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Praxis Business School

Assignment No - 01

Class or Mass?A report

Submitted to

Prof. Charanpreet Singh

In partial fulfillment of the requirements of the course

Written Analysis and Communication

On 15/12/2009

By

Ronak Agarwal

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LETTER OF TRANSMITTAL

Neptune Gourmet Seafood

Date: 15/12/2009

To - Stanley Renser, chairman and CEO

From Ronak Agarwal

Subject:

I am enclosing my report on the future plan of action of Neptune Gourmet

Seafood with respect to increasing inventory.

Ronak Agarwal

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Executive Summary

Neptune Gourmet Seafood is North America's third-largest seafood producer

offering highest quality products. The new laws along with latest technologytrawlers have contributed to piling up of stock at an alarming rate, and stock is

expected to pile up in future too. Creating more demand through price cut or

bringing in a new brand without tarnishing its image is the challenge faced.

Its recommended to create a new brand and differentiate the old and

new brands on the basis of packaging and trawlers used to catch fish. This

would expand the market size to sell the excess inventory and also

differentiate between the two brands, avoiding cannibalization.

Word Count: 107

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Table of contents

SERIAL

NOCONTENTS

PAGE

NUMBER

1 Situation analysis 5

2 Problem Statement 5

3 Options 5

4 Criteria 6

5 Evaluation of Options 7

6Recommendations

8

7 Plan of Action 8

8 Exhibits 9 & 10

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Situational Analysis

Neptune Gourmet Seafood, an $820 million company is the most upmarket

player in the $20 billion industry. In the past 40 years, the company has earned

the reputation for producing the best seafood and the company is doing

everything it can to preserve its premium image among customers. Neptune

attained its sales through various channels (exhibit 1). Neptune invested

heavily to stay ahead of rivals and as a result it was able to charge premium on

their products (exhibit 3) as compared to their rivals. They recently brought

state-of-the-art freezer trawlers, whose autopilot mechanisms guided them to

the best fishing grounds, manipulated fishing gear, landed catches and

reported data to shore. Fishing equipment ensured only mature fish were

caught which resulted in only top quality catches. The freezer trawlers

technology enabled to super freeze fishes to -70 degree F within four hours of

capture. This avoided formation of ice crystals and along with dry ice and liquidnitrogen packing, increased shelf life by 50%. This new technology along with

new fishing regulations which reduced access to fish near the coast resulted in

catches that were bigger than ever. Though demand was at an all-time high,

the company was still continuously getting piled up with excess inventory

(exhibit 4) and there was no relief in sight.

Rita Sanchez (exhibit 2), came up with two strategies of cutting prices or

launching a new mass-market brand that Hargrove (exhibit 2) felt would

destroy the companys premium image as well as endanger the ASPD gold sealof approval on every product they sell is possessed only by them. Not many

executives (exhibit 2) in the company are in favour of cutting prices either, but

its clear that Sanchez is gaining ground in her bid to launch a low-priced

brand. Along with reputation worries, Hargrove fears that an inexpensive

brand would cannibalize the companys premium line. He has to come up with

a way where the excess inventory problem would be solved without affecting

the brand image or profits of the company.

Problem Statement

To find a market for the finished goods inventory that has piled up and also the

finished goods inventory that is expected to pile up continuously in future.

Options

The following are the options Neptune gourmet seafood could consider

1)Slash the price of the existing range of products, i.e. Neptune gold2)Bring in a new brand targeting the lower segment3)Entering/ expanding into new markets in other parts of the country

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Criteria

Brand Image: to maintain or build on the brand image the company has

earned in the past 40 years in seafood business.

Long term solution: as the problem of excess stock would be a long term

phenomenon, the company would want to come up with a solution to not onlysolve the short term objectives, but also have long term sustainability.

Not eating up Future sales: the company should make sure that a discount

shouldnt lead to stocking of the product by the consumers. This would lead to

less demand in the subsequent months to come, hence destabilizing the

monthly sales figures.

Company culture: the culture of the company shouldnt be changed because it

could have a long term impact on the working and handling of the company.

