GRBUS 511 Natureview Farm Case A. Yudelson
Natureview Farm Success, Growth Strategy And Financial Analysis Of The Three Options Under Consideration
Natureview Farm yogurt originated in 1989 and was based on the family recipe that used only natural ingredients, and no artificial flavors or thickeners. That was one of the main points of differentiation from bigger competitors such as Dannon, Yoplait, and Breyers, and gave the Natureview farm yogurt the privilege of a niche producer. Moreover, Natureview Farm's yogurt's average shelf life was 50 days, 20 days longer than that of competitors. That way special production process and ingredients helped Natureview Farm to save on efficient supply chain that competitors needed to reduce shipping time to their distributors. Strong reputation for high quality and great taste, as well as high perception of natural ingredients, helped the company to grow quickly to national distribution. The Natureview brand occupied the organic & natural segment that was not served adequately through the normal retailing chains at that time. Natureview Farm was considering two growth strategies: through Supermarket Channel and Natural Foods Channel. Supermarket Channel usually dominated by large manufacturers such as Dannon and Yoplait. The product takes just four steps before it gets to the final consumer. In this channel, an 8oz cup sells for $0.74. However, in order to sell its yogurt in the supermarket channel, Natureview farm has to pay a "slotting fee" for each flavor of the same size cup. Moreover, the company - manufacturer is obligated to participate in promotions four times per year, which costs from $7,500 till $15000 per ad per retailer depending on the region. Nature Foods Channels are friendlier to the small manufacturers like Natureview Farms who don't have massive funds for advertisement and promotions. The only one-time payment for new manufacturers is allocated in this channel. Even though, natural foods channel charge lesser fees in general, the product makes longer way (five steps) to get to the final consumer through this channel. The prices in this channel are slightly higher an 8oz cup of yogurt goes for $0.88. In order to grow revenues from their current $13,000,000 revenue to $20,000,000 before the end of the year, Natureview Farm is reviewing three options. Table 1 compares the margin of each distribution channel and shows the cost of production and manufacture price per unit for each of the options. Option 3' s channel appears to be lengthier and pricier for the customer, but it does not usually affect sales, as natural foods consumers are less price-sensitive. As Table 1 shows company prices 8 oz. cup at $0.46, 32 oz., cut at $1.68 and children's multipack at $ 1.84. Table 1. Unit Cost Calculation and Chanel Margin Comparison for All Three Options Option 1 Option 2 Option 3 Price Margin Price Margin Price Margin Retailer Price 0.74 27% 2.7 27% 3.35 35% Distributor Price 0.54 15% 1.97 15%...