For the exclusive use of A. WATKINS
JUNE 7, 2007
KAREN MARTINSEN FLEMING
It was a crisp Vermont morning in February 2000. Christine Walker, vice president of marketing for Natureview Farm, Inc., a small yogurt manufacturer, paused to collect her thoughts from a recently adjourned meeting with the other members of Natureview’s senior management team. The team faced a challenging situation—that of finding a path to grow revenues by over 50% before the end of 2001. The central focus of the meeting was whether Natureview should expand into the supermarket channel in order to meet its revenue goal—a move which would represent a major departure from the company’s established channel strategy and one which would impact every aspect of Natureview’s business.
Despite the growth that Natureview Farm had been able to achieve since it began in 1989, the company had long struggled to maintain a consistent level of profitability. Jim Wagner, hired in 1996 as chief financial officer (CFO), had developed financial controls that brought steady profitability to the company, in line with dairy industry standards. No one at the firm had questioned Wagner’s recommendation in 1997 that Natureview arrange for an equity infusion from a venture capital (VC) firm to fund strategic investments. However, the VC firm now needed to cash out of its investment in Natureview. Natureview management had to find another investor or position itself for acquisition, and increasing revenues was critical in order to attain the highest possible valuation1 for the company. Wagner had advised the management that it would be critical to grow Natureview’s revenues to $20 million before the end of 2001—a large jump from the $13 million the company reported in 1999. (See Exhibit 1 for 1999 income statement.) While Wagner realized the bind Natureview was in, alternative financing would be extremely difficult until the VCs cashed out. The previous day, Natureview’s Chief Executive Officer (CEO) Barry Landers had admonished his management team that he needed a plan:
1 Organic foods companies similar to Natureview were frequently valued on a multiple of revenues rather than profit or cash flow because these VC firms were investing in order to generate significant revenue growth. Typical sales multiples ranged from 1.5 times to 2.1 times revenue, so maximizing overall revenue was critical to achieving a higher valuation by potential investors.
________________________________________________________________________________________________________________ Karen Martinsen Fleming prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. An MBA from Harvard Business School, she has held marketing management positions at major consumer products companies. She currently teaches marketing courses and runs a consulting business in Vermont. This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the narration.
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This document is authorized for use only by Aja Watkins in MGT/Entrepeneurship taught by Dr. Ron Steffel from August 2013 to February 2014.
For the exclusive use of A. WATKINS
2073 | Natureview Farm
We have to come up with a plan that takes us to $20 million in revenues by the end of 2001. This immediate pressure to grow the top line is going to help us get to the size that we have long aspired to be. As you think...
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