aquarius food industry case study

Topics: Food processing, Food industry, Cagayan de Oro City Pages: 7 (1364 words) Published: September 14, 2014
Drex Norrizz Libaton
Paolo Martin Uy
A Case Study on Aquarius Food Industries, Inc.
I. Central Issue
Aquarius Food Industries, Inc. experienced stable, nearly flat sales growth for the past few years. The company desires to boost sales and profit, and strengthen its position in the industry. II. Areas of Consideration

a. External Analysis
i. Macro Environment
1. Socio-Cultural
Security issues in Mindanao
AFI strictly implements a 30 days credit term to its customer beginning from the delivery date. However, with the recent business downturn in Mindanao partly due to the Abu Sayyaf hostage crisis, customers have been stretching these payment terms to 60 days. ii. Micro Environment

1. Industry Rivalry
Mindanao market share
In Mindanao, Neptune, AFI’s brand of bagoong alamang, is in tight rivalry with Lasap brand. Each grabbing around 30 percent of the market share. While Frisco brand is not far, grabbing 20 percent market share. Lasap under new management

Lasap brand’s new company management has expressed intentions to modernize plant facilities and squeeze out costs further. Complementary to this was a more aggressive marketing and distribution tack, designed to overtake Neptune in Mindanao market. Rumor has it that the company that manufactures Lasap are intending to give volume discounts and a more generous credit term to big wholesalers/dealers. Moreover, Lasap has reportedly approached AFI’s key wholesalers in some parts of Mindanao like GenSan, CDO, etc., and may be able to persuade some of them to shift allegiance. 2. Power of Suppliers

AFI favored by shrimp fry suppliers
Because of AFI’s more stable requirements compared to its competitors, AFI is more favored by the shrimp fry suppliers since its competitors tend to be irregular in their purchases. 3. Power of Buyers

SM Bonus Plans to toll manufacture from AFI
With AFI already toll manufacturing for Golden Hands, SM Bonus is also planning to ask AFI to be their toll manufacturer to fill up the demands of their customers. But in return for SM Bonus’ commitment of purchasing a minimum of 600 cases per month, SM Bonus requires AFI to manufacture only for them and not to companies intending to sell in Metro Manila retail outlets. They also want the credit terms to be 60 days. 4. Force of Substitutes

Increasing processed food manufacturing firms
With a current 1,165 registered processed food manufacturing firms in the country, the processed shrimp paste is just one product among many, and accounts for only a small percentage of total sales turnover in the food processing industry. These companies in the food processing industry offer a wide range of native Filipino processed foods like fruit preserves, coconut products and sauces, can easily be a substitute for shrimp paste. 5. Barriers to entry

Intermediaries
In Davao, AFI has given exclusive distributorship rights to Davao Duck Enterprises. AFI also sells through sixteen different wholesalers for the other cities in Mindanao. b. Internal Analysis
i. Product
1. Secret recipe
Neptune brand has a “unique” and “hard to imitate” process the shrimp fry in which the company becomes the low priced leader in the industry. 2. Venturing to processed coconut industry
With a former childhood friend inviting AFI owner to set up a small-scale operation producing processed coconut items, they now 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. ii. Promotion

1. Davao Duck’s in store promotion and hard selling
Davao Duck Enterprises pushes the product, Neptune, with aggressive in-store promotions in a “hard selling” manner. 2. Lack of monetary support
Aquarius Food Industries does not give any monetary support to its wholesalers; monetary support is used for promotions on the end consumer level. Volume discount to entice wholesalers to push the Neptune brand is also not practiced in the company. iii....
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