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1) How has Natureview succeeded in the natural foods channel?
- Natureview was a major brand in the natural foods channel in 1999 (24% market share in
the United States).
- Because of the emphasis on natural ingredients and its strong reputation for high quality
and great taste (no artificial thickeners), Natureview grew quickly to national distribution
and shared leadership in the natural foods channel.
- Its revenues had grown from $100,000 to $13 million over the past 10 years.
- Natureviews yogurts average shelf life was longer than its competitors products shelf life,
therefore it was able to have fewer production plants and therefore save on cost.
- It developed strong relationships with leading natural foods retailers, including the chains
Whole Foods and Wild Oats.
- Natureviews creative, low-cost guerilla marketing tactics that worked well in this
channel.
- Premium pricing in the natural foods stores.
2) What are the strategic advantages and risks of the 3 options presented? What channel
management and conflict issues are involved?
Option 1. To expand six SKUs of the 8-oz. product line into one or two selected
supermarket channel regions (Northeast and West, 20 retail chains).
Strategic advantages:
- Access to the larger customer base and brand recognition will increase.
- Eight-ounce cups represented the largest dollar and unit share (74%) of the yogurt
market, providing significant revenue potential.
- Consumers in Northeast and West regions are most likely to purchase organic yogurts.
- Other competitors had successfully expanded their distribution into supermarket channel.
- Chance to gain a first move advantage on their organic yogurt competitors.
- Experts predicted unit volume growth of organic yogurt at supermarkets of 20%/year.
- Expected 1st year sales of 35 million units ($16.1 million revenue). (*)
Risks:
- High risk
- Depends on brokers to use existing relationships with supermarkets in the target regions.
- Direct competition with large national brands (Dannon, Yoplait, etc.).
- Requires quarterly trade promotions and a meaningful marketing budget.
- High advertising cost ($1.2 million per region per year).
- Increase in cost of $320,000 for SG&A.
- Need to hire sales personal with experience in the supermarket channel.
Option 2. To expand four SKUs of the 32-oz. size nationally.
Strategic advantages:
- Fewer competition offerings in this size (Natureview has strong competitive advantage
because of products longer shelf life)
- Higher gross profit margin than 8-oz. (43.6% versus 36%)
- Marketing and average trade promotional expenses were lower.
- Expected 1st year sales of 5.5 million units ($9.18 million revenue). (*)
Risks:
- High risk
- Very difficult to achieve full national distribution within one year.
- Higher slotting expenses due to a large number of retailers.
