A Path Towards Holistic Growth for NatureView

Amna Zia (400181196), Derrick Wu (400498897), Rishabh Rajiv Ramamurti (400508913),

Jonathan Waldman (400500489) & Shefali Liyanage (400135241)

DeGroote School of Business, McMaster University

BUSADMIN M650: Strategic Marketing Management

Dr. Bharat Sud

July 5, 2024
Table of Contents

Executive Summary and Introduction............................................................................................. 2

Problem/Opportunity Definition......................................................................................................3

Marketing Situation: External Analysis (Porter’s Five Forces).......................................................3

Marketing Audit: Internal Analysis (4P’s Analysis)........................................................................4

Implication of the analysis............................................................................................................... 5

Marketing Strategies & Financial Calculations............................................................................... 6

Recommendations: 4Ps of the Proposed Strategy........................................................................... 8

Implementation Plan........................................................................................................................ 9

Risks and Contingencies................................................................................................................ 10

Conclusion..................................................................................................................................... 10

Appendix........................................................................................................................................11

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Executive Summary and Introduction

Natureview Farm is actively seeking new investors from the capital market to support its

long-term growth and valuation initiatives. With enterprise values typically ranging from 1.5 to

2.1 times revenues, Natureview aims to increase its sales to achieve $20 million in revenue by

the end of 2001. After evaluating three options—two involving supermarket entry and one

expanding the product portfolio in natural food chains—introducing a multipack product line in

natural food channels is recommended. This strategy not only aims to achieve the revenue target

and break even in the first year with an incremental net income of $914,000, but also continues

to nurture important long-term relationships with leading natural foods channel retailers.

Effective implementation of this option can be achieved through a rigorous timeline in year one

of the launch that would lay the foundation for generating the required revenue to close the gap,

in order to meet the valuation target while being a net positive investment.

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Problem/Opportunity Definition

After taking into account the projected organic revenue growth by the end of 2001,

Natureview anticipates falling short of its target by $1.3 million (Supplement: Problem

Identification). Although the gap appears small, achieving higher revenues by the deadline

improves the chances of securing a higher valuation and attracting increased external funding for

future operations. Therefore, the key problem statement is: how can Natureview maximize

revenue while ensuring profitability and preserving its established competitive advantage in

stakeholder relationships and product offerings?

Marketing Situation: External Analysis (Porter’s Five Forces)

Natureview operates in a competitive landscape with low threat of new entrants due to

high barriers to entry, such as substantial initial investments in production facilities, slotting fees,

and promotional costs. The bargaining power of suppliers is very high as Natureview uses

natural ingredients and rGBH-free milk, limiting alternative supplier options. In supermarkets,

the bargaining power of buyers is substantial; not only do 97% of yogurt sales flow through this

channel but they also exert strict control over shelf space, with requirements for slotting fees and

trade promotions, as well as having price-sensitive consumers. Conversely, consumers in natural

foods channels prioritize health benefits over price, resulting in lower bargaining power. The

threat of substitute products, such as plant-based yogurts, is moderate to high, driven by evolving

consumer preferences for healthier options and substitutes potentially available at lower prices.

Industry rivalry is intense: in supermarkets, the top four competitors dominate over 50% of the

market (Case - Exhibit 5). In the natural foods channel, Natureview leads with a 24% market

share. However, they face competition from Horizon Organic (19%) and Brown Cow (15%),

with Horizon Organic’s IPO posing a challenge to Natureview’s supermarket expansion.

​ Other market trends indicate a rising consumer interest and demand for organic and

natural products. Organic yogurt in supermarkets was projected to grow by 20% (unit volume)

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annually from 2001 to 2006, significantly outpacing the overall yogurt category, which was

growing at a rate of 2-4%. Similarly, yogurt sales within the natural foods channel have been

increasing by 20% annually (Supplement: Industry & Market Size Analysis).

