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Natureview Case Executive Summary

Natureview needs to increase its annual revenue from $13,000 to $20,000 by the end of 2001. It is considering three options to expand into the supermarket channel: 1) Expand 6 SKUs of its 8-oz product line into 1-2 regions, which has the highest revenue potential but is also the riskiest. 2) Expand 4 SKUs of its 32-oz size nationally, which has fewer competitors but a smaller market share. 3) Introduce 2 SKUs of a children's multi-pack into natural foods channels, which has the lowest risk but also the lowest expected revenue. A financial analysis shows that Option 1 would yield the highest profit but also carries the most risk.

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176 views3 pages

Natureview Case Executive Summary

Natureview needs to increase its annual revenue from $13,000 to $20,000 by the end of 2001. It is considering three options to expand into the supermarket channel: 1) Expand 6 SKUs of its 8-oz product line into 1-2 regions, which has the highest revenue potential but is also the riskiest. 2) Expand 4 SKUs of its 32-oz size nationally, which has fewer competitors but a smaller market share. 3) Introduce 2 SKUs of a children's multi-pack into natural foods channels, which has the lowest risk but also the lowest expected revenue. A financial analysis shows that Option 1 would yield the highest profit but also carries the most risk.

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asj91992
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Natureview Case Executive Summary Natureview needs to make some strategic marketing decisions with the goal of increasing

revenues from the current $13,000 (1999) to $20,000 before the end of the 2001 fiscal year. The central strategic decision to be made is whether Natureview should expand into the supermarket channel in order to meet its revenue goal. There are three options to consider. Option 1 is to expand 6SKUs of the 8-oz product line into one or two selected supermarket channel regions. This option has several strategic advantages. First, Natureview would have access to a large customer base and brand recognition will increase. Moreover, since the 8-oz cups represent the largest dollar and unit share of the yogurt market, this option has huge revenue potential. However, this option is highly risky since it is due to its largely increased costs in marketing, advertising, brokering, and shelving costs. Lastly, Natureview would be facing fierce competition from large national brands. Option 2, is to expand 4 SKUs of the 32-oz. size nationally. This option provides Natureview with an opportunity with fewer competitors, as there are few offerings in the 32-oz size. Moreover, this product has a higher gross profit margin and marketing expenses are expected to be lower than with option 1. However, this market represents a smaller dollar and unit share. Moreover, it is risky since there is a possibility that new users may not want to purchase the larger product. Lastly, it is difficult to achieve full national distribution in one year in time to meet the set goal. Lastly, option 3, is to introduce 2 SKUs of a childrens Multi-Pack into the Natural Foods Channel. This option has many advantages mainly that it is low risk due to the facts that it is low cost and that the company could take advantage of current relationships within their existing channels. Moreover, Natureview could take advantage of the growing natural foods channel. The main drawback of this option is that it has a low expected revenue when compared to the other options. If the objective to reach $20,000 before the end of the 2001 fiscal year is set in stone, then the most important tool to decide among these options is a financial analysis. This analysis shows that option 1 is the one with the highest revenue. However, it is also highly risky as it is highly alienating to Natureviews current channel partners and it faces fierce competition. If the revenue goal is not completely set in stone, after careful analysis of the benefits and risks I recommend that Natureview should follow option 3. Although it falls short of the revenue

objective, this option provides the company with the lowest risk as it involves lower costs, there would be a low competitive response, and the brand faces no risk of dilution. Moreover, focusing on the natural food segment builds off on the companys current channels.

Appendix: Financial Analysis Option 1 Revenue COGS Gross Profit Expenses Administration/Freight Sales Marketing R&D Slotting free Broker's Fee Net Income 2000 $29,070,950 $19,040,000 $10,030,950 2001 $32,285,140 $21,210,000 $11,075,140

$2,210,000 $1,880,000 $3,660,000 $390,000 $1,200,000 $642,838 $48,112

$2,210,000 $1,880,000 $3,660,000 $390,000 $771,406 $2,163,734

Option 2 Revenue COGS Gross Profit Expenses Administration/Freight Sales Marketing R&D Slotting free Broker's Fee Net Income 2000 $22,214,425 $13,635,000 $8,579,425 2001 $24,057,310 $14,724,000 $9,333,310

$2,210,000 $1,720,000 $1,894,000 $390,000 $2,560,000 $368,577 -$563,152

$2,210,000 $1,720,000 $1,894,000 $390,000 $442,292 $2,677,018

Option 3 Revenue COGS Gross Profit Expenses Administration/Freight Sales Marketing R&D Slotting free Broker's Fee Net Income 2000 $16,317,073 $10,260,000 $6,057,073 2001 $16,383,414 $10,007,640 $6,375,774

$2,210,000 $1,560,000 $640,000 $390,000 $82,927 $132,627 $1,041,519

$2,210,000 $1,560,000 $640,000 $390,000 $135,337 $1,440,437

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