Natureview farm Case Study
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Transcript of Natureview farm Case Study
BACK
GROUND
Founded in 1989
Yogurt manufacturer
Strong brand
Differentiators1. Long shelf life
2. Natural ingredients3. Reputation for high quality and good taste
SUCCESS STORIESNatural yogurt (organic) and special process
Affordable according to it’s channel
Average shelf life 50 days
Added flavors to both 8-ounce (oz.) and 32-oz. cup sizes of yogurt
Developed strong relationships with leading natural foods retailers
Raise revenue to $20 million by the end of
2001.
Whether or not to expand
into supermarkets?
Ultimate goal is to maintain brand image.
GOALS
OPTION 1
Bring in the 6 SKUs of the 8-
oz. size
Expand in Northeast and
West supermarket
region
RISKS
Advertising plan costs $1.2
million per region per year
Direct competition with national yogurt brands
SG&A expenses would increase
Year 2000 Year 2001 Year 2002 Year 2003
Revenue $ 29,070,950 $ 32,285,140 $ 36,142,168 $ 40,770,602
Costs of Good Sold $ (19,040,000) $ (21,210,000) $ (23,814,000) $ (26,938,800)
Gross Profit $ 10,030,950 $ 11,075,140 $ 12,328,168 $ 13,831,802
Admin / Freight $ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)
Sales $ (1,880,000) $ (1,880,000) $ (1,880,000) $ (1,880,000)
Marketing $ (3,660,000) $ (3,660,000) $ (3,660,000) $ (3,660,000)
R&D $ (390,000) $ (390,000) $ (390,000) $ (390,000)
One-Time Slotting Fee
$ (1,200,000) - - -
Brokers' Fee @ 4% $ (642,838) $ (771,406) $ (925,687) $ (1,110,824)
Total Expense $ (9,982,838) $ (8,911,406) $ (9,065,687) $ (9,250,824)
Net Income $ 48,112 $ 2,163,734 $ 3,262,481 $ 4,580,978
Profit Margin 0.17% 6.70% 9.03% 11.24%
OPTION 1 ANALYSIS :
OPTION 2
Expand supermarket with 4
SKUs of 32oz yogurt
Strong competitive advantage: longer
shelf life
Promotional expenses will be
lower
RISKS
It would increase SG&A expense by
$160,000
New users may won’t purchase
large 32oz quantity of product
Hiring salesperson with experience for
sophisticated supermarket
channel
Year 2000 Year 2001 Year 2002 Year 2003
Revenue $ 22,214,425 $ 24,057,310 $ 26,268,772 $ 28,922,526
Costs of Good Sold $ (13,635,000) $ (14,724,000) $ (16,030,800) $ (17,598,960)
Gross Profit $ 8,579,425 $ 9,333,310 $ 10,237,972 $ 11,323,566
Admin / Freight $ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)
Sales $ (1,720,000) $ (1,720,000) $ (1,720,000) $ (1,720,000)
Marketing $ (1,894,000) $ (1,894,000) $ (1,894,000) $ (1,894,000)
R&D $ (390,000) $ (390,000) $ (390,000) $ (390,000)
One-Time Slotting Fee
$ (2,560,000) - - -
Brokers' Fee @ 4% $ (368,577) $ (442,292) $ (530,751) $ (636,901)
Total Expense $ (9,142,577) $ (6,656,292) $ (6,744,751) $ (6,850,901)
Net Income $ (563,152) $ 2,677,018 $ 3,493,221 $ 4,472,665
Profit Margin -2.54% 11.13% 13.30% 15.46%
OPTION 2 ANALYSIS :
OPTION 3
To introduce two SKUs of a children’s multi-pack into
the channel
It would yield the strongest profit contribution of all
the strategies
Financially attractive and high margins
RISKS
Ignores the opportunity in the growing supermarket
channel
Can not achieve the target objective
Year 2000 Year 2001 Year 2002 Year 2003
Revenue $ 16,317,073 $ 16,383,414 $ 16,451,083 $ 16,520,104
Costs of Good Sold $ (10,260,000) $ (10,007,640) $ (10,043,993) $ (10,081,073)
Gross Profit $ 6,057,073 $ 6,375,774 $ 6,407,090 $ 6,439,032
Admin / Freight $ (2,210,000) $ (2,210,000) $ (2,210,000) $ (2,210,000)
Sales $ (1,560,000) $ (1,560,000) $ (1,560,000) $ (1,560,000)
Marketing $ (640,000) $ (640,000) $ (640,000) $ (640,000)
R&D $ (390,000) $ (390,000) $ (390,000) $ (390,000)
One-Time Slotting Fee $ (82,927) - - -
Brokers' Fee @ 4% $ (132,683) $ (135,337) $ (138,043) $ (140,804)
Total Expense $ (5,015,610) $ (4,935,337) $ (4,938,043) $ (4,940,804)
Net Income $ 1,041,463 $ 1,440,438 $ 1,469,046 $ 1,498,227
Profit Margin 6.38% 8.79% 8.93% 9.07%
OPTION 3 ANALYSIS :
Option 1 Recommended 8 –oz yogurt is the highest demand and have the largest dollar shareReach beyond the target objective of 20 million revenue by end of 2001A bit risky but in a long term will generate revenues of 200%
Creates a strong long term financial situationWill have the first mover advantages of natural product to enter supermarket