Marketing Audit: Internal Analysis (4P’s Analysis)

Product. Natureview differentiates its products by using only high-quality, natural

ingredients without artificial thickeners or the rGBH growth hormone. This commitment appeals

to health-conscious and animal-conscious consumers. Additionally, Natureview's unique

production process yields yogurt with a 50-day shelf life, nearly double that of most competitors,

enhancing distribution efficiency without needing additional local production plants.

Natureview's product lineup also includes a variety of flavors and two competitive sizes to cater

to diverse consumer preferences. The 8-oz yogurt, available in 12 flavors with

"fruit-on-the-bottom," is favored by women, who make up over 70% of US yogurt purchases.

The 32-oz size offered in plain and vanilla targets heavier yogurt consumers seeking a versatile

mixing base and better value.

Despite its strengths, Natureview's product range is limited to yogurt, which concentrates

its market exposure and risk. Diversifying into related dairy or non-dairy products could better

support the company's long-term health. Additionally, Natureview does not currently offer a 6-oz

size, the second most preferred in the US market, or multipack options for children or adults. The

limited flavor options for the 32-oz size may deter consumers seeking more variety, including

niche flavors.

Price. Natureview justifies its premium pricing strategy through its use of high-quality,

natural ingredients, appealing to health-conscious and environmentally aware consumers. This

strategy enhances Natureview’s perceived value and market image as a high-quality producer.

However, the higher price point may restrict market penetration among cost-sensitive consumers.

While Natureview targets educated consumers who prioritize product origins and manufacturing

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processes, this niche focus may limit broader appeal, especially in mainstream supermarkets

outside the health foods channel.

Place. Natureview has cultivated strong relationships with natural food retailers, who

cater directly to its target consumer segment without requiring typical expenses like slotting fees,

trade promotions, and weekly advertisement costs seen in regular supermarkets. These retailers

usually request just one free case of product per new SKU. Additionally, natural food distributors

may offer added benefits, such as stocking shelves and managing paperwork, fostering a more

personal retail relationship. This nurturing of key relationships, combined with Natureview’s

longer product shelf life, enhances distribution and logistical efficiencies. However, Natureview's

reliance on natural chains limits its market penetration, resulting in a modest 3% market share.

This reliance restricts opportunities for growth compared to competitors in general supermarkets.

Promotion. Natureview has successfully utilized guerrilla marketing to achieve high

visibility within its target segments at minimal cost. This strategy, combined with strong brand

loyalty, has consistently sustained its market position. However, these initial tactics, while

successful for niche growth, may not reach audiences beyond the natural foods segment.

Expanding into larger supply chains may necessitate more expensive promotional strategies and

a cohesive master headline to compete for visibility and attract new customers, areas where

Natureview currently lacks experience in traditional large-scale marketing.

Implication of the analysis

The analyses suggest that Natureview could benefit from entering supermarkets to gain a

first-mover advantage and greatly increase market share. However, this would require absorbing

significant upfront costs and likely straining relationships with current natural foods retailers.

Natureview's premium pricing strategy, reflecting its brand image of high-quality natural

products, may restrict market penetration among price-sensitive consumers prevalent in

supermarket channels. Lowering prices could dilute the brand's reputation and lead to increased

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price pressure from both supermarket and natural food channels. Conversely, maintaining

premium pricing in supermarkets may require additional promotional investments to justify the

higher cost to consumers. Natureview also needs to transition from guerrilla marketing to

traditional large-scale strategies that communicate product features to mainstream consumers.

While there is consumer interest in superior products at competitive prices in

supermarkets, Natureview must clearly articulate why its premium pricing represents better

value. In the organic foods channel, diversifying the product line—such as targeting

health-conscious mothers with children—could capture a larger segment of current consumers.

Overall, the most influential factors affecting Natureview's strategies include the

substantial bargaining power of supermarket buyers, intense industry rivalry, consumer price

sensitivity, and the need for product diversification.

Key Issues. Derived from the aforementioned implications, the key issues in this case are

1) Balancing revenue growth and long-term profitability;

2) Maintaining competitive advantage amidst other manufacturers;

3) Risk of jeopardizing current retailer relationships;

4) Feasibility of expanding distribution and marketing efforts aligned with the strategies.

