Class – or Mass?
A. Executive Summary: Neptune Gourmet Seafood is currently struggling with what appears to be a temporary problem of excess inventory. A combination of new coastline regulations and an investment in new fishing vessel technology and freezer trawlers has increased their average catch size while demand in the current segment has not grown as quickly. The Neptune management team is faced with a decision of how to clear out its excess inventory that is not moving fast enough under its Neptune Gold branding. My recommendation is to launch a mass-market product under a different product line in order to monetize excess inventory and position Neptune to capture more of the ...view middle of the document...
Additionally, discounting prices or introducing mass-market brand would tarnish image.
* Rita Sanchez argued that with $63 million invested in the 6 new fishing vessels there was no way they could sit idle and not continue fishing and growing inventory total. She argued that selling the excess inventory at a loss was better than not selling it at all.
C. Importance of Decision: While the decision for Neptune of what to do with its current excess inventory is vital for short-term financial health, the decision to launch a new lower-end product line will be crucial in terms of the company’s long-term positioning. As the analysis has shown, Neptune’s investment in technology and commitment to product improvement has provided a strong supply of quality product, however, its strong growth in the high-end market does not match its increase in supply. Successfully introducing a mass-market product line while maintaining its high-end Gold product line could potentially help Neptune capture hundreds of millions more of the $20 billion North American seafood industry. If it fails to make the right strategic move at this fork in the road Neptune may continue to lose margins on wasted inventory and be placed in a weaker position where it may need to respond to competitor action.
D. Evaluation Criteria and definitions
The following criteria are used in evaluating what is best for Neptune Gourmet Seafood
1. Financial Short term – will the alternative create strong cash flow in the short term?
2. Financial Long term – will the alternative create strong cash flow in the long term?
3. Quality of goods produced – will the alternative create or maintain the high quality Neptune customers are accustomed to?
4. Brand Image – will brand image be damaged by the alternative?
5. Competitor’s Response – will competitors respond to the alternative and threaten Neptune’s future success in the market?
6. Low Risk – will the alternative provide a high probability of success?
Two potential solutions were proposed at the Marketing and Operations Council meeting. Rita Sanchez, the sales lead, suggests a reduction in the price of current products by 40-50% or introducing a new lower-market brand reaching value consumers in order to quickly sell the excess inventory. Jim Hargrove, the Marketing Directory, strongly disagreed with either scenario arguing they would permanently tarnish the brand’s premium quality image. A fourth alternative could be to introduce a new premium line while dropping the price of the Gold line to maintain brand image.
1. Cut prices as supply and demand fluctuates (cut prices on existing products 40-50%)
* Steep price cut will stimulate significant increase in sales and move inventory
* Allow Neptune products to reach budget and value consumers
* Damage to brand image and quality perception of existing products
* Decreasing margins on...