Nutrasweet in China-Sb

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-Case Study Analysis-|
NutraSweet in China|
Sandra Burga|

Professor Stephen Rapier
Pepperdine University

Professor Stephen Rapier
Pepperdine University

I. History
Back in 1994 NutraSweet’s Consumer Products division (CPD) considered entering the growing China market. Their intent was to take advantage of the growing Chinese market and expand their brand developing a new sector of brand followers. The CPD perceived three main opportunities: leverage the product brand, leverage marketing & manufacturing competencies and capitalize on China’s post-Cultural Revolution. One of the enticing driving factor’s for NutraSweet (NS) was the low sugar consumption numbers in China, based on this perceived notion NutraSweet was posed with a couple of questions: Should NutraSweet enter the Chinese Market? If so, what will be the Risk vs. Profit opportunities? In addition, they also needed to consider their timing and strategy to enter the market. In doing so, they will have to carefully consider their Positioning and their Indirect versus Direct Distribution. NutraSweet assigned Eve Stacey a recent Harvard Business School grad, formerly of Ingredients Division, to head the project. According to the information provided for the case, Ms. Stacey was given only 3-months to prepare recommendations. There is no additional information provided on the case that tells us if Ms. Stacey was already familiar with the Chinese culture or if she had a good understanding of the market as it related to NutraSweet. What we know if that she sought the help of a company called SRG to do door-to-door interview of 200 Chinese consumers. Overall, this was a very small sampling of the Chinese market to be able to access the need. Back in the early nineties, NutraSweet’s Consumer Products division was responsible for tabletop sweeteners under the brand names of Equal®, Canderel®, and NutraSweet®, brands already known to the US market. NutraSweet came about accidentally in 1965 when a chemist discovered it while working in a lab at Searle. Searle was a small pharmaceutical company later acquired by Monsanto.

The Monsanto Company is a Fortune 500 manufacturer of performance chemicals, agricultural, food ingredients and pharmaceutical products. Headquartered in St. Louis, Missouri The laboratory accident that launched NutraSweet grew into a $1 billion dollar business for Monsanto. Because Searle was a pharmaceutical company, NutraSweet was initially marketed as an over-the-counter product, not as a food product. Monsanto consolidated the tabletop sweetener business during a reorganization period in which it faced many positioning challenges. In the United States NutraSweet was marketed as a mainstream product using a similar marketing strategy as Equal® which had a low calorie sugar-like sweetness. In the European and Latin American countries the marketing was based around the concept of “lifestyle” consumption. In less developed markets it was marketed as a niche product for consumers with a medical need. NutraSweet consumer products sales by region in 1994 largely came from the large demand in the US with 58%, followed by Europe with 29%. As shown in the pie chart below, based on the small market share (4%) there seemed to be a great opportunity to expand into the Asia to increase the market share.

II. Key Points
A. Market Drivers and Growth
Foreign Investors pumped billions into China’s economy back in 1994, the Chinese economy was booming. Citizens were spending 40% of their disposable income on food. This attractive fact seemed like a great opportunity for NutraSweet back then. Although expected to decrease with increasing cost of living, Monsanto was eager to enter the market. There was an emerging middle class with projected increase in purchasing power. NutraSweet saw an opportunity in the Chinese consumers’ infatuation with Western brands...
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