The purpose of this case study is to obtain an in-depth insight into the alternative strategies associated with the current market, alongside focusing on the issues that are presented in the form of question 1, 2, 4, and 5. For some case studies, the development of models in Excel is of great significance for the evaluation of options encountered by an individual. In this regard, the answer of 3a will be entailed with adequate emphasis on the aspect above.
Natureview has gained notable success in the area of natural foods station as it carries out the utilization of such brokers who are provided with the responsibility of selling the products such as yogurts mainly by targeting natural food retailers. The agents working for Natureview have maintained a direct relationship with the retailers that are entrenched in the aspect of Natureview yogurt purchase by the retailers from the brokers, instead of buying the product directly from the industry . With the use of this broker distribution network, Natureview has captured 25% of the favorable outcomes regarding natural food market. In addition to this, the implemented system has also provided the industry substantial assistance by facilitating them with increase sales on the 8 ounces and 32 products.
On the other hand, the channel designed for health food has gained more success as the products were disseminated widely so that the target market can be reached. In this regard, the principal aim of the Natureview’s product is to facilitate the health conscious women. Therefore, their retailers worked with other retailers as they had adequate accessibility to the targeted demographics. Conversely, the primary target was to focus on those women who are the high-income earners, well educated and resides in the Northeast or West regions of the US .
For the attainment of best possible outcomes through the target market, some fundamental strategies were designed. In this context, the first approach is encapsulated with the aspect of remaining associated with the individual channels of natural and healthy food products distribution, alongside aligning slight modifications to the current model whereas, the second strategy is designed for entering selected supermarkets so that broader exposure can be achieved.
The first growth strategy was entailed with a significant increase in the market share possessed by Natureview by the concentration on natural foods market in which they have already established good grounds . However, they would have put their emphasis on the efforts required for marketing for covering target audience with better intensity . Moreover, Natureview would have to undertake the modification of the product for the satisfaction of this segment’s needs by the utilization of price differentiation as well as launching campaigns of advertisement and promotions for supporting this strategy.
The second strategy of growth is underpinned with the entrance in selected supermarket and to break into the segment that covers grocery market. Furthermore, the factors that are entrenched with motivation for entering the supermarket were based on the fact that 97% of all the yogurts should be sold in that supermarket. Another significant that has been emphasized in the second strategy is to cover 46% of the organic food consumers at supermarkets. To be successful in the market, the Natureview would encounter a definite need for developing a line of yogurt product for supermarkets with price points of good nature, along with enormous advertisement and promotional plans (Proctor, 2014). Conversely, Natureview also needs to carry out negotiation of terms and conditions with the involved supermarkets due to the type of relationships with their brokers.
The upper management of Natureview decides to expand/grow the revenues of the business to $20,000,000 compared to the current sales revenue of $13,000,000 before the end of the fiscal year 2001 . For this, the company gathers data about their target customers to decide and develop new strategies for the future .
The central fact about yogurt/dairy consumption in the United States shows that the overall 40% of the population uses yogurt, out of which approximately 70% are women living in the US. The statistics also show that heavy organic buyers consume 74% of organic dairy products, and the light general consumers consume 29% of organic milk products. The factors that vary the purchase behavior of consumers are the ingredients and organic nature of the dairy products. The particular decisions to buy yogurt depends on the package, flavor, price, size, freshness, detail of ingredients, and finally whether it is organic or not. The organic products are distributed through the supermarkets, small health stores, and natural foods supermarkets. The proportion of sales is divided into the following.
Supermarkets – 46%,
Natural Foods Supermarket – 29%, and
25% of the consumers buy the dairy products from small health stores.
The company’s management aims to explore different distribution channels to increase the overall profitability and provides three options to Christine Walker (who is the vice president of marketing for Natureview Farm Inc.).
