Natureview Farm Case Study

SUMMARY STATEMENT

Natureview Farm should immediately offer the 32-oz size of its organic yogurt in supermarkets nationally in order to increase revenues, secure additional venture capital financing, and maintain strong profitability. Of the three potential options to grow revenue, this course of action is the most likely to deliver $20M+ in sales by 2001, and will do so without reducing the company's operating profit or disrupting existing channel relationships.

SITUATION ANALYSIS

Context: Organic yogurt is a growing segment within the total U.S. refrigerated yogurt market. Organic yogurt producers compete with the major U.S. yogurt brands by catering to ingredient-conscious consumers and distributing through natural foods stores. Several natural yogurt producers, including Natureview, are considering expanding into the supermarket distribution channel. Key factors for this decision will be the likely response from customers, competitors and the company's current distributors.

Company: Natureview is a privately-owned dairy farm that manufactures organic yogurt. In ten years, Natureview has grown to $13M in annual revenue and has recently achieved consistent profitability with the help of an equity infusion from a venture capital firm. In order to secure additional VC financing, company management has set a revenue target of $20M by the end of 2001.

Customers: Refrigerated yogurt, consumed by 40% of the U.S. population, is purchased in supermarkets and natural foods stores. In general, consumers are increasingly interested in purchasing organic and natural foods, including yogurt. Organic food shoppers tend to be older, more educated, and earn higher incomes than typical food shoppers. Furthermore, they are willing to pay a premium for natural or organic foods. Supermarkets are taking advantage of this trend by beginning to stock natural products; 46% of organic food shoppers buy organic products at supermarkets.

Competitors: The total refrigerated yogurt market is dominated by four major players: Dannon, Yoplait, Breyer's and Columbo. The natural yogurt market is much smaller (3% of total), and Natureview holds 24% of this segment. Natureview's main competitors in the natural yogurt space are Horizon Organic (19%), Brown Cow (15%) and White Wave (7%), with Horizon Organic of particular concern following a recent IPO.

Collaborators: Natureview has strong relationships with the natural foods retailers who sell its products. It also works with natural foods brokers, wholesalers and distributors. If it decides to enter the supermarket chain, Natureview will rely on brokers to facilitate new relationships with supermarkets and distributors. This move has the potential to strain existing relationships with collaborators in the natural