Class or Mass

Yan Ting Lin

Class or Mass

1. Executive summary:

The Neptune Seafood company is facing trouble on its excess inventory. Rita Sanchez suggested the upper management slash Neptune’s flagship product “Gold Line” and creating a budget product brand “Silver Line” in the U.S market. Jim Hargrove strongly opposed this proposal. Jim expressed that carrying “Silver Line” will cannibalize Neptune’s “Gold Line” because both products would use the same quality seafood from the inventory. Jim argued that this would undermine Neptune’s margin and brand value, and selling at a loss is unrealistic and unsustainable in the long run. My recommendations are to work with retailers to supply their private label products and expanding Neptune’s market to Central and South America for higher growth in the long run.

1. Industry Dynamics: 

The Neptune Seafood company is currently the third largest seafood producers with over $800 million in sales. And, Neptune is an upmarket player with the reputation of producing the best quality seafood to charge the premium price and enjoy attractive margins. 30% of Neptune’s revenue is generated by selling frozen and processed fish product to U.S premia grocery chains, like Wole Foods Market and other organic retailers. Another 33% of sales came from restaurants all over the U.S, from a premium steak house in New York to Sushi bar in LA. Neptune has many competitive advantages over its counterparts. Neptune has the best fishing trawlers and technologies that allow them to produce finest seafood product consistently. Reputation and exceptional quality become primary drivers of Neptune’s success. The IBIS report has shown relatively insignificant growth (1%) for seafood industry in North America for the next five years. (See E1 Appendix)

C. Situational Analysis Summary

Jim Hargrove has strong reservation regard of slashing 50% of the price of the “Gold Line” and creating “silver line” product series to reduce excess inventory. It is apparent that the cause for this consternation is caused by Jim’s concerns on undermining the brand value and losing future premium margin. (see Root Cause analysis in Appendix) In addition to the difference in launching a new brand in America, it seems there is a lack of appreciation by Rita Sanchez on Neptune’s premium brand value.  "Every luxury company I know of--Gucci, Mercedes-Benz, BMW, Tiffany, even Hyatt--has struggled to go mass without destroying its premium image. I wonder if that adds to the brand's luster or tarnishes it?” said COO Mr. Germain. (see stakeholder’s analysis in Appendix):

•    Different expectation on brand value: Premium brand (Gold Line) Vs High-value brand (Silver Line)

•    Different objectives on handling excess inventory: Long Term Vs Short Term

•    Where to grow: North America Vs Emerging markets (Central and South America) (see Appendix E3)

This analysis will focus on three questions 1. The strategic direction to reduce excess inventory 2. A decision has been made about where the new brand will be sold 3. Finally, a recommendation for CEO Stanley Renser. A complete SWOT analysis and other information gathered is provided in Appendix B.  

D. Impact of Situation

While deciding whether to launch a new brand is critical, the bigger issue is what could be done with future growth of inventory. (With new freezer trawlers and technologies, inventory is likely to grow drastically). The result of will have significant implications for Neptune- undermined margin and brand value could lead to decreasing revenue and losing its leading position in the seafood industry. Neptune Seafood is currently making over $800 million in sales and 34.2 million (4% profit margin) in profit. Neptune is currently making greater profit margin than the seafood industry (See Appendix E2).

E. Evaluation criteria and definitions: The following criteria are used in evaluating what is the best for Neptune.

1. Financial Investment Short Term- Is the alternative expensive to implement
2. Long Term Investment- Will the Investment generate great ROI and revenue
3. Competitor Response- Will competitor aggressively follow and response with negative act (Price War)
4. Association of Seafood Processors and Distributors’ response- Will the ASPD responses negatively.
5. Risk- will the alternative have good chance of success
6. Market Size- Will the alternative capture good market size
7. Brand Value- Will the alternative provide positive value to the band
8. Growth—Will the alternative have potential to grow the market share

F. Alternatives

The case had provided three potential alternatives for Neptune’s CEO to make—Launching a budget brand “Silver Line” in the U.S, creating the new market in Central and South America, supplying retailers with private-label products in the U.S. These alternatives are potential solutions to reduce inventory and handle future fishery harvesting. To understand which of these alternatives will benefit Neptune the most, I have developed three strategy plans that could be pursued by the CEO of Neptune. “Do nothing” is not an option for Neptune—Neptune has major inventory problem to handle with. The alternatives provide potential solutions, just in different directions.