The case study Natureview Farm explores channel management problems in the U.S. food industry. The Vermont-based producer of yogurt is the leading national yogurt brand until, in 2000, the company faces financial pressure to further grow revenues due to a planned exit by its venture capital investors. Natureview's vice president of marketing faces the decision of how to increase revenue by expanding into the supermarket channel.
Karen Martinsen Fleming
Harvard Business School (2073-PDF-ENG)
Juni 07, 2007
Case questions answered:
Case study questions answered in the first solution:
- What option should Natureview Farm pursue? Why?
- Analyze the three options and explain your recommendations. (Financials on the three options are expected).
- Would it help if the VC extended their deadline for another year or more? What channel conflicts arise in the various options?
Case study questions answered in the second solution:
- How has Natureview Farm succeeded in the natural foods channel?
- What are the two primary growth strategies under consideration by Natureview?
- What are the strategic advantages and risks of each option? What channel management and conflict issues are involved?
- What action plan should the company pursue?
Case study questions answered in the third solution:
- What are the two primary growth strategies under consideration by Natureview?
- How do the three options compare financially in terms of yearly revenue, gross margin, required investment, and profit potential? What are the advantages, risks, and potential channel conflict issues? Think about both quantitative and qualitative factors.
- What action plan should the company pursue? What changes in the marketing mix do you recommend in order to implement the plan?
Note: In order to determine the quantitative factors in #2, please use the Natureview Financials .xls file on Canvas. Solve the “Margin” tab using data from the case and exhibits. Then use the gross margins you calculate to solve the revenue and profit figures for each option on the tab “Revenue_Profit.”
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Natureview Farm Case Answers
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Executive Summary – Natureview Farm
In this report, we provide business recommendations to Natureview Farm to help increase its revenue to meet the goal of $20 million by the end of 2001. We discuss the Channel Analyses, the Alternatives with Financial Analyses, and the recommendation of which alternative Natureview Farms should choose.
Channel Analyses and Market Share
The channel analyses provide a brief overview of the distribution channels of the supermarket and the natural food market. We also analyze the current market share held by different types of yogurt and the key competitors within both the Supermarket and Natural Food Channel.
Alternatives with Financial Analyses
The alternatives with financial analyses will discuss three options that have been proposed. The first two options involve entering the supermarket channel.
The first option is to expand six SKUs of the 8-oz. size into the eastern and western Supermarket regions. The second option is to expand four SKUs of the 32-oz. size nationally into the supermarket channel. And, the third option involves continuing with the traditional natural foods channel by introducing two children’s multi-pack into the natural foods channel.
Under each alternative, one will find both the advantages and disadvantages of choosing that option. We have also included the financial impact that each option will have on the company’s goal of reaching $20 million by 2001.
Recommendation
The first and the second options both allow Natureview Farm to reach the $20 million mark. We recommend that it move forward with option 1. This option will help Natureview Farms not only reach its goal of $20 million by 2001. Still, it will also help break into the supermarket channel and obtain new customers without the added risk of trying to expand to 64 supermarkets in a short period of time.
Introduction – Natureview Farm
Natureview Farm manufactured and marketed refrigerated cup yogurt since 1989. The unique family yogurt recipe used all-natural ingredients, which gave the yogurt its unique smooth and creamy texture and 50-day shelf life, which was around 20 days longer than that of its competitor’s products which used artificial thickeners.
Currently, the yogurt produced by Natureview Farms is sold only in the Natural Foods stores, where the shoppers were more educated and earned higher incomes than the typical shopper at a supermarket. According to 58% of US households, they would buy more organic products if they were relatively cheaper.
Looking at the consumer spending trends in the adjacent graph, we conclude that it would be very beneficial to enter the supermarket as the consumers have started spending more and more on organic food in the supermarkets. The price for yogurt will also be less in supermarkets as compared to the natural foods store. More people will be likely to make purchases of the product. The loss in revenue due to the reduction in the price will increase due to the sale of a higher number of units.
Situation Overview
Natureview Farm wants to grow its revenue by over 50% to reach the target of $20 million in revenue in 2011. Previously, it reached $13 million in 1999. To achieve this goal, it needs to select the appropriate course of action from the three available alternatives.
Channel Analyses
Supermarket Channel
The supermarket channel is comprised of several supermarket chains spread in the Northeast, Midwest, Southeast, and West regions of the country. The market share by region is shown in the graph.
The supermarket channel has four steps in its distribution cycle viz. manufacturer, distributor, retailer, and customer. The supermarket channel sells around 97% of the total amount of yogurt consumed, giving the Natural Foods channel only 3%. Looking at these figures, it is inevitable that Natureview Farm has to…
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