Natureview Farm Case Analysis

NATUREVIEW FARM CASE ANALYSIS

Natureview Farm Case Analysis Ruoyu Wen Marketing Fundamentals Prof. Joan Crooker Summer 2015

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Natureview is a company that makes yogurts. However, there is a new challenge at present which is the company want their revenues grow to 50%, and we must help the company choose the best plan. There are some elements that have contributed to Natureview’s success. Natureview is the leader of the nature food channel. It has strong relationships with retailers, and these retailers all trust its products are better. Natureview also has built a impression of high quality and great taste for their customers. Natureview’s yogurts have long quality guarantee period. Customers can stow the yogurts for a long time so they can buy many yogurts once instead of buying everyday. And most important element is the company use a creative strategy named “guerrilla marketing.” It can help the company lower their cost to make the company more efficient. The company already has three options. On the first option advocated by the firm’s Vice President of Sales, the firm would have to expand six SKUs of the 8-oz. product line into one or two selected supermarket channel regions. First, as we know, the eight ounce cups represent the largest dollar and unit share of the refrigerated yogurt market, thus it has major revenue potential. Secondly, if the company expands six SKUs of the 8-oz product line, this would allow Natureview Farm to produce enough cups to put them on the supermarket’s shelves, with minimal slotting expense. Third, Based on other natural food brands success in expanding their product in the supermarket channel has shown significant proves Natureview’s product will have a high chance of success. However, there are still disadvantages. The management had estimated for comprehensive advertising plan will cost $1.2 million per region per year and Natureview’s

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sales, general and administrative expenses (SG& A) would increase by $ 320,000 annually. Due to Lack of experience in supermarket channel, their broker might take advantage of their relationship with top supermarkets retails chains in Northeast and West. And also this option might create direct competition with national yogurt manufacturer. The second option was proposed by the firm’s Vice President of Operations. He claims that the firm should expand four SKUs of the 32-oz. size nationally in order to address the revenue gap. This option also has some benefits. First of all, while the 32-oz. cups comprised a smaller unit and dollar share of the yogurt market, they generated an above-average gross profit margin for the firm. In addition, there were fewer competitive offerings in this size, so this option would present the firm with a competitive advantage because of the product’s longer shelf life. Besides, Natureview’s brand has achieved a 45% share of this size in natural food channel, it could sell approximately 5.5 million units in the first year if the Company decided to expand into 64 supermarket retail chains across the country. Last but not the least, promotional expenses would be lower since this size was only promoted twice a year. And this option might create conflict of channel between supermarket and natural food stores. The last option was proposed by the firm’s Assistant Marketing Director who suggests that the firm would have to introduce two SKUs of a children’s multi-pack into the natural foods channel. This option has less risks and costs but seems conservative. Choosing this option will allow the company to have more time to prepare before entering the supermarket channel. The financial potential was very attractive with expected high margin of 37.6%. This option can also build a strong relationships with the leading natural food channel retailers. The disadvantages

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are Natureview Farm will miss the opportunity to enter the supermarket before competitors, and due lack of experience, the company is not convinced that they have the necessary resources or skill-set to sell effectively to and through supermarkets. They are not sure they are ready. My recommendation for Natureview Farm is option 1. Even though the risk of choosing option 1 is higher, Natureview Farm should do so because based on what two other natural food companies’ result, their revenues increased 200 %. In addition, entry to this supermarket channel with 8 –oz size is more viable than option 2 where to expend into this channel with 32 –oz cup size. The 8 –oz size price is more acceptable than 32-oz size’s for customers. And also this option focuses on regional distribution instead of national, which should make it easier to implement this product information to region consumer. And the most important thing is the revenue of option 1 is the highest. Based on my calculate, the option 1 has the revenue of 35,000,000×$0.74= $25,900,00> option 2 which is $14,850,000 and option 3 which is $6,030,000. By expanding six SKUs of the 8-oz size into eastern and western supermarket regions, Natureview Farm would be able to achieve a net income of $7,004,000, excluding all the costs, which is the highest net income out of the three options that we proposed.