Natureview Case
Background
Natureview Farm manufactures organic yogurt which it sells through natural food stores. Able to achieve steady profitability with the aid of strict financial controls and a VC capital infusion in the late nineties, the company now needs to grow revenues from $13M to $20M (54%) in less than two years to better position itself for alternative funding or possible acquisition. To solve this dilemma, senior management has narrowed their possible actions to three distinct options.
Problem
Senior management must decide whether to expand into the supermarket channel (option 1 or 2) in order to meet their ambitious growth goals or continue selling through natural food stores (option 3); while delivering the product mix most likely to deliver the best results.
Critical Issues
Channel Conflict:
• Research leads Natureview management to believe unit sales could grow more than the projected 15% annually over the next five years due to products in development, as well as sales growth of the natural food channel, which continues to outpace that of supermarkets by a margin of seven to one. Whole Foods and Wild Oats hold a 35% market share in this space (projected to reach 70% in the next four years) and Natureview enjoys leading status in natural food stores (with 24% share of sales and Horizon its closest competitor at 19%).
i. By providing the volume-based pricing breaks necessary to compete in the supermarket channel, Natureview risks alienating its existing channel of natural food stores.
Brand
• Entering the supermarket channel would, by way of increased volume and availability, dilute the Natureview brand image it has worked hard to establish: family recipe, natural ingredients, lack of artificial thickeners and rGBH and Vermont farm heritage.
Capacity
• If opting for entering the supermarket channel, Natureview’s broker advised expanding into 64 chains across the U.S.
i. Some doubt existed among management regarding the “necessary resources
Natureview Farm manufactures organic yogurt which it sells through natural food stores. Able to achieve steady profitability with the aid of strict financial controls and a VC capital infusion in the late nineties, the company now needs to grow revenues from $13M to $20M (54%) in less than two years to better position itself for alternative funding or possible acquisition. To solve this dilemma, senior management has narrowed their possible actions to three distinct options.
Problem
Senior management must decide whether to expand into the supermarket channel (option 1 or 2) in order to meet their ambitious growth goals or continue selling through natural food stores (option 3); while delivering the product mix most likely to deliver the best results.
Critical Issues
Channel Conflict:
• Research leads Natureview management to believe unit sales could grow more than the projected 15% annually over the next five years due to products in development, as well as sales growth of the natural food channel, which continues to outpace that of supermarkets by a margin of seven to one. Whole Foods and Wild Oats hold a 35% market share in this space (projected to reach 70% in the next four years) and Natureview enjoys leading status in natural food stores (with 24% share of sales and Horizon its closest competitor at 19%).
i. By providing the volume-based pricing breaks necessary to compete in the supermarket channel, Natureview risks alienating its existing channel of natural food stores.
Brand
• Entering the supermarket channel would, by way of increased volume and availability, dilute the Natureview brand image it has worked hard to establish: family recipe, natural ingredients, lack of artificial thickeners and rGBH and Vermont farm heritage.
Capacity
• If opting for entering the supermarket channel, Natureview’s broker advised expanding into 64 chains across the U.S.
i. Some doubt existed among management regarding the “necessary resources