The analysis of the financial conditions for all the options shows that the gross profit margins for all the three option lie in between 38.9 - 42.0%. The analysis of the overall profitability shows that net incomes for 2000, for option 1 and 2 are lower compared to the year 2001. Whereas, the results of option 3 are more satisfactory as the net income and profit margin are more stable and fruitful. Therefore, it is stated that the company must focus on introduce a new children's multi-pack size product. The decision is based on the analysis of the financial health of the individual products, and the company's distribution channel is also same, and therefore, the company does not require any particular strategy to strengthen its distribution channel.
If the venture capitalists extended their deadline for meeting the $20 million revenue target for 12 to 18 months, the following parameters are designed to distinguish the option that best matches the requirements of Natureview.
The revenues of option number are the highest, the channel distribution is also simple, but the project is risky than option 3. The decision of the management will change if the limit is set that a total of $20 million revenues are required in the next 12 months. Option number 3 cannot be considered as the sales/revenues fall short of the limit (i.e. $20 million).
Analysis of the Options
The options one deals with the expansion plan of 6SKUs of the 8-oz product category into supermarket channel, and it was put forward by Walter Bellini, the vice president of sales. The strategic benefits and risks of each option are provided to provide a detailed analysis of each option.
The potential available of expansion of supermarket is great.
The company will be able to attract a new group of customers who have higher income levels and are also less sensitive to the prices of the product.
The forecasts of the supermarket growth also show a positive and exponential growth and therefore, setting the products in supermarket distribution channel would result in higher profits.
The demand for the products (organic dairy products) is exponential.
The chief danger of supporting the expansion of 8-oz cup requires trade promotion activities on a quarterly basis and a substantial marketing budget.
The total expenditure for advertising and promotional plans cost a total of $1.2 million per region per year, and it shows that the costs are high for the expansion process.
The overall SG&A expenses for the business are expected to increase by $320,000 on an annual basis.
The risk of competition will also increase with the entrance of Natureview in supermarket sales.
Jack Gottlieb, who is the vice president of operations for Natureview, puts the expansion plan forward. The plan includes expansion for 4 SKUs of 32-oz product size to the entire nation.
The operation department considers the fact that the development/expansion of 32-oz products would result in improving the average profit margins compared to 8-oz size.
The products longer shelf life and lower marketing and other promotional expenditures provide a competitive advantage to Natureview product line.
The department doubts the ability of the sales teams to reach the nationwide distribution channel in the given time frame (i.e. 12 months).
The requirement of additional sales teams and building relationships with new brokers is full of risks.
The increase in SG&A expenses through the expansion of 32-oz size would reach to $160,000 every year.
Kelly Riley, an assistant marketing director, puts the option 3 forward. The option provides a new idea to introduce a new line of product that is 2 SKUs of children’s Multi-pack and the distributional channel must be the Natural Foods Channel.
The observation behind the option is that the company (Natureview) will be able to establish itself as a market leader for the Natural Foods Channel.
The position of the products is also efficient, and the multi-pack for children would attract new customers through the channel.
The financial improvement due to the introduction of the new Children’s multi-pack is also favorable to increase the business of Natureview.
Being a market leader also has to face additional risks.
Natureview would not be able to collect average $20,000,000 revenues, and therefore, the project is not attractive for the business.
Natureview must adopt option 3 for the future growth of 6 SKUs 8-oz product line to gain most benefits in the future. The company must identify one or two supermarket channels to distribute its products. The prices of the products play a significant role, and therefore, the prices must be by the market analysis. The prices must be higher than the currently offered products since the target market for Natureview would be more price insensitive, and there are chances that the company will earn higher profits from the supermarket channel in the long run. The promotional activities and other marketing activities will also increase, and it is essential that the marketing expenditure is utilized in the best possible means. The company must focus on a single supermarket channel and understand the overall operations and must gain expertise in the supermarket distribution channel. Natureview is also recommended to start later a new product line for children and must focus on the supermarket channel present in the Northeast and Western parts of the US.
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