Marketing Strategies & Financial Calculations

Sensitivity Test Scenarios. Given the dynamic market conditions, three scenarios

(realistic, optimistic, and pessimistic) were defined to capture all potential outcomes when

evaluating each option. The scenarios are differentiated by the incremental dollar sales growth

rate of the three proposals (outlined in Supplement: Scenario Setting).

Option 1: Expand 8-oz. Product Line into Supermarket Channel in Selected Regions.

Accounting for a 72% dollar share of the U.S. refrigerated yogurt market, the 6 and 8-oz. size

category offers significant revenue potential. Natureview is likely to capitalize on the massive

intense market if it sells at just $0.04 (5.5%) above supermarket’s average yogurt price

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(Supplement: Natureview Financials). Furthermore, the success of other natural foods brands

expanding into supermarkets validates this strategy. However, there are notable drawbacks.

Natural foods retailers may react negatively to Natureview's supermarket presence at lower

prices, potentially damaging long-standing retail relationships crucial to past success.

Moreover, despite the potential to double revenue in one year through increased unit

sales, the breakeven period for the incremental implementation costs is lengthy, requiring up to

27 years in the realistic scenario and five years in the optimistic scenario (see Supplement:

Option 1 - Details). If supermarket sales fall short of expectations and products are removed after

a year, Natureview risks not achieving its $20 million revenue goal for 2001, with an estimated

sunk cost nearing $3 million (Supplement: Option 1 - Details).

Option 2: Expand 32-oz. Product Line Nationally into Supermarket Channel. Given

the supermarket channel's vast national market and fewer comparable 32-oz. offerings,

Natureview's longer shelf life provides a strong competitive edge despite a $0.12 (4.8%) price

premium (Supplement: Natureview Financials). However, expanding into 64 supermarket chains

across the U.S. presents logistical challenges. Financially, the product line yields a higher gross

margin for Natureview. Combined with lower upfront and recurring expenses, this option is more

profitable than expanding the 8-oz. lines into supermarkets, despite lower anticipated

incremental retail sales in units. Our financial projection (Supplement: Option 2 - Details)

indicates a breakeven period of 24 years, or four years with extremely optimistic growth.

Additionally, Natureview risks a $2.8 million sunk cost if the products fail to retain shelf space

after a year, jeopardizing the FY2001 revenue target.

Option 3: Introduce Multi-pack into Natural Foods Channel. Introducing a children's

multi-pack product in the natural foods channel has significant benefits. Natureview’s strong

relationships with natural foods retailers would ensure support for the launch, reducing

operational uncertainties. Additionally, sales and marketing expenses are lower in the natural

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foods channel compared to supermarkets. Projections for this option (Supplement: Option 3 -

Details) indicate that, despite lower forecasted incremental unit volume and revenue compared to

supermarket expansion, Natureview can achieve about $1 million in incremental net income in

the first year. The targeted revenue gap could realistically be exceeded by $2.7 million in 2001,

and potentially reach nearly $5 million with maximum growth. Even if the revenue target is not

met, the project still generates a positive return due to the low implementation costs.

Decision Criteria and Rationale. To evaluate whether the proposed strategies balance

short-term revenue growth with long-term brand and channel health, the report used several

decision criteria derived from the key issues: (1) product line profitability, (2) current and

potential market share in targeted segments, (3) impact on existing relationships and sales in the

natural foods channel, and (4) logistical and operational feasibility, including distribution and

marketing expenses. These criteria were chosen to evaluate market share and competitive

position to help determine the strategy's long-term viability and growth potential. Evaluating the

channel impact ensured that the decision would not jeopardize existing successful relationships

and sales channels. Lastly, operational feasibility was crucial to ensure the strategy could be

implemented without overextending resources.

Recommended Strategy. Focusing on the natural foods channel (Option 3) is the most

viable strategy. In addition to meeting the revenue gap, it shows immediate profitability and the

quickest breakeven across all scenarios. Moreover this is the only option that generates a positive

NPV even in the pessimistic scenario (Supplement: Options Evaluation - Summary).

