Bitter Competition: the Holland Sweetner Company vs. Nutrasweet

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Bitter Competition: The Holland Sweetner Company vs. NutraSweet (A)
Jon Bain-Chekal

Introduction: The worldwide aspartame market has enjoyed patent protected financial prosperity since the early 1980’s. In 1986 the world demand for aspartame was 5,730 tons annually with future projected world demand reaching 10,000 tons annually, a 75% increase over 1986 demand. The Monsanto Corporation, the current owner of the rights to manufacture aspartame, under the brand name NutraSweet (NS), reported 1986 sales of $711 million. The estimated ROA was approximately 8%.1 With this being such an attractive industry, companies like Holland Sweetener Company (