Class or Mass

1 January 2017

Should Neptune launch a mass-market brand? Excerpted from HBR Case Studies: Class — or Mass? , by Idalene F. Kesner & Rockney Walters. Reprinted with permission from Harvard Business Press. All Rights Reserved. Should Neptune launch a mass market brand? Here’s the case of an organization reassessing its strategic priorities when faced with working capital pressures due to capacity being higher than demand, and this has led to a reassessment of its growth strategy . Neptune is under serious threat of facing a stall point because of a situation of price premium captivity .

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We therefore believe Neptune should launch a mass market brand, for unlocking new growth opportunities beyond its current franchise, and not just for tactically tiding over the temporary crisis. Following are strategic growth opportunities that can be unlocked with a mass market brand. It is however imperative that Neptune opts for a differentiated business model for the mass segment to mitigate any cannibalization threats from its current core business. Growing the seafood category Ironically, the vision of the company’s founder was to “sell some of the fish so low so that more people would eat sea food” .

As the company grew bigger, it set a narrower category definition for itself as “the best seafood in the water planet” . Neptune can grow the seafood category and get a disproportionate share of it by inducing a shift from mass affordable meat products through a better value proposition like a “healthier food at the same price” . This is also likely to find common cause with ASPD because it gives its members an opportunity to grow and emerge stronger with an aggressive pricing strategy. Upgrading from unbranded seafoods

While it is not explicitly mentioned in the case, but there could be an opportunity to trade up consumers from unbranded seafoods. Neptune’s turnover of $820 million represents only a 4% share of the $20 billion seafood business. Given that Neptune is the 3rd largest player in the category, it would be reasonable to assume that there is a significant consumption of unbranded or quasi-brands that are priced at the lower end which the mass brand can unlock through brand based value proposition “why buy anything when you can buy Neptune. ” Growing the consumer franchise

Currently only 34% of Neptune’s sales come from consumers directly with 66% coming from indirect customers. Growing consumer sales will enhance brand equity because these consumers will choose Neptune as a brand (as opposed to choosing a restaurant to eat in) and will credit the quality of the seafood to the brand (unlike the restaurant goers who will credit the quality of the seafood to the restaurant). A mass market brand can help increase the consumer franchise and with the least cannibalization if done in conjunction with the category growth strategy.

In order for Neptune’s mass market strategy to be sustainable and profitable, 2 key issues will need to be addressed: Brand Endorsement : While it is essential to give the new brand the equity support of Neptune, there should be some distance maintained between the two to mitigate cannibalization and equity dilution risk. Hence, an endorsee brand approach (Healthy Eats from Neptune) could work better than a straight varianting approach like Neptune Silver. Cost Structure :

Reducing cost structure while maintaining acceptable quality would be key to sustainability of brand investments and profitability , especially in light of the margin pressures which exist even in the premium business. A serious look into the entire supply chain network and costs is therefore warranted for both the business models in order to propel Neptune into the next virtuous cycle of profitable growth. Case Study Analysed by Saugata Gupta, CEO -Consumer Products, Marico. The author would like to acknowledge the contribution of Sushrut Pant, Category Head, Marico.

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