Avoid Cannibalization: if a new product segment is brought in, it shouldnt eat

up the market of the existing product or let the competitor cannibalize.

Not to get into a nasty price-cut war: there should not be a situation where

the company is trying to contest against the competitors on the basis of price

as this would ruin the image of a premium product and hence erode the

chance to charge premium for quality.

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Evaluation of options

Option Pros Cons

Slash the price of the

existing range of

products, i.e. Neptune

gold

Immediate solutionIts better than not selling

at all

Competitors might beslashing prices anyways in

future because there is an

industry wide increase in

inventory

Attract new consumers

Consumers mightperceive that there is

something wrong with

the productErode the brand

equity of the company

Lead to competitorsreducing prices

Reduce profit marginsConsumers would feel

they were

overcharged earlierPosition itself close to

competitors

Increase sales at theexpense of future

sales

Bring in a new brand

targeting the lower

segment

Exposure to new and massmarket

Educated consumerswould trade up toNeptune gold

Both short and long termsolutions

Use of old trawlers/technology

Increased profitsSandwich strategy -

compete againstcompetitors on the basis

of price

Highly riskyErode brand imageCannibalizing Neptunegold rangeWinning shelf space in

supermarkets and

stores

Lead to Price war

Entering/ expanding

into new market in

other parts of the

country

Increasing the market sizeCreating a new brand of

price cuts wouldnt be

required

Long term sustainabilityMaximum utilization ofasset ( goodwill)

High initial costNo guarantee of

success

Competition fromexisting players

Inadequate capital

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Recommendation

Its recommended to create a new brand and differentiate the old and new

brands on the basis of packaging and trawlers (technology) used to catch fish.

This would expand the market size to sell the excess inventory.This would also differentiate between the two brands, avoiding

cannibalization of the premium brand.

Action plan

Discontinue the production of seafood using old trawlers for about amonth.

Start selling the new trawlers catches to get existing consumers

(exhibit -1) accustomed to the improved quality.After about a month, using the old trawlers and technology, come up

with a new brand with a new look, feel and packaging at lower prices

compared to Neptune gold range of products.

Smart messaging appealing to the right consumers.Not to compete on the basis of price, instead position it as another

quality product at a cheaper price.

Leave the ASPD seal to differentiate between the new brand and thepremium one.

Distribution channels should be retail stores, local supermarket wherethe mass can be tapped.

Word Count - 1033

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Exhibits 1

Exhibit -2

Key persons and their designation

Name Designation

Stanley Renser Chairman and CEO, Neptune gourmet seafood

Jim Hargrove Managing Director, Neptune gourmet seafood

Rita Sanchez Sales department head, Neptune gourmet seafood

Nelson Stowe Legal Counsel, Neptune gourmet seafoodPat Gilman Head of institutional business, Neptune gourmet

seafood

Sandy McKain Head of consumer business, Neptune gourmet

seafood

Dan Sculman (Expert Advisor) CEO, Warren (New Jersey based Virgin mobile USA)

Dipak C. Jain (Expert Advisor) Dean of Kellogg school of management

Oscar de la Renta (Expert advisor) Chairman, Oscar de la Renta Limited

Thomas T. Nagle ( Expert Advisor) Founder and chairman, Strategic Pricing Group

33

33

30

4

Sales of Neptune gourmet seafood

Resturants within 250 kms of

Fort lauderdale and cruiselines

wholesalers distributing to

resturants all over USA

U.S. grocery chains and organic

food retailers

fish market outside Fort

Lauderdale

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Exhibit 3

Premium charged over competitors, product wise

Product name % premium charged over rivals

1.Canned salmon2.Tuna3.Sardines4.Mackerel5.Herring6.Pilchard

30%

1.Lump crabmeat2.Anchovies3.

Clams

4.Lobster meat5.Mussels6.Oysters7.Shrimp

25%

Exhibit 4

Level of inventory as compared to the level of sales in that month

Time period Level of inventory

One year back 110 days equivalent of sales

3 months back 120 days equivalent of sales

Current 150 days equivalent of sales