Nature View has succeeded in the natural foods channel through the use of brokers who sell its product (yogurt) to natural foods retailers. Their brok...
1) How has Natureview succeeded in the natural foods channel?
Nature Nature View has succeeded in the natural foods f oods channel through the use of brokers brokers who sell its product (yogurt) to natural foods retailers. Their brokers brokers have the direct relationship with the retailers, meaning: the retailers purchase the Natureview yogurt from the brokers and not directly from Natureview itself. sing this broker distribution channel system Natureview Natureview has succeeded in capturing !"# of the natural food market. This system has has also enabled an increase increase in sales for its $ ounce ounce and %! ounce products. &erhaps &erhaps more importantly, the health food channel was successful because of its success in reaching the target market. 'ealth conscious women were Natureviews target market and their brokers worked with retailers that had access to that demographic. ore speci*cally they targeted women who earned high incomes, were education, and lived in the Northeastern or +estern -
- 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. - Natureview’s yogurt’s 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. - Natureview’s creative, low-cost ‘guerilla marketing’ tactics that worked well in this channel. - Premium pricing in the natural foods stores.
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3) 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
sau Advantages of Option 1:
Very High potential for increased revenue Consumers in NE and W region are most likely to purchase organic yogurt Expected 1.5% market share after 1year (35 million unit sales) 8 oz product line is the major market, so launching it makes senseDisadvantages of Option 1: High risk involved as expenses go up steeply Direct competition from national players like dannon Price war expected as competition’s basic revenue comes from 8 oz pack
Less knowledge about handling super market relationshipsAdvantages of Option 2:
Lesser competition as 32oz pack is not the bread and butter sales for nationalplayers Lower on average trade promotion expense Higher profit margin for 32oz versus 8oz Expected 1st year sales of 5.5 million unitsDisadvantages of Option 2: New users may not want to purchase large 32oz quantity of product Very difficult to achieve full national distribution within one year Large SKU slotting fee of around $2.56 MnAdvantages of Option 3: Take advantage of current relationships within natural food channel Low risk factors as knowledge about the product exist Low cost option Take advantage of growing natural foods channel The children’s pack is the most rapidly growing segment (12.5%) of all the other pack sizesDisadvantages of Option 3: Low expected revenue
