Executive Summary: Neptune Gourmet Seafood is known for its premium image, quality products and higher priced margin. However, Neptune currently has an oversupply of fish, which solutions regarding this dilemma potentially could affect the image of the company and its products. The inventory’s day of supply has tripled since last year and is at an all times high. Rita Sanchez, Sales Director, advocates for cutting prices by 40-50%. Rita’s logic is based off basic supply and demand model (see Appendix A). This option is forecasted to increase sales reducing inventory. Along with this, implementation of lower priced product suggestions also included whether to create a new brand, “Silver”. On the other hand, Jim Hargrove, Marketing Director, opposes the idea of price cuts due to the risk of decreasing Neptune’s brand image. My recommendations involve both short-run as well as long run. In the short-run, inventory needs to be reduced. To reduce the temporary problem of the 60-day supply, Neptune should sell the fish with a discount price. This would increase sales but allow Neptune to keep their high prices moving forward. In the long run, Neptune will continue to capture more fish due to the investment on machinery. I recommend Neptune to sell fish internationally. This recommendation allows Neptune to keep a consistent high quality product and price while expanding its customer base.

Industry Dynamics: Currently Neptune Gourmet Seafood is one of the three large players in North America of the seafood industry. They provide products to grocery stores as well as supply fish to restaurants. The canned goods and processed/frozen products are priced 25% and 30% higher than competitor products, respectively. Neptune Gourmet Seafood is also known as restaurant’s supplier of choice. They obtain high quality seafood products and competitive advantage by largely investing in new technology and equipment. For example they invested in new machines that could freeze fish under four hours, which results to more fresh and tasty products. They also invested 63 million dollars in ships. Neptune’s competitors include Japan, China, Peru, and Chile. The Product Life Cycle is currently at maturity (see Appendix R2). Their value resides in its brand name, which customers gain value from as well. When the products enter grocery stores and restaurants the brand name attracts consumers to these places. (See Appendix C for 5 C’s Analysis)

Situation Analysis Summary: The increase of supply and inventory poses important issues that the company must face. If inventory is not dealt with this will cause the company to lose money from high inventory costs and unsold products. From the Root Cause Analysis (see Appendix D), we find that although Sanchez and Hargrove’s recommendations clash, both root from the problem of a limited customer base. Hargrove, although wants to maintain price and brand image, faces inventory problems because there’s not enough high-end fish buyers. Sanchez, on the other hand, wants to reduce price thereby trying to enter a new customer base. But this creates problems for the brand name, Neptune’s competitive advantage, as well.

Importance of Decision: Although the oversupply of fish seems to be a short-term problem, the recommendations will affect the industry in the long run. From 2005 to 2006 revenues will increase from 739.3 Million to 820 Million, however, cost of goods sold has increased as well reducing the gross contribution margin from 22% to 20%. There’s also a decline net profit after tax from 5% to 4%. Along with that due to increasing competition and costs, Neptune faces a 10% reduction in company margins. The decision will allow Neptune to increase their customer base, revenues and resolve the issue of the declining financial implications provided in the case.

Evaluation Criteria and Definitions
1. Brand image: will the high quality brand image be effected
2. Financial Short-Run: will the cost of