Aquarius Food Industries, Inc.

AQUARIUS FOOD INDUSTRIES, INC.

I. Statement of the Problem

AFI’s reach in the market is only limited to Visayas and Mindanao, due to this the sales and profit from the product are limited. In order to strengthen its position in the industry, AFI must push to extend their market to Luzon where the company can sell it’s bagoong for a higher retail therefore ending AFI’s long time streak of flat-revenues.

II. Case Facts / Background

1. The main product of Aquarius Food Industries is bagoong alamang sold under the brand “Neptune”. Bagoong as a product is very versatile and can be paired with many Filipino dishes, but then it cannot be considered as an everyday commodity. The market of AFI’s bagoong is limited to Visayas and Mindanao but mainly focused on the latter.

2. SM bonus has made an offer for a toll manufacturing arrangement. Specifically, the offer is that they will buy 600 cases per month for one year, under these conditions:

• Payment terms must be 60 days from date of delivery.

• AFI must not manufacture for other companies who sell within Metro Manila. SM Bonus requires exclusivity.

3. AFI at present is operating at nearly 90 percent of full-capacity, even with the SM Bonus deal out of the picture; the company is currently able to sell 100 percent of its total output.

4. Adam Teves has invited AFI to put in a 33 percent equity stake on his “backyard” business venture into producing processed coconut items. These products require similar equipment and packaging material as the bagoong that AFI produces but then, Tex (CEO of AFI) is aware of the competition present in the native sweets industry.

III. Situational Analysis

Macro Environment /External Analysis

Security issues in Mindanao

AFI purely implements a 30 years recognition period to its client. However, with the recent concern downswing in Mindanao partially due to the Abu Sayyaf hostage crisis, customers have been stretching these payment terms to 60 days.

Mindanao market portion

In Mindanao. Neptune, AFI’s trade name of bagoong alamang is in tight competition with Lasap. Each has gain about 30 percent of the market portion. While Frisco is not far catching 20 percent market share.

Lasap new management under new direction

Lasap brand’s new company direction has expressed purposes to overhaul works installations and squash out costs farther. Complementary to this was a more aggressive selling and distribution tack, designed to catch Neptune in Mindanao market. Rumor has it that the company that manufactures Lasap are meaning to give volume price reductions and a more generous recognition term to large wholesalers/dealers. Furthermore, Lasap has reportedly approached AFI’s key distributors in some parts of Mindanao like GenSan. CDO. etc., and may be able to carry some of them to switch commitment.

AFI favored by shrimp Fry providers over its competitor

Because of AFI’s more stable demands compared to its rivals. AFI is more favorite by the shrimp Fry providers since its rivals tend to be irregular in their purchases.

SM Bonus interested AFI as toll manufacturer

With AFI already toll manufacturing for Golden Hands. SM Bonus inquires AFI to be their toll maker to make full up the demands of their clients. But in return for SM Bonus’ commits of buying a lower limit of 600 cases per month. SM Bonus requires AFI to produce just for them and not to companies meaning to sell in Metro Manila retail merchant establishments. They want the credit terms to be 60 days.

Increasing processed nutrient production houses

There are currently 1.165 registered processed food manufacturing houses in the country, the processed shrimp paste is just one merchandise among many, and accounts for only a little percentage of entire gross revenues turnover in the food processing industry. These companies in the food processing industry offer a broad scope of native Filipino processed food like fruit conserves, coconut merchandises and sauces, can easy be a replacement for shrimp paste.

Intermidiaries

In Davao, AFI has given sole distributorship rights to Davao Duck Enterprises. AFI sells through 16 different wholesaler/distributors, which turn pass on the product to the retail level to the other metropolis in Mindanao.

Internal Analysis

Secret Recipe

Neptune trade name has a “unique” and “hard to reproduce” procedure the shrimp Fry in which the company becomes the low priced leader in the industry.

Venturing to processed coconut industry

A childhood friend and godfather of his son Adam Teves, asks for AFI proprietor to put up a small-scale operation producing processed coconut products, they already have an option to produce processed coconut items, since it has a ready market, and it utilizes similar equipment and packaging material as shrimp paste.

Davao Duck’s in shop publicity and difficult merchandising

Davao Duck Enterprises pushes the merchandise, with aggressive in-store promotion, or “hard selling” mode. The promotion at the groceries and supermarkets there virtually thrust the product in the customers’ face, such tactics may turn off some shoffers.

Lack of financial support

Aquarius Food Industries does not give any financial support to its wholesaler/ distributors; financial support is used for promotions on the terminal consumer degree. Volume price reduction to lure jobbers to force the Neptune trade name is not practiced in the company.

Supermarkets and food markets in Mindanao

Mostly, AFI distributes its Neptune brand in Mindanao. It segregates its main markets into two: (1) Davao, and (2) General Santos/Cagayan de Oro/Butuan/Zamboanga and other cities. AFI’s wholesaler/dealer and