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Natureview Farm Case Study

Essay by   •  October 1, 2011  •  Case Study  •  1,655 Words (7 Pages)  •  3,066 Views

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Executive Summary:

Natureview farm is interested in positioning itself for acquisition by a venture capitalist and attain highest possible evaluation for the company they need to increase revenues. Natureview intends to increase its revenue to 20 million before the end of 2001. Natureview Farm holds 25% of the market share within the natural foods industry. This poses the issue of truly identifying the value and benefits of their current distribution channel, while exploring other alternatives to create value to the distribution of their product while increasing total revenue in Supermarket channel. In order to achieve this goal Christine Walker, Vice President of Marketing is considering 3 options with senior management where two options require them to enter the supermarket channel. Based on quantitative analysis we can see that clearly option 3 does not generate enough revenue at end of 2 years to meet the target. Although, option 1 is beneficial with maximum revenue but it's equally risky with huge anticipated incremental cost (such as trade promotions, SG&A, etc) and high number of skilled sales personnel.

Option 2 seems be best suitable for target Natureview has for next 2 years based on calculation (see spreadsheet) and risk benefit considerations. Total revenue for 2 years exceeds $20M with significantly lower cost and risks. At the same time it can serve as test bed for future expansion into supermarket channel for 8 oz. size. Industry experts predict growth of organic yogurt at supermarkets up to 20% per year from 2001-06. Therefore, once Natureview establishes itself in the supermarket channel they can switch to option 1 after 2001 which involves high risk of investment. In addition, it is not correct for senior management to just focus on increasing revenues, there has to be significant profits associated with option selection. Lastly strategic management of supermarket channel management is critical factor for the success of Natureview.

Introduction

Natureview has been established in 1989 and has succeeded in the natural foods channel for last 10 years because of the emphasis on natural ingredients and strong reputation for high quality and great taste. The company has traditionally focused on selling its yogurt in three different sizes, 4 ounce, 8 ounce, and 32 ounce servings, to natural foods retailers, which leaves Natureview Farm with a narrow, but growing target market. The company uses sales brokers to sell their yogurt to the natural foods retailers. Primary reason for their success can be attributed to the longer shelf life than that of its competition. Most of their competitors have product shelf life of 30 days while Natureview products have shelf life of 50 days. In addition, Natureview offered many flavors in both sizes (8 oz. and 32 oz.) which allowed the brand to expand its product offerings which in turn increased the revenue. Developing strategic relationships with leading natural food retailers like the chains of Whole Foods and Wild Oats and applying low cost "guerilla marketing" strategy played a major role in the Natureview's success in natural food channels. Less price sensitivity of customers in natural food channel allowed Natureview to charge higher prices as compared to supermarket.

Findings, Considerations and Strategies

The two primary growth strategies under consideration by NV are Market Development and Product Development. (Option 1 and 2 are expanding the existing products into new markets and option 3 is introducing new products in existing market.) Yogurt is consumed by roughly 40% of U.S. population, with women comprising 70% of purchases. Thus, Natureview should position its yogurt to target segment that includes women interested in buying organic food for their family. By using correct pricing tactics they can entice price sensitive consumers as well. Natureview should plan to position its products as Natureview Yogurt, a healthy choice. Positioning Statement like "Natureview Farm offers Natureview Yogurt, healthy choice for all adults and children at an affordable price" can be used to promote the brand in supermarket channel.

At least 77% US household indicated price was barrier to their purchase of organic products and 58% expressed willingness to purchase if prices were dropped. Thus, by entering supermarkets they can target these customers and to maintain its current natural food channel they can offer price concessions as well. Statistics show 46% of organic food consumers buy products at supermarket versus 29% at a natural foods supermarket, so obviously Natureview can target more customers by entering supermarket channel. Finally, they should not let go significant first-mover advantage by first brand to enter supermarket channel. Supermarket channel was competitive with 57% of market secured by Dannon and Yoplait, but Natureview had significant room for establishing its brand in that channel. Natureview is leading natural food channel but has to watch out for close competition from Horizon Organic and Brown cow. Three most important criteria for 32 oz. size were: brand, expiration date and price. Natureview had significant competitive advantage of avg. 50 days shelf life and by correct pricing strategy

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