Natureview Case Essay

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Introduction Natureview Farm is a yogurt company that distributes the majority of its products in natural food stores across the United States. Since 1989, the company has been manufacturing yogurt at its own production facility in Cabot, Vermont. In the previous 10 years, annual revenue has increased from $100,000 to $13 million. One of the keys to the products success is the family's unique original yogurt recipe that uses a special creation process and only natural ingredients. Natureview Farms uses milk from regular cows who are not treated with an artificial growth hormone (rGBH) and this gives their yogurt a competitive advantage in the market; an average shelf life of 50 days compared to 30 days for its rivals. Though it has experienced tremendous growth over the past decade, Natureview Farms was presented with a difficult situation: find a way to grow revenues by 50% by the end of the fiscal year. This major increase was due to the fact that a venture capitalist firm had to pull out its equity stake in Natureview Farms. Management now needed to replace the lost equity with new investors or prepare itself for acquisition within the next year. Organic food companies were typically valued based on revenue multiples (instead of profit or cash flow), therefore attaining maximum revenue would generate the highest valuation for the company to be purchased at. Senior management created three alternatives that will be analyzed in depth to determine which path is the best for the firm moving forward. Option 1 Option 2 Option 3 Revenue Incremental sales x Supermarket Retail Price (35,000,000 x 0.74/unit) Incremental sales x Supermarket Retail Price (5,500,000 x 2.7/unit Incremental sales x Natural Foods channel Retail Price (1,800,000 x 3.35/unit) COGS Incremental sales x manufacturing costs (35,000,000 x 0.31/unit) Incremental sales x manufacturing costs

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