ayush srivastava natureview farm case study

NATUREVIEW FARM

SUBMITTED BY-

AYUSH SRIVASTAVABtech III YearMNNIT Allahabad

AGENDA

OVERVIEW• Company• Natural/Organic Market Trends• Yogurt Market Trends• Challenge

Option 1Option 2Option 3FinancialsRccommendations

COMPANY• Founded in 1989.

• Manufacturer and marketer of refrigerated cup yogurt

• Differentiators: Natural Ingredients Longer shelf life Reputation for high quality and great taste

• Key success factors: Strong brand Effective low cost “guerrilla marketing” National distribution in natural food channel. Strong relationships with distributors.

NATURAL/ORGANIC MARKET TRENDS• Organic food market predicted to grow from $6.5 billion to $13.3 billion over 4 years.

• Generally organic products consumers tend to be more educated, be older and live in the Northeast and West.

• 67% of households consider price as a barrier to purchase of organic products.

• 44% of the customers would like a wider selection of organic products in supermarkets.

• Supermarkets are moving towards attracting new customers by offering more organic products.

YOGURT MARKET TRENDS• Concentrated- 4 competitors control over 50% share.

• Supermarkets= 97% of total sales(3% annual growth).

• Natural Food Stores= 3% total sales(20% annual growth)

• Factors in purchasing decisions: Package type/size, flavour, price, freshness, ingredients, Organic

CHALLENGE :Identify path to grow revenues by over 50% within 23 months.

GOAL :Attain against possible valuation in order to secure new investors or positionItself for acquisition.

OPTION 1

Expand 6 SKU’s of the 8-oz product line into one or two selected supermarket channel regions

PROS:• 8-oz cups represent largest dollar and unit share of market.

• Supermarkets fear losing market share to natural food competitors.

• First-Mover advantage.

• Supermarkets may only authorize 1 organic yogurt manufacturer.

CONS:• Highest level of competitive trade promotion and marketing spend.

• Possible channel conflict between supermarkets and natural food stores.

• Promotion and lower price at supermarkets may hurt the brand.

• Little experience in dealing with supermarket chains.

OPTION 2

Expand 4 SKU’s of the 32-oz product line nationality.

PROS :• Natureview already has strong relationships with leading natural foods cahnnel retailers

• More time to prepare the company for moving into supermarkets.

• Financially attractive.

• High margins- 37.6%.

• Low sales and marketing expenses.

CONS :

• Fast growth of natural food channel will lead to demands equal to those of supermarkets.

• Miss opportunity to enter supermarkets before competitors.

OPTION 3

Expand 2 SKU’s of a children’sMulti-pack into the naturalfoods channel.

PROS :

• Financially attractive

• High Margins- 37.6%

• Low sales and marketing expenses

CONS :

• Fast growth of natural food channel will lead to demands equal to those of supermarkets.

• Miss opportunity to enter supermarkets before competitors.

Financial Of Option 1:

• SALE PRICE

• RETAIL MARGIN

• PRICE TO RETAIL

• DISTRIBUTOR MARGIN

• PRICE TO DISTRIBUTOR

• MFC COST

$0.78

$0.21

$0.57

$0.09

$0.48

$0.31

GROSS PROFIT NV $0.07

GROSS PROFIT MARGIN 35.95%

Financial Of Option 2:

• SALE PRICE

• RETAIL MARGIN

• PRICE TO RETAIL

• DISTRIBUTOR MARGIN

• PRICE TO DISTRIBUTOR

• MFC COST

$2.83

$0.76

$2.07

$0.31

$1.76

$0.99

GROSS PROFIT NV $0.77

GROSS PROFIT MARGIN 43.6%

RECOMMENDATIONOPTION 1:

• Financials

• Only a regional distribution instead of national which should make it easier to implement.

• Competitors are going to move into the supermarket space and we may miss a huge opportunity by not taking the risk.

• Higher slotting fees, but more visibility of the product.

NET MARKETING CONTRIBUTION =

(Sales Revenue * % gross profit) – marketing expenses

2001 2002 2003 2004 2005 2006 Average

OPTION 1 $3599.65 $4817.58 $6279.09 $8032.91 $10137.49 $12662.99 $7588.28

OPTION 2 $3699.08 $4301.04 $5027.80 $5863.57 $6824.70 $7930.01 $5602.70

OPTION 3 $997.07 $1308.84 $1698.55 $2185.68 $2794.61 $3555.76 $2090.08