7%) $0.23
distributor (15%,
15%, 9%) $0.11 $0.41 $0.30
retailer (27%, 27%
35%) $0.20 $0.73 $1.17
price to consumer $0.74 $2.70 $3.35
Market Share
Supermarket Natural Food Stores
Industry Analysis
Porter's 5 Forces for Yogurt
Threat of New Entrants
Threat of Substitute Products or
Services
Bargaining Power of Buyers
Bargaining Power of Suppliers
Low due to multiple barriers to entry.
High because if you wanted to switch from eating yogurt
to any other snack food there are no switching costs.
High because there are many other substitute goods
retailers could put on their shelves instead of
Natureview.
Medium because some suppliers are critical and have
few alternatives where as other suppliers are more
easily replaceable.

High due to the fact that two competitors make up half of

Rivalry Among Existing Competitors the total market share for yogurt in supermarkets.
Additional Information Needed
Information that Natureview Farm should know to make a more educated
and rational decision
● How many markets and chains they expect to enter
● Better knowledge of end consumer
○ demographics, behaviors, lifestyles
○ how many consumers in each region purchase natural yogurt, and from what
type of store
Recommendation
Sell Children’s yogurt to Natural Food retailers

● Will not sell as much as 8 oz in Supermarket would, but they will save on
the high stocking and marketing fees
● 32 oz comprised a smaller unit and dollar share of the yogurt market
● Natural foods industry is growing faster
● Highest profit margin option
● Already high market share in natural food industry
● Keeps consistent and positive relationships with established value chain
● Create unique product which stands out against competitors so retailers
choose Natureview
Implementation
● Construct marketing campaign to attract end users with the estimated
$250,000 budget
● Conduct market research to further understand and segment market
● Product design appeal for differentiation: on-the-go tubes instead of cups
● Create a mascot for brand image
● Ads in parenting magazines
● Child celebrity endorsements
● Partner with child entertainment companies i.e. Marvel
Appendix
Porter’s 5 Forces: Threat of New Entrants

Low. There are high capital requirements such as manufacturing

facilities, transportation acquisition, etc. Economies of scale are
also high due to the high fixed costs. Product differentiation is
medium bc while there a lot of yogurt brand and even some
organic brands, there are none with the all natural ingredients
that Natureview provides.
Porter’s 5 Forces: Threat of Substitutes

High. If you wanted to switch from eating yogurt to applesauce you could. There
are all kinds of substitutes, especially in a grocery store setting.
Porter’s 5 Forces: Bargaining Power of Buyers

High. There are many other substitute goods a supermarket or natural foods
retailer could buy to put on their shelves, but they have high power because
Natureview farms wants to be on their shelves so much that they are willing to pay
slotting fees and one-time allotment of free products
Porter’s 5 Forces: Bargaining Power of Suppliers

Medium. Some suppliers, such as those who provide the special milk and bacteria
have high bargaining power becuase their product is so vital to the process and
not widely produced. Other suppliers, such as those providing sugar, flavoring,
and fruit, have low supplier power because there are many more companies that
make these products.
Porter’s 5 Forces: Competitive Rivalry

High. Dannon and Yoplait hold 57% of market share for yogurt in supermarket
stores. In natural food stores, Natureview has the highest individual market share
but is followed closely by Horizon Organic and Browncow. Dannon is also
expected to release a brand of organic yogurts to directly compete with
Natureview.