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 technology
trawlers 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.
It’s 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
PAGE
SERIAL
CONTENTS NUMBER
NO

1 Situation analysis 5

2 Problem Statement 5

3 Options 5

4 Criteria 6

5 Evaluation of Options 7

Recommendations
6 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 liquid
nitrogen 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 company’s premium image as well as endanger the ASPD gold seal
of 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
it’s 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 company’s 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 gold
2) Bring in a new brand targeting the lower segment
3) 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 only
solve the short term objectives, but also have long term sustainability.
Not eating up Future sales: the company should make sure that a discount
shouldn’t 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 shouldn’t 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 shouldn’t 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
Slash the price of the • Immediate solution
existing range of • It’s better than not selling
products, i.e. Neptune at all
gold • Competitors might be
slashing prices anyways in
future because there is an
industry wide increase in
inventory
• Attract new consumers
Bring in a new brand • Exposure to new and mass
targeting the lower market
segment • Educated consumers
would trade up to
Neptune gold
• Both short and long term
solutions
• Use of old trawlers/
technology
• Increased profits
• Sandwich strategy -
compete against
competitors on the basis
of price
Entering/ expanding • Increasing the market size
into new market in • Creating a new brand of
other parts of the price cuts wouldn’t be
country required
• Long term sustainability
• Maximum utilization of
asset ( goodwill)
7
Cons
• Consumers might
perceive that there is
something wrong with
the product
• Erode the brand
equity of the company
• Lead to competitors
reducing prices
• Reduce profit margins
• Consumers would feel
they were
overcharged earlier
• Position itself close to
competitors
• Increase sales at the
expense of future
sales
• Highly risky
• Erode brand image
• Cannibalizing Neptune
gold range
• Winning shelf space in
supermarkets and
stores
• Lead to Price war
• High initial cost
• No guarantee of
success
• Competition from
existing players
• Inadequate capital
Recommendation
It’s 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 a
month.
• 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 the
premium one.
• Distribution channels should be retail stores, local supermarket where
the mass can be tapped.

Word Count - 1033

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 Exhibits – 1

Sales of Neptune gourmet seafood

Resturants within 250 kms of

33 Fort lauderdale and cruiselines
30
wholesalers distributing to
resturants all over USA
U.S. grocery chains and organic
food retailers
fish market outside Fort
Lauderdale

33

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 seafood
Pat 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

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Exhibit – 3
Premium charged over competitors, product wise
Product name % premium charged over rivals
1. Canned salmon
2. Tuna
3. Sardines 30%
4. Mackerel
5. Herring
6. Pilchard
1. Lump crabmeat
2. Anchovies
3. Clams
4. Lobster meat 25%
5. Mussels
6. Oysters
7. Shrimp

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

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