Introduction
Although Natureview has made a significant progress since its inception for its revenues have grown from $100 thousand in 1989 to $13 million in 2000, increasing competition hinders it from making consistent and sustainable revenues. The chief executive officer of Natureview analyzed the market stance and tasked his team to develop strategic plan to ensure that the revenue growth increase by over 50% at the end of the year 2001. Thus, this case analysis examines how Natureview succeeded in the natural foods channel, describes advantages and risks associated with the three strategic plans, and recommends an appropriate strategic plan.
Natureview’s Success
Natureview succeeded in the natural foods channel because it manufactured yogurt using natural ingredients. Unlike other brands of yogurt, Natrureview’s yogurt lacks thickeners and artificial growth hormone used to increase milk production. Natureview penetrated competitive markets of the natural foods because it focused on natural ingredients and manufactured tasty and quality yogurt. Moreover, Natureview’s yogurt penetrated the natural food channel because its shelf life (50 days) is longer than that of its competitors (30 days). With the help of low-cost guerrilla marketing strategies, Natureview successful boosted its market share in the natural foods channel. In the organic market, Natureview associated with market leaders such as Wild Oats and Whole Foods. Given that consumers became interested in natural and organic foods, companies that sell their products in the natural foods stores thrive. As shoppers in the natural foods market are educated, rich, and experienced, they enabled Natureview to gain substantial market share. Most shoppers of organic foods purchased organic dairy yogurt, including Natureview’s brand.
Strategic Advantages and Risks
The first strategic plan involved the expansion of six stock keeping units of 8-oz yogurt into the supermarket channel in selected regions. This plan is advantageous because it provides enough yogurt for shelf presence and minimizes slotting fee. The supermarket channel offers a profitable opportunity for marketing and sales for other companies, such as Amy’s Organic Foods and Silk Soymilk, managed to raise their revenues by 200% in two years. In addition, increasing competition could compel supermarkets to choose a dominant brand, which would enjoy the first-mover advantage. A major risk with this strategy is that increasing competition and the need to dominate the market would persuade supermarkets to allocate diverse brands of yogurt in their shelves, resulting in reduced sales and revenues. Another risk is that brokers could increase their fees and fail to market products effectively despite demanding extensive resources for promotion. Hence, Natureview would incur considerable costs in paying brokers and advertising its products constantly as demanded by supermarkets.
The second strategic plan entailed the expansion of stock keeping units of 32-oz yogurt. The advantage of this strategic plan is that the 32-oz package of yogurt generates more profits (43.6%) than the 8-oz package. Besides, the expansion into 64 supermarket stores is advantageous because products have a longer shelf life than that of competitors. Since Natureview promotes 32-oz products twice a year, costs of advertising would be lower when compared to those of 8-oz products. An apparent risk is that the national distribution of supermarkets would increase slotting fees and reduce profit margins. The inability of the company to achieve national distributions within a year is a substantial risk because it would have to hire experienced sales personnel and brokers. Launching of the 32-oz brand would experience intense competition because competitors and supermarkets are likely to introduce their respective brands into the market.
The third strategic plan comprises the introduction of two stock keeping units of the multipack of children into the natural foods channel. Since Natureview’s yogurt is a natural and organic brand, the introduction into the natural foods channel, which grows at 20% per year, is advantageous. Lack of brokers in the natural foods channel reduces unfavorable manipulation of products, and thus, provides Natureview an opportunity for growth and expansion. The distribution of two stock keeping units of children’s multipack is realistic and achievable. Projections show that sales would increase by 10% and profitability would form 37.6% of sales. The introduction of multipack poses a significant risk because it requires additional costs. The growth of the natural foods channel would lead to increased costs of advertising, as in the case of supermarkets.
Recommended Option
Since the objective of Natureview is to grow its sales by more than 50% at the end of the year 2001, the appropriate strategic plan is the first option of expanding into the supermarket channel. Unlike the natural food channel, the supermarket channel has an established distribution system, which allows real-time monitoring of sales trends using sophisticated scan technology. The efficient distribution of system reduces retailing price and increases profit margins.
Since other companies of natural food brands, such as Amy’s Organic Foods and Silk Soymilk, managed to grow their revenues by more than 200% within two years, Natureview has the same potential if it capitalizes effectively on the increasing demand for organic products.
Given that Natureview already dominates natural foods channel with 24% of market share, the expansion into the supermarket channel would enhance its competitiveness in the organic food industry. The projection of sales shows that the expansion into the supermarket channel would generate sales of $35 million. Natureview’s package of 8-oz yogurt is appropriate for the supermarket channel for it dominates the market and generates 74% of sales. Additionally, Natureview would get the first-mover advantage as natural foods competitors plan to expand into the supermarket channel.