Company background 1989: founded – revenue $100 K – yogurt products. Introduced 2 flavors 1996: Jim Wagner hired to steady profits 1997: CFO Jim Wagner got VC capital infused capital in 1999 Today February 2000: annual revenue is $13M in 1999. Total 12 flavors in 8 Oz and 4 flavors in 32 Oz. VC to cash out at the end of 2001. Revenue needs to grow to $20M.
Product profile Emphasis on natural ingredients and its strong reputation for quality and great taste No artificial thickeners and rGBH mixed mil Comparing to the other products’ 30 days shelf life, Natureview’s yogurt will remain fresh for 50 days 8 Oz has 12 flavors and 32 Oz 4 flavors.
Customer and competition Customer Brand sensitive Natural foods customer Taste savvy Less price sensitive Woman (single and with kids) take 74% market share Customer loves Natureview yogurt
Competition Main competitor Recent IPO Flush with Cash Bigger than Natureview Already uses supermarket channel
SWOT Strengths Major and trusted brand in natural foods Product quality Strong relationships in natural food market Channel leader Relatively rapid revenue growth Longer product shelf life
Weaknesses Owns small portion of the yogurt market Not ventured into supermarket channel High dependence on brokers for distribution and promotion Inefficient nature foods distribution channel
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Opportunities Supermarket channel provides significant potential of growth Natural food’s sales expected to grow by 20% Opportunity for lowering customer cost
Threats Lack of capital Main competitor (Horizon) is getting stronger No expertise in supermarket channel Company may have to reposition Risk Inter Product cannibalization
Problem definition Its problem is that they have to make strategic marketing decisions to grow revenues to $20M from their current $13M before the end of the 2001 fiscal year.
Market Topology The Yogurt Market 8 Oz cups and smaller : 74% Children’s multipacks : 9% 32 Oz cups: 8% Other: 9% Channel market share Supermarket: 97% Natural Foods channel: 3% Natural Foods channel Natureview farm: 24% Horizon Organic: 19% Brown Cow: 15% White Wave: 7% Other: 35% Supermarket channel Danone: 33% Yoplait: 24% Columbo: 5% Private label: 15% Other: 23% Distribution channel Natural Foods channel:
manufacturer wholesaler distributors retailer customer Supermarket channel: manufacturer wholesaler retailer customer
Alternatives Alternative 1: Expand 6 SKUs of the 8 Oz product line into one or two selected supermarket channel regions: proposed by Walter Bellini VP Sales. Alternative 2: Expand 4 SKUs of the 32 Oz size nationally: proposed by Jack Gottlieb, VP Operations. Alternative 3: Introduce 2 SKUs of a Children’s Multi-Pack into the Natural Foods Channel: proposed by Kelly Riley, the assistant marketing director.
Alternative 1: Expand 6 SKUs of the 8 Oz product line into one or two selected supermarket channel regions: proposed by Walter Bellini VP Sales. Pros: Great upside potential For supermarket adding these products would attract higher-income less price-sensitive customers Unit volume growth of organic yogurt at supermarkets of 20% per year from 2001 to 2006 This option also has the highest incremental demand
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Cons: Supporting 8-Oz cup size would require quarterly trade promotions and a meaningful marketing budget Advertising plan would cost $1.2M per region per year in addition to the promotional ads expenses SG&A expenses would increase by $320,000 annually
This option creates direct competition with national yogurt brands.
Income forecast
Alternative 2: Expand 4 SKUs of the 32 Oz size nationally: proposed by Jack Gottlieb, VP Operations. Pros: Potentially give higher average gross profit margin than 8-Oz size It also has stronger competitive advantage like longer shelf life and lower marketing expenses
Cons: Doubt on claim of new users would readily “enter the brand” via a multi-use size Doubt on sales team’s ability to achieve full national distribution in 12 months Need to hire sales personnel and establish relationships with supermarket brokers The 32 Oz expansion option would increase SG&A expense by $160,000
Income forecast:
Alternative 3: Introduce 2 SKUs of a Children’s Multi-Pack into the Natural Foods Channel: proposed by Kelly Riley, the assistant marketing director. Pros: Established leader in this channel Perfect positioning for new multi-pack product Long term the financial potential was very attractive Cons: Established leader in this channel Perfect positioning for new multi-pack product Long term the financial potential was very attractive Income forecast
Channel conflict and cannibalization There will be a horizontal channel conflict with supermarkets It is possible the current channel partners may be alienated This may end up having 3-way impact: We discussed product demand, revenue growth Now we need to test product cannibalization All forecasts need to be stress tested for sensitivity
Decision matrix
Since the most important to them is the $20M: We would choose option 1: we recommend Natureview to expand the multi-pack into supermarket channel in Northeast and west. The pros high growth (12% changes from last year) minimized channel conflicts: through this expansion, Natureview can make its revenue goal by 2001 (no cannibalization/alienation) new target customers: supermarket will be selling these multi-packs relatively cheap higher expected annual demand
