Clover Valley Dairy Company
In the fall of 1978, Vince Roth, General Manager of the
Clover Valley Dairy Company, was considering whether
a newly developed multipack carrier for yogurt was
ready for market testing and, if so, how it should be
Since 1930, the Clover Valley Dairy Company had
sold, under the trade name Valleyview, milk, ice cream,
and other milk by-products—such as yogurt, cottage
cheese, butter, skim milk, buttermilk, and cream—in
Camden, New Jersey. The raw milk was obtained from
independent farmers in the vicinity of Camden and was
processed and packaged at the Clover Valley Dairy.
Clover Valley’s sales had grown steadily from 1930
until 1973 to an annual level of $3.75 million. However,
between 1973 and 1977, a series of milk price wars cut
the company’s sales to $3.6 million by 1977. During this
time, a number of other independent dairies were
forced to close. At the height of the price wars, milk
prices fell to 75 cents per half-gallon. In the spring of
1977, an investigation of the milk market in Camden
was conducted by the Federal Trade Commission and
by Congress. Since then, prices had risen so that Clover
Valley had a profit for the year to date.
Clover Valley served approximately 130 grocery
store accounts, which were primarily members of a cooperative
buying group or belonged to a 10-store chain
that operated in the immediate area. Clover Valley no
longer had any major chain accounts, although in the
past they had sold to several. Because all three of the
major chains operating in the area had developed exclusive
supply arrangements with national or regional
dairies, Clover Valley was limited to a 30 percent share
of the Camden area dairy product market.
Although Clover Valley had a permit to sell its
products in Philadelphia, a market six times the size of
Camden, management decided not to enter that market
and instead concentrated on strengthening their
dealer relationships. In addition, it was felt that, if a
price war were to ensue, it might extend from Philadelphia
into the Camden area. With the healthier market and profit situation in early 1978, Clover Valley began to look for ways to increase sales volume. One area that was attractive because of apparent rapid growth was yogurt. During the previous three years, management had felt that this product could help to reverse Clover Valley’s downward sales trend, if given the correct marketing effort. However, the financial problems caused by the loss of the national grocery chains and the price war limited the firm’s efforts. As a result, Mr. Roth felt that Clover Valley had suffered a loss of share of yogurt sales in the stores they served. Since 1975, Mr. Roth had been experimenting with Clover Valley’s yogurt packaging with the hope that a new package would boost sales quickly. All dairies in Clover Valley’s area packaged yogurt in either 8-oz or
1-lb tubs made of waxed heavy paper. Clover’s 8-oz tub
was about 5 in. high and in. in top diameter, tapering
to in. at base.
The first design change to be considered was the
use of either aluminum or plastic lids on the traditional
yogurt tubs. However, these were rejected because the
increased costs did not seem to be justified by such a
modest change. Changing just the lid would not make
their tubs appear different from their competitor’s tubs,
it was felt.
By 1976, Mr. Roth had introduced a completely different
package for Clover Valley’s yogurt. The 8-oz tubs
were replaced by 6-oz cups, designed for individual
servings. In addition, the new cups were made of plastic
and had aluminum foil lids. The 1-lb tubs were
unchanged. No special promotional effort was undertaken
by Clover Valley, but unit sales of the new 6-oz
cups were more than triple the unit sales of the old
8-oz tubs (see Exhibit I-1). While the increased sales
volume was welcomed, the new plastic cups increased
unit packaging costs from 7.2 cents to 12.0 cents. This
more than offset the saving of 4 cents because of the
reduction in the amount of yogurt per container. Retail
prices were reduced from 41 cents to 34 cents for the dollar contribution to fixed costs from yogurt by only
5 percent. (All dairies priced their yogurt to give retailers
a 10 percent margin on the retail selling price.
Competitor’s retail prices for their 8-oz tubs remained
at 41 cents.)
Mr. Roth felt that both the change to plastic and
the convenience of the smaller size were responsible for
the increased sales. However, he was disappointed
with the high packaging costs and began to look at ways
of reducing them, without changing the package much
further. He felt another package change would be too
confusing to consumers. Because of the economies of
scale needed to produce plastic containers, costs could
be reduced if more units were produced and sold.
Mr. Roth felt that packaging a number of cups together
would make the 6-oz cups easier to carry home, which
might increase sales, and would certainly reduce packaging
By 1978, work had begun on developing a multipack
holder to hold six cups together. A single strip of
aluminized plastic would serve both as holder and as
the top for two rows of three yogurt cups. A single cup
could be readily separated from the others in the pack.
Dairy personnel constructed wooden models of several
different cups for use with the holder and with plasticmolding
experts, choosing one that would mold easily
and cheaply. Eventually, some of these carriers were
made to order for testing in the plant and among
Clover Valley employee families.
Several problems soon became apparent. The
holder did not always fasten securely to all six cups in
the multipack. While the holder strip was being put on,
the side walls of the cups were slightly compressed,
causing some cups to crack at the edges. When consumers
tried to remove one of the cups, they sometimes
pulled the top from an adjacent cup. The problem was
the strength of the aluminized plastic, which made it
difficult to tear even when perforated.
The multipack was redesigned and again tested in
the plant and by employee families. It appeared that the
new package was performing satisfactorily. Negotiations
with Clover Valley’s carton supplier resulted in an estimated
price of 8.5 cents for the first 100,000 units. Thereafter
unit costs would drop to 7.5 cents per 6-oz cup Mr. Roth decided that the best multipack carrier
presently possible had been designed. His attention
then turned to methods of testing the new packs for
consumer acceptance. Mr. Krieger, his father-in-law
and president of Clover Valley, sent him the following
letter concerning market testing:
Concerning the market test of the new cups and carriers, I
have a few suggestions that may be helpful, although the final
decision is yours. I think we should look for a few outlets
where we are not competing with the other dairies, perhaps
the Naval Base or Bill’s Market. Actually, if we use Bill’s,
then the test could be conducted as follows:
1. Give Bill a special deal on the multipacks for this weekend.
2. In the next two weeks, we’ll only deliver the multipacks
and no single cups at all.
3. In the third week we’ll deliver both the packs and the
4. During the third weekend we’ll have someone make a
survey at the store to determine its acceptance.
5. Here is how it could be conducted:
a. Station someone at the dairy case.
b. After the shoppers have chosen either single cups
or the multipacks, question them.
c. If they chose the multipacks, ask them why.
d. If they chose the single cups ask them why they
didn’t buy the packs.
e. Thank them for their help and time.
Questions for Discussion
1. Should the new multipack carrier be tested?
2. If a test is judged necessary, what should be the
criteria for success or failure?
3. How useful is the proposed test in addressing the
management problem? What changes, if any,
would you recommend?