Bitter Competition: the Holland Sweetener Co. vs. Nutrasweet (a)

Topics: Marketing, Revenue, NutraSweet Pages: 4 (917 words) Published: December 11, 2011
Bitter Competition: The Holland Sweetener Co. vs. NutraSweet (A)

1. How should Vermijs expect NutraSweet to respond in the Holland Sweetener Company’s entry into the European and Canadian aspartame markets?

Vermijs could expect two responses from NutraSweet: try to “save” its monopoly by fighting and low the price and start a price-war with HSC; or accept the entrant and its pricing and finally share the market.

With the acquisition of Searle in the summer 1985 by the giant Monsanto, NutraSweet became a stronger brand. In 1986, the net income of Monsanto Corporation was $433M, and NutraSweet net sales rose to $711M.

With Monsanto support, NutraSweet was strong enough to conduct a price war, but the HSC had strong resources too: $412M of net income the same year, and net sales of $17.712M only in Europe and North America ($22. 530M in 1984), but also the chemical and technical know-how with Tosho patented process for manufacturing aspartame (considered less costly and more flexible) and the HSC’s European market knowledge and raw material supply. Added to a political goodwill ($17M from the European Investment Bank), Monsanto might beware of the DSM potential in the aspartame market. Furthermore, the cost of goods sold by HSC was more than twice higher in 1986 ($15.743M for $6.879M), in accordance with the net sales higher in the same proportion, providing more flexibility to HSC to lower it in case of price-war.

With a competitor with almost equivalent financial and technical resources, a price-war can conduct to a lose/lose game, both of NutraSweet and HSC would, at the end, make losses by decreasing always their prices, until one of the player exit the market, a risky situation for Monsanto, especially for the European market. But in the other hand, the size of HSC aspartame plant (500 tonne against more than 7000 estimated tonne) probably not allows it to make important economies of scale and serve the whole market… and the multi-years...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Bitter Competition The Holland Sweetener Company Versus NutraSweet Essay
  • Essay about Bitter Competition: The Holland Sweetener Company versus NutraSweet
  • Case Memo Bitter Competition: the Holland Sweetener Essay
  • Essay on Bitter Competition: the Holland Sweetner Company vs. Nutrasweet
  • Holland Sweetener Essay
  • Aspartame and Holland Sweetener Co. Essay
  • Bitter Competition Essay
  • Nutrasweet Essay

Become a StudyMode Member

Sign Up - It's Free