The first option, to expand six SKUs of the $8-$oz$.$ product line into one or two selected supermarket

channel regions, was most strongly advocated by Walter Bellini, vice president of sales. $($Pursuing six

SKUs struck the right balance between having enough cups on the shelf to provide a good shelf

presence, while not incurring too large a slotting expense. The six SKUs chosen were the best$-$selling

SKUs of the $8-$oz$.$ line.$)$ His argument was based on three key points:

Eight$-$ounce cups represented the largest dollar and unit share of the refrigerated yogurt

market, providing significant revenue potential.

Other natural foods brands had successfully expanded their distribution into the supermarket

channel. Two such brands$-$Silk Soymilk and Amy's Organic Foods$-$had increased

revenues by over $200\%$ within two years of entering supermarkets. Natureview, the leading

natural foods brand of refrigerated yogurt, was uniquely positioned to capitalize on the

growing trend in natural and organic foods in supermarkets.

Bellini had heard rumors that one of Natureview's major natural foods competitors would

soon try to expand into the supermarket channel. Supermarket retailers would likely

${?}^5$ Natureview used a discount rate of $8\%$ to evaluate projects.

$6$

For the exclusive use of N$.$ Nyamowa, $2024$

Natureview Farm $|2073$

authorize only one organic yogurt brand. The first brand to enter the channel could therefore

have a significant first$-$mover advantage.

One of Natureview's brokers had told Bellini that supermarket chains$-$afraid of losing market

share to other channels$-$believed that offering more organic products in their stores would attract

higher$-$income, less price$-$sensitive customers. Bellini mentioned that some industry experts were

predicting unit volume growth of organic yogurt at supermarkets of $20\%$ per year from $2001$ to $2006.$

These predictions were relative to unit growth projections of $2\%$ to $4\%$ for the yogurt category overall

in the supermarket channel.

The team acknowledged that this option had great upside potential but also higher risks and

costs. The $8-$oz$.$ size received the highest level of competitive trade promotion and marketing

spending. Natureview Farm's sales broker had indicated that supporting this cup size would require

quarterly trade promotions and a meaningful marketing budget. Natureview's advertising agency

estimated that a comprehensive advertising plan $($comprising television, radio, outdoor, and print

advertising$)$ would cost Natureview $$1\mathrm{.}2$ million per region per year. These launch expenditures

were in addition to the trade promotion expenditures the company would need to make.

Natureview's sales, general, and administrative expenses $($SG&A$)$ would increase by $$320,000$

annually; $$200,000$ would be incremental SG&A for additions to sales staff required to manage the

supermarket brokers in the two regions, and $$120,000$ would go towards additional marketing staff.

With this level of advertising support, Natureview felt it could achieve a $1\mathrm{.}5\%$ share of

supermarket yogurt sales after one year, producing an incremental annual sales volume of just over

$35$ million units. $($See Exhibit $6$ for incremental unit sales projections by strategic option.$)$ This

projection also assumed Natureview's brokers could take advantage of their relationships with the

top $11$ supermarket retail chains in the Northeast and the top $9$ chains in the West. Research showed

that supermarket consumers in the northeastern and western regions were more likely to purchase

organic and natural foods than consumers in other regions.

Walker found Bellini's arguments compelling. It was hard to counter his belief that Natureview

had to enter the supermarket channel to successfully address the revenue gap. For Bellini, the $"$go or

no$-$go$"$ decision was clearly a question of "when" and "how," not $"$if$."$ Walker glanced down at her

notebook again.