Financial Analysis of the 3 Options

Option 1 Income Statement Expand into the supermarket channel with 6 SKUs of 8oz yogurt in two regions Revenues $ 25,900, % Cost of Goods Sold 10,850,000 42% Gross Profit 15,050,000 58% Expenses Advertising/ Freight 2,400,000 9% Sales 200,000 1% Marketing 120, % Research & Development - - SKU's Slotting Fee 1,200,000 5% Trade Promotions 3,480,000 13% Broker Fee 1,036,000 4% Net Income 6,614,000 26% Current Revenue + Estimated Revenue = $38,900,000

Option 2 Income Statement Expand into the supermarket channel with 4 SKUs of 32oz yogurt in all regions Revenues $ 14,850, % Cost of Goods Sold 5,445,000 37% Gross Profit 9,405,000 63% Expenses Advertising/ Freight - - Sales 160, % Marketing 120, % Research & Development - - SKU's Slotting Fee 2,560,000 17% Trade Promotions 4,096,000 28% Broker Fee 594,000 4% Net Income 1,875,000 13% Current Revenue + Estimated Revenue = $27,850,000

Option 3 Income Statement Introduce 2 SKUs of a children’s multi-pack into the natural foods channel Revenues $ 6,030, % Cost of Goods Sold 2,070,000 34% Gross Profit 3,960,000 66% Expenses Advertising/ Freight - - Sales - - Marketing 250, % Research & Development - - Broker Fee 241,200 4% Cost of Complementary Cases 150, % Net Income 3,318,050 55% Current Revenue + Estimated Revenue = $19,030,000

Q4. What are the strategic advantages and risks of each option? What channel management and conflict issues are involved?

Option 1: Expand into the supermarket channel with 6 SKUs of 8oz yogurt in two regions Advantages Can have first mover advantage Potential for high growth expected 1.5% market share after 1 st year(35 million units) Consumers in NE and W are more likely to go for organic 8-oz cups & smaller has highest dollar share 74% in supermarket Smaller length of channel to market Leveraging on current relationships Disadvantages High Risk High expense($.32 million) & advertising cost pa($2.4mln) Direct competition with biggies with huge cash power Channel Conflict Issue of pricing differentially

Option 2: Expand into the supermarket channel with 4 SKUs of 32oz yogurt in all regions Advantages Fewer competition Lower on average trade promotion expense Higher profit margin for 32oz versus 8oz Expected 1 st year sales of 5.5 million units Can have first mover advantage Consumers in NE and W are more likely to go for organic Smaller length of channel to market Disadvantages High risk Low Dollar share of 32 oz cups Doubts over full national distribution in an year Sales force expansion cost $160,000 Indirectly Competing with big brands Launch will make competitors to be prepared for 8oz variable of Nature view Channel Conflict Issue of pricing differentially

Option 3: Introduce 2 SKU of children multi pack into natural foods channel Advantages Leverage current relationships within nature foods channel Low risk No channel conflict Nature well positioned for option Natural foods channel growing seven times faster than Supermarkets Low cost Take advantage of growing natural foods channel Disadvantages Low expected revenue Requires R&D to develop product

Go With Option 1(Highest NPV); Meet Revenue targets Action Plan Leverage the relationship with brokers to strike a deal with supermarkets Work in close association with brokers to eliminate the concerns of successful association with super- markets Partner with more than one VC to minimize risk. Enter Super Markets Deploy maximum resources to make effective use of the channel. Have a sale and marketing function dedicated to supermarket. Try to maintain the premium image of the brand through unique promotions Design Trade promotions A supermarket would charge $0.74 for the same cup of yogurt priced at $0.88 in natural food stores Incentivize retailers for the perceived loss. (Retailer Engagement Schemes) Work with retailers, distributors and wholesalers to reduce cost, maintain margins & decrease the price difference. Manage Channel Conflict