Neptune Gourmet SeafoodÐ'ÐŽÐ'¦S Supply Problem

Abstract

Neptune Gourmet Seafood is facing a problem with oversupply for existing demand. It can either decrease supply to match demand or increase demand to match supply. I recommend the latter. I further recommend the way to increase demand is for Neptune to increase its marketing efforts in its existing markets and to penetrate other markets it currently is not in.

The Competitive Environment

Neptune is a 40-year-old, $820,000,000 company, specializing in quality shell and non-shell seafood in a $20 million industry. It is North AmericaÐ'ÐŽÐ'¦s third-largest seafood producer, but that designation is misleading, because its revenues account for only 4.1% of the total market. As such it is but one of many firms operating in the seafood processing industry, one whose market structure could be termed monopolistic competition. The industry is not limited to North American firms such as Neptune, but also includes companies from China, Peru, Chile, and Japan, competition from which has pushed Neptune to upgrade its fishing fleet and which also has helped shrink the companyÐ'ÐŽÐ'¦s margins by 10%.. Neptune markets to the high end of the market, differentiating itself from the competition by its quality, selling its high-end brand at 25-30% above the rest of the market. Their years of experience coupled with the companyÐ'ÐŽÐ'¦s value development pose a threat to any new firm trying to enter the market. It is the only member company of the U.S. Association of Seafood Processors and Distributors (ASPD) to receive the associationÐ'ÐŽÐ'¦s Gold Seal of Approval on all its products (Kesner and Walters, 2005). Neptune currently markets its seafood to individual consumers, restaurants, wholesalers, grocers and grocery chains, and transportation and leisure cruise operators. The top restaurants within 250 miles of the companyÐ'ÐŽÐ'¦s headquarters in Fort Lauderdale, Florida and the biggest cruise lines account for 33% of the companyÐ'ÐŽÐ'¦s sales. The 33% goes to wholesalers who distribute to restaurants throughout the United States, 30% goes to upscale grocery chains along the east coast and into the mid-west, and the remaining 4% of sales comes from the companyÐ'ÐŽÐ'¦s own fish market outside Fort Lauderdale. Restaurants account for 66% of the companyÐ'ÐŽÐ'¦s revenues, but one-half of that is to local restaurants. Clearly, there are some untapped markets for the companyÐ'ÐŽÐ'¦s existing product line: more mid-west and eastern seaboard grocery chains, west coast grocery chains, and more restaurants throughout the United States, not to mention Internet sales to individuals and those seeking ready-to-eat, fish-based meals.

The Fundamental Environment

One of the major reasons for NeptuneÐ'ÐŽÐ'¦s current oversupply dilemma is because of changes in its fundamental environment: legal and technological. The legal change is new U.S. laws limiting the company access to fishing grounds near the coast, forcing it to go farther out to sea. The technological change is the addition of new more efficient fishing trawlers. As a result, the company is fishing in waters where supply is more abundant. They are using the new and more advanced fishing trawlers that allow them to catch more fish. In addition, the trawlersÐ'ÐŽÐ'¦ more advanced refrigeration techniques enhance the shelf life of the catch, up to 50% longer.

Major Market Drivers

There are varieties of market drivers contributing to the current dilemma as well as to the solution to the problem. The rate of technological change, increasing industry globalization, changes in cost and efficiency, and regulatory influences all have contributed to the current oversupply. The company is facing heavy foreign competition, which has forced it to upgrade its fishing fleet, technological changes in the form of more advanced fishing trawlers is making the production process more efficient, and new laws have pushed the company to find sources of supply that have turned out to be more abundant than what it used to have.

Other market drivers, however, affecting the demand side, are helping to contribute to the solution.

These market drivers would include:

Ð'„Ð'« Changes in customers who buys the product because of marketing and education

Ð'„Ð'« The shifting or emerging of buyer preferences from meat, poultry, and pork to fish

Ð'„Ð'« Changing of social concerns, attitudes and lifestyles, emphasizing healthier living and eating,

Ð'„Ð'« An inelasticity of demand from shifting buyer preferences, causing an all-time high demand, and consumer habits of brand loyalty

All point toward the company to take advantage of the demand to resolve its current and projected oversupply.

Combine these demand market drivers with that of the rate of marketing innovation, to help the company to find unique ways to market its product, and the solution to the oversupply problem is at hand.

Competitive Strategy

It has been argue by others in the company that the solution to the oversupply problem is to cut prices and initiate a new low-priced product line. Cutting prices when demand is high and margins are slim will only lead to selling our product at below cost, this