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Natureview Farm Case: SDM Group 6

1) Natureview Farm is considering three options to increase its annual revenues from $13 million to $20 million by expanding into new product categories and distribution channels. 2) Option 1 involves launching smaller sized SKUs in the supermarket channel nationally. Option 2 focuses on larger sized SKUs in supermarkets nationally. Option 3 introduces multipacks in the natural foods channel within its existing regions. 3) Based on financial projections, Option 1 is expected to generate the highest revenues of $38.9 million, exceeding the target. However, it also carries the most risk of channel conflicts and competition. Option 3 is least likely to meet the revenue target but has the lowest risk being in their current natural foods channel.

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Sreejit Janardhanan
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92 views5 pages

Natureview Farm Case: SDM Group 6

1) Natureview Farm is considering three options to increase its annual revenues from $13 million to $20 million by expanding into new product categories and distribution channels. 2) Option 1 involves launching smaller sized SKUs in the supermarket channel nationally. Option 2 focuses on larger sized SKUs in supermarkets nationally. Option 3 introduces multipacks in the natural foods channel within its existing regions. 3) Based on financial projections, Option 1 is expected to generate the highest revenues of $38.9 million, exceeding the target. However, it also carries the most risk of channel conflicts and competition. Option 3 is least likely to meet the revenue target but has the lowest risk being in their current natural foods channel.

Uploaded by

Sreejit Janardhanan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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SDM

Group 6

NATUREVIEW FARM CASE


ASSIGNMENT 3

SUBMITTED BYGROUP 6

FT151001

Nivedita Krishnan

FT151053

Sreejit Janardhanan

FT154041

Anand Viswanath

FT151052

Rohan Shah

SDM

Group 6

OBJECTIVE
Natureview had to increase revenues from $ 13 million to $20 million by end of 2001 to obtain highest valuation for the
company while attracting investors.
CONSIDERATIONS FOR DECISION MAKING

SDM

DIMENSION
Product
Channel
Coverage
Reason for
product
choice

Competition

Constraints /
Concerns

Benefit to
channel

Channel
growth
potential

Group 6

OPTION 1
6 SKUs of 8-oz product

OPTION 2
4 SKUs of 32-oz product

Supermarket
One or two regions

Supermarket
National - 64 retail chains
across
Generates above average
gross profit margin

Largest dollar and unit


share of market
Successful distribution
expansion into
supermarkets by other
natural foods brands with
200% revenue increase
within 2 years
First mover advantage as
supermarket retailers may
authorise only one brand.
Potential channel conflict.
Ability to handle distribution
in terms of logistics and
technology.
Increase marketshare
compared to other
channels.
Attract higher income, less
price sensitive customers

Currently less competition in


the segment. Dannon and
supermarkets through
private labels were expected
to enter the segment.

20% annual organic yogurt


unit volume growth with
overall 2% to 4% yogurt

20% annual organic yogurt


unit volume growth with
overall 2% to 4% yogurt

OPTION 3
2 SKUs of children's multipack
Natural Foods Channel
Existing coverage
Expand product line and tap
on low price sensitive
customers
Natureview had 24%
marketshare with Horizon
organic coming close with
19%.

Need to hire experienced


sales force to establish
relationships and sell in new
channel. Potential channel
conflict. Ability to handle
distribution in terms of
logistics and technology.
Increase marketshare
compared to other channels.

Natural Foods Channel


lacked automated scanner
checkout systems which was
required to better track
sales and spot trend.

Higher income from slotting


fees

Natureview's plan to launch


new products could help
boost sales
Channel sales growing 7
times faster than
supermarket

Brought in good revenue


and profit to the channel

SDM

Group 6

ANALYSIS

HEAD
REVENUE
COGS
GROSS PROFIT
EXPENSES
Advertising
Marketing Staf
Sales Staf
Broker Fee @ 4%
Slotting Fee
Trade Promotions
Complimentary
Cases
Net Profit
Current Revenue
Total expected
Revenue
Achieving Target?

OPTION 1
25900000
1085000
24815000

OPTION 2
14850000
5445000
9405000

OPTION 3
6030000
5130000
900000

2400000
120000
200000
1036000
1200000
3480000

0
120000
160000
594000
2560000
4096000

0
250000
0
241200
0
0

150750

16379000
13000000

1875000
13000000

408800
13000000

38900000

27850000

19030000

Yes

Yes

No

CONCLUSION

Launching products in the supermarket channel clearly helps meet and exceed their revenue target of $20
million.
Going with option 1 gives highest projected revenues and hence from a valuation perspective, would be the best
choice.

SDM

Group 6

Opting for supermarket channel comes with the risk of channel conflict and straining existing relationship with
natural foods channel partners.
This option would also attract aggressive responses from cash rich competitors.
Decisions to be taken:
o Revenue Target perspective: Option 1 to achieve maximum revenues
o Low Risk perspective: Option 3 as natural foods channel is growing 7 times faster than supermarkets and
launching multipack through this channel would exploit customers who are not price sensitive. Over the
years with higher unit sales, profitability would be higher.

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