Decision Sheet
Name: Sheetal Rani
Register number: 2128151
Date: 5th September 2022
Case analysis
Problem statement
Natureview Farm’s revenues had grown from a 100 thousand dollars to 13 million dollars. Now the main
problem is the company wants to increase its revenues by 50% but the confusion is to promote which
product line in order to achieve the target.
SWOT Analysis
Strengths Weaknesses
• No artificial, natural ingredients • Highly dependent on brokers
• Market leader with 24% share in Natural Foods • Only in natural food channel/not supermarket
Channel • Still a small share in the full yogurt market
• Highest shelf-life products
• Strong Channel Partner Relationships
Opportunities Threats
• 12.5% growth rate with multi-packaged • Not sufficient capital and financing options
products for children • No experience with supermarket channel
• Supermarket channel • Competition intensifying; Horizon Organic with
19% market share
• Cannibalization of sales
Option 1
Expand 6 SKUs of the 8-oz. product line into one or two selected supermarket channel regions.
Pros:
• 8-oz. cups have the largest dollar and unit share of market, along with highest incremental
demand
• First-mover advantage as an organic yogurt brand to enter the supermarket channel
• Other natural brands have successfully expanded to supermarkets
Cons:
• High level of competitive trade promotion and marketing spend
• Possible conflict of interests between supermarkets and natural foods stores
• Lack of sales experience in dealing with supermarket channels
Option 2
Expand 4 SKUs of the 32-oz. product line nationally through supermarket channel
Pros:
• 32-oz. cups have a higher profit margin than 8-oz. cups
• Fewer competitive offerings in this size
• Strong competitive advantage in terms of shelf-life
• Lower promotion expenses
Cons:
• Higher slotting fees due to nation-wide distribution
• Possible conflict of interests between supermarkets and natural foods stores
• Doubtful of new users would readily enter the brand via multi-use products.
• Doubtful if existing sales team can achieve nation-wide distribution in 12 months.
Option 3
Expand 2 SKUs of the children’s multi pack into the Natural Foods channel
Pros:
• Existing strong relationships with leading natural food channel retailers
• The sales team was experienced in this distribution channel
• Financially attractive – the natural foods channel was growing 7 times faster than the
supermarket channel
Cons:
• Rapid growth of Natureview Farms in the natural food channel might lead to bigger demands
from retailers, similar to the case of supermarket channel
• Missing out on the opportunity to become the first-mover in the supermarket channel
Recommendation: Option 1
Channel Selling Price Cost Price Margin
Retailer $0.74 0.73 * $0.74 = $0.54 27%
Distributor $0.54 0.85 *$0.54 = $0.46 15%
Supplier (Natureview) $0.46 $0.31 33%
Year 2000 2001
Incremental Unit Sales 35000000 35000000 * 1.2 = 42000000
Revenue 35000000 * $0.46 = $16100000 42000000 * $0.46 = $19320000
Cost of Production 35000000 * $0.31 = $10850000 42000000 * $0.31 = $13020000
Gross Profit $5250000 $6300000
Advertising Cost $1200000 * 2 (regions) = $2400000 $1200000 * 2 (regions) = $2400000
SG&A $320000 $640000
Slotting Fees $10000 * 6 SKUs * 20 retailers = NA
$1200000
Broker Fees $16100000 * 0.04 = $644000 $19320000 * 0.04 = $772800
Net Expense $4564000 $3812800
Net Profit $686000 $2487200
Option 1 should be pursued for the following reasons
• Returns the highest expected increase in revenue among the three options.
• Total revenue by 2001 is $32,320,000, which is well above the target $20 million
• First-mover advantage of organic yogurt manufacturer to the supermarket channel.
• Exposure to a larger range of customers
• 8 oz. yogurt cups have the maximum demand
• Short-term risk is compensated by large long-term revenue increase
