Principles of Marketing
Assignment
Nature View Farm
Animesh Jain: 23 PGIB007
Ishu Pattnayak: 23 PGIB017
Saurabh Mundle: 23 PGIB027
Contents
Overview of the case .............................................................................................................................................. 2
Case ........................................................................................................................................................................ 2
4P Analysis .............................................................................................................................................................. 3
Options Analysis ..................................................................................................................................................... 3
Option 2 .................................................................................................................................................................. 4
Option 3 .................................................................................................................................................................. 5
Conclusion .............................................................................................................................................................. 7
Overview of the case
1989
Entered as a manufacturer of refrigerated cup yogurt
First enter market 8-oz and 32-oz with plain and vanilla flavor
Use natural ingredient with longer average shelf-life of 50 days
1999
Company revenue growth from $ 100.000 to $13 million Fruit on the bottom yogurt.
Expand to 12 yogurt flavors & multipack yogurt (for children)
2000
Expand to 12 yogurt flavors & Multipack yogurt (for Children)
Case Issues
• VC needed to cash out of its investment
• Need to find a path to grow revenues by over 50% before the end of 2002
($20 million)
• Should Natureview Farm expand into supermarket channel
4P Analysis
Product
Price
Natural Yogurt(Organic)
8 -oz. size with 12 flavors
32-oz. size with 4 flavors
Affordable
Place
Promotion
Natural food Channel
Wholesale club National retailer channel
Convenience and Drug store
It’s natural flavor and high quality and great state
growth in the national distribution and natural
food channel
Low cost guerilla marketing
Option Analysis
Option 1
Expand 6 SKUS of the 8-oz into eastern and western supermarket regions
Pros
•
•
•
8-oz have highest incremental demand
High potential to increase revenue
First mover as organic yogurt brand to enter supermarket channel
Cons
•
•
•
•
•
High Risk & High Cost (Marketing)
Require Quarterly trade promotions
Advertising plan would cost $1.2 million per region per year
SG&A expenses increase by $320,000 annually
Need to pay one time slotting fee
Supermarket Channel Margin Analysis
Channel
Selling Price
Margin
Retailer
$ 0.74
27%
$0.74/0.27=$0.58
Distributor
$0.58
15%
$0.58/1.15=$0.51
Natureview
$0.51
64.50%
Projection
Income
Statement
2000
Unit Sales
35000000
Revenue
35000000x$0.51=$17850000
Cost of goods sold 35000000x$0.31=$10850000
Gross Profit
Cost Price
$0.31
2001
35 000 000 x (1+20% ) = 42
000 000
42000000X0.51=$21420000
42000000X0.31=$13020000
$7,000,000
$8,400,000
$1200000x2region=$2400000
$2,400,000
$320,000
$640,000
Expenses
Advertisement
SG&A
Slotting Fee
6x$10000x20retails=$1200000 $0
Broker's Fee
$17850000x0.04=$714000
Net Profit
$21420000x0.04 = $856800
$2,366,000
$4503200
Option 2
Expand 4 Skus of the 32 -oz size nationally into supermarket regions
Pros
•
•
•
Generate higher profit margin than 8-oz size
Strong competitive advantage: longer shelf life
Lower promotion expenses
Cons
•
•
•
•
Doubt on claim of new users would readinly “enter the brand ” via a multi-use size
Doubt on sales team’s ability to achieve full national distribution in 12 months
Needs to hire sales personnel and establish relationships with supermarket brokers
The 32-oz expansion option would increase SG&A expense by $160,000
Supermarket channel margin analysis
Channel
Selling
Price
Margin
Cost price
Retailer
$2.70
27%
$2.70/1.27= $2.13
Distributor
$2.13
15%
$2.13/1.15=$1.85
Natureview
$1.85
($1.85$0..99)/$1.85
=87%
$0.99
Projection income statement
Unit sales
2000
2001
5500000
5500000
Revenues growth
550000x1.85=10175000
10175000
Cost of Goods sold
5500000x0.995=445000
5445000
Gross profit
4730000
4730000
Expense
Slotting Fee
4X10000x64=2560000
SG & A
120000X4=480000
0
480000
Advertising cost
407000
367400
Broker's fee (4% revenues)
160000
160000
1123000
3722600
Net profit
Option 3
Introduce two SKUs of a children multipack onto the natural foods channel
Pros
•
It would yield the strongest profit contribution on all the strategies under consideration
•
•
•
The natural foods channel was growing almost seven times faster then the supermarket
The financial potential was very attractive
The Sales team was confident than they could achieve distribution for the two SKUS.
Cons
•
There were many potential conflicts and other uncertain factors that the manager could not
determine
Nature
Food Channel Margin Analysis
Channel
Selling
Price
Margin
Cost Price
Retailer
$3.35
35%
$3.35/1.35=$2.48
Distributor
$2.48
9%
$2.48/1.09=$2.28
Nature foods
wholesalers
$2.28
7%
$2.28/1.07=$2.13
Natureview
$2.13
($2.13 $1.15)/$1.15
=85%
$1.15
Projection income statement
Unit sales
2000
2001
5500000
5500000
Revenues growth
550000x1.85=10175000
10175000
Cost of Goods sold
5500000x0.995=445000
5445000
Gross profit
4730000
4730000
Expense
Slotting Fee
4X10000x64=2560000
SG & A
120000X4=480000
0
480000
Advertising cost
407000
367400
Broker's fee (4% revenues)
160000
160000
1123000
3722600
Net profit
Final Conclusion
Go for OPTION 1
•
Reach beyond the target objective of 20 million revenue by end of 2001 with projected of $21.4
million
•
•
•
•
•
Highest Net Profit opportunity
8-oz yogurt is the highest demand
In supermarket, can expose to more range of customers
Will have the first mover advantages of natural product to enter supermarket
A bit risky but in a long term will generate revenues of 200% (as looking at two other competitors)