Natureview Farm Case – Executive Summary
Natureview Farm Case – Executive Summary
1. Grow Natureview’s revenue to $20M by calendar year end 2001. 2. Position Natureview for acquisition and / or find a new investor.
With opportunities such as the one presented in the Natureview Farm case, executives and corporate leaders have a tendency to focus exclusively on the stated revenue objective. We believe that doing so is short sighted and will not best position Natureview for acquisition or additional equity investment, either via a private equity sponsor or via a business to business transaction. There are several options being considered by Natureview, however; taken independently, these options will either not meet the revenue objective or will have an adverse impact on margin. The erosion of margin should be a significant factor considered when looking at Natureview from a holistic point of view.
It is our position that in addition to the revenue focus, it is incumbent upon executives and corporate leaders to position Natureview for future growth and to improve margin while achieving the stated revenue objective. Further, the existing executives and corporate leadership need to create their own value proposition and distinctive value in order to both move the acquisition multiplier up the scale and to protect their positions post-transaction. Each of these objectives is accomplished with our solution.
Our recommended solution is to implement Option 3, introducing two SKUs of a children’s multi-pack into the existing natural foods channel. Concurrently, we recommend a phased implementation of Option 1, which is to expand six SKUs of the 8-oz product line into one or two selected supermarket channel regions. Our recommended phased implementation will begin with the northeast region in Q3 of 2000 and will be followed by the west region in Q4 of 2000.
Although there are several benefits or predictive factors of success, the key elements of the successful implementation of our combination strategy lie in the following areas:
1. Natureview has the existing infrastructure to produce and distribute in the natural foods channel. 2. Mitigates conflict issues by offering a unique product to the existing channel. 3. Natureview’s current positioning should allow for successful implementation of this option.
1. Entering the supermarket channel in the northeast is geographically favorable due to Natureview’s current domicile
2. Market intelligence and demographics of consumers in this region, as well as in the west, suggest favorable results of a product launch into the supermarket channel
3. Natureview would enjoy the first mover advantage
4. “Phasing” the implementation will allow Natureview to address the staffing and logistical concerns associated with this option. Our combination approach provides stronger revenue and profit growth than either Option 1 or Option 3 independently. Furthermore, the profit from implementing Option 3 funds the investment required for the recommended phased implementation of Option 1. Successful implementation of the combination approach will result in calendar year end 2001 revenue of $33.26M and profit of $2.867M or 9%. Our combination approach exceeds the revenue target, creates a healthy margin, and mitigates the risks associated with each of these options.
The combination approach of Option 3 and Option 1 should result in the current venture capital investors receiving a multiplier at the higher end of the range and should attract the attention of Natureview’s competition possibly leading to a business to business acquisition. This will lead to an increase in sale price of between $18.9M and $27.9M. Finally, by achieving these objectives, the executives and corporate leaders will increase their opportunity to survive such a transaction by way of creating an additional value proposition and in creating their own distinctive vale critical to the future success of the company.
Future consideration of Option 2, as well as the development of additional product offerings in both the natural foods channel and the supermarket channels, will create the necessary opportunity for the future growth of Natureview. This future growth potential is critical to achieving optimal interest in Natureview from either a private equity sponsor or acquisition perspective.