Recommendations: 4Ps of the Proposed Strategy

Product. Introduce two SKUs of a children’s multipack into the natural foods channel.

The multipack will include six 4-oz. packs and eight 2-oz. tubes. This product leverages

Natureview’s existing resources and relationships to sell effectively through natural food stores.

The use of all-natural ingredients positions this product in Natureview's core sales channel.

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 Price. Financial analysis shows the multipack line, generating a gross profit margin of

37.6%, will retail at $3.35, matching the average price in the natural foods channel (Supplement:

Natureview Financials). With this pricing, incremental sales volume is estimated at 1.8 million

units, aligning with market expectations for a premium, organic product.

Place. Launch the multipack product in the natural foods channel, utilizing Natureview’s

established relationships with retailers. The natural foods channel is growing seven times faster

than the supermarket channel, offering Natureview a strong opportunity to boost sales and

achieve targets. Furthermore, not only is there high confidence in securing strong distribution,

but this product also boasts the highest profit contribution.

Promotion. Utilize the $250,000 annual budget to market and promote the new multipack

in the natural foods channel. The strategy involves guerrilla marketing, proven effective for this

segment and channel.I n addition to roadshow tasting events and in store tastings within natural

food retailer stores, with the latter being funded by the complementary case budget.

Implementation Plan

Timeline. The timeline for introducing the multipack product line in the natural foods

channel begins in February 2000 with securing necessary approvals and developing R&D and

operational capabilities (Refer to Appendix: Figure 1). By March, preparations for the launch

will be finalized. April and May will focus on advertising and marketing through trade shows

and markets, particularly those centered on health food, wellness, and alternative medicine.

These efforts will include roadshow tastings and interactive pop-up parks to engage families and

establish Natureview as the go-to brand for natural yogurt. The product launch in June will be

accompanied by low-cost guerrilla marketing for the first quarter, including interactive pop-up

playgrounds during the "Back to School'' season in September (Appendix: Figure 2). These

particularly target mothers with their young kids, allowing them to taste samples thus, boosting

Natureview’s visibility as a healthy, fun, and mess-free snack for kids (Supplement: Guerilla

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Market). From July to December, sales and revenue performance will be evaluated and tracked

by the sales and finance teams. Simultaneously, the complementary case budget (2.5% of

revenue, $82,933) will be used to execute free sampling at natural food retailers. This strategy

will not only strengthen product visibility but also assess the multipack's success among adults

for future expansion. The year will conclude with a Christmas-themed mall pop-up featuring

photo opportunities with Santa and branded merchandise to reinforce brand visibility and appeal

to families (Appendix: Figure 3). The objective is to ensure continued growth and achieve

targeted sales, revenue, and profit in 2001.

Risks and Contingencies. Although implementing the multipack is easily feasible with

the firm's existing competencies, it may not provide the challenge needed to develop core skills

such as channel entry management and mass marketing with data collection. For a growing firm

like Natureview to maintain a competitive edge, it should consider how to integrate these

practices during the R&D phase of the new product.

The main risk associated with introducing a new product is its potential lack of

commercial success within the targeted market. If the projections falsely account for product

appeal or influential market variables, the product could result in a loss rather than breaking even

or generating a profit. To mitigate this risk, Natureview could limit the introduction of the

multipack to only the most popular flavors among children or young families on a trial basis.

Conclusion

In conclusion, Natureview Farm should introduce a children’s multipack product in

natural food channels to achieve its $20 million revenue target and sustain long-term growth.

This strategy leverages strong retailer relationships, established operational capabilities, and

promises immediate profitability with a quick break even period. By focusing on product

differentiation and targeted marketing, Natureview can meet short-term financial goals and

enhance its competitive advantage, ensuring continued success in the organic yogurt market.

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Appendix

Figure 1. Implementation Project Timeline 2020

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Figure 2. Interactive Pop-up Playground in September

Figure 3. Interactive Pop-up Playground in December

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