Natureview Farm

NATUREVIEW FARM

1. How do the three options compare financially in terms of yearly revenue, gross margin, required investment, and profit potential?

a. Step 1: Work back from the retail price to obtain Natureview’s manufacturer’s selling price across the products (8oz., 32 oz., Multipack) and channels (Supermarket, Natural Foods). Then calculate the contribution per unit sold for each (this will give you manufacturer’s gross margin by product and channel). Everything you need for this part can be found in the case text or Exhibit 3.

b. Step 2: Break down the market share value of the $1.8 billion yogurt market by channel, size of package, and geographic region. Everything you need for this part can be found in the case text or Exhibit 2. (Note: Step 2 in independent of Step 1)

c. Step 3: Evaluate the three options. This involves calculating the gross profit, marginal sales growth, and market share percentages that Natureview could achieve under each of the three options. To do so, you’ll need the contribution per unit sold and manufacturer sale price from Step 1 and the market share dollar values from Step 2.

Option 1: To Expand six SKUs of the 8- oz. product line into one or two selected supermarket channel regionally

Option 2: To Expand four SKUs of the 32- oz . size nationally.

Option 3: To Introduce two SKUs of a children’s multi- pack into the natural foods channel.

2. What are the strategic advantages and risks of each option? What channel management and conflict issues are involved?

Option 1:

Advantage: -If Natureview is the first brand to expand into the Supermarket channel, would likely is the only one organic yogurt brand authorized, and this means the first mover advantage, even in the relationships with the top 11 supermarket retail chains in the Northeast and the top 9 supermarkets in the West.

- Better Incomes

Risk: High costs in trade promotions and marketing (need hire sales personnel).

Option 2:

Advantage: -Due the longer shelf life, the size 32 oz. win market share in organic products.

- Less promotional expenses (only twice a year) and marketing expenses

Risk: Slotting expenses would be higher. Need sales headcount and establish relationships with supermarket brokers.

Option 3:

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