Case write-up questions: 1. What are the strategic advantages and risks of each option?
Each option has several advantages and risks attached to them. Some have larger risks but also have a larger reward. No matter which option is chosen, they will most likely have a positive outcome to the company, it’s just a matter of how much. The first option seems to have more advantages than disadvantages. It is the expanding of the 6 SKUs of the 8-oz. size into eastern and western supermarket regions. The first advantage would be that the 8-oz. cups already have the largest dollar and unit share of the refrigerated yogurt market. This means that there is more of a possibility of potential revenue since they have already proven the product to be successful. To make it even more successful, they would use the six best-selling SKUs on the 8-oz. cup line, which also would ensure the potential for revenue. Option one has a high probability of maxing out their revenue because other brands who have already expanded into the supermarket have increased their revenues by 200% within two years. Since Natureview is the leading natural food brand of refrigerated yogurt, they are in a good position to follow along this trend. In this option they decide to use six cups per package and believe that six is a good balance of cups on the shelf in a supermarket but not having too many that overpower everything else and incur large slotting expenses. Another advantage would be that supermarkets are looking for more organic products in their stores. The stores like organic products because research shows that it attracts higher-income and less price-sensitive customers. If they added more organic products, more people would choose to buy at that store, which in return would increase the percent of organic yogurt growth at supermarkets. It can be predicted that this would increase by 20% from the years of 2001 to 2006. Lastly, advertising the Natureview brand is predicted to receive a 1.5% share of the supermarket yogurt sales after just one year. This would allow the company to produce 35 million units in a year. With this, the brokers of Natureview could take advantage of the relationships with the top 9 supermarkets in the West and the 11 top chains in the Northeast. These relationships could help Natureview in the long run. On the other side, there are a few disadvantages or risks for option one. Because other natural brands have already successfully expanded their distribution into the supermarkets, it makes it a challenge for Natureview, a different natural brand, to enter their distribution into supermarkets. Along these same lines, there has already been word about Natureview’s major competitors also expanding into the supermarket channel. This causes problems because supermarkets usually only like to use one organic yogurt brand in their stores. Due to this, it is most likely that the first to enter into the channel will get the advantage of being the one and only organic yogurt brand. Advertising of this product has a positive outcome, as stated before, however, it will also cost the company around $1.2 million dollars per year, per region. Compared to the other options, this is a higher advertising expense that may change some opinions. Lastly, option one has a high risk overall, but with risk is great reward. Therefore, if it has upside potential it will require more risk and that is something the company will have to think about before making a decision. The second option seems to have equal amount of positives and negatives but is overall a good option. It calls to expand 4 SKUs of the 32-oz. size nationally into the supermarket channel. An advantage of this option would be that since the 32-oz. cups have already generated an above-average gross profit, we can infer that it will continue to increase for the company. Another advantage is that there are not as many competitors for this size of container and