Finally, Option 3 gives a better profit than the former but not sufficient revenue. Nevertheless, this option highlights the trend and the researched growth rate of 12.5% with the children’s market and multi-pack sales which is an opportunity to capitalize on. This option also bears the least amount of risk due to minimal investment, maintaining and enhancing relationships with existing intermediaries and channel partners, and not having to undergo marketing changes such as brand positioning, or significant production changes. Gross profits with product sales here are 37.6%.
There are some critical issues and analysis that need to be investigated before recommending which option be best for Natureview Farm. The first critical issue is that of keeping the company’s existing stance in mind: “We owe it to our customers, our suppliers, and our distribution partners to make the right strategic choices…” The second is that of not being able to secure other financing options for the company which implies that high-risk initiatives need to be chosen with extra caution.
The channel flow analysis in Appendix 3 shows the differences between the supermarket channel and the natural foods channel. The relationship of the incentive compatibility with the service output of bulk-breaking is important since bulk-breaking is one of the primary value-added services that the intermediaries provide, which in turn increases the price of the yogurt for the end consumer. In addition, the product shelf-life is another factor that’s relevant with regard to service output demands. Both these factors are high in demand for the natural foods channel but not the supermarket channel which implies higher incentive compatibility with the former channel partnership. Consumers in turn would also want to be able to purchase a product that lasts longer and is broken down for them already. In the supermarket channel it can also be seen that there are more responsibilities added for Natureview to deal with such as merchandising, payments such as the slotting fee, and added promotions. The natural foods channel has these responsibilities eliminated and has further benefits such as tracking paperwork being down with the intermediaries and the information being passed upstream to Natureview. This does end up increasing the cost due to the additional work done by the intermediaries. The key issue is the horizontal conflict that could potentially occur due to channel power shifts and lack of control from the natural foods channel. Research showed that 67% of the US consumers find that price is a barrier to them purchasing the organic yogurt; this implies that these price sensitive individuals would be more inclined in purchasing the product at the supermarket.
Based off the analysis, the best alternative to go forth with would be Option 3. This is mainly because it is the best channel that would avoid any horizontal conflicts stemmed because of a power struggle between the two separate channels. Option 3 also capitalizes on a growing trend in the market and the natural foods industry is expected to grow at 20% annually as well. It would be of interest to maintain and enhance the existing relationships with the channel partners since adding the supermarket channel into the system would make the partnership with the natural foods channel incompatible due to lack of incentives. Furthermore, this is the least risky option that they can invest in with higher returns on investment in comparison with the other options. With existing happy customers, a premium brand position, and strong partnerships with distributors like Wholefoods, Natureview can leverage its equity sources to increase revenue and market share by manufacturing the multipacks targeted towards the younger population. The decision matrix in Appendix 4 further supports this recommendation.(责任编辑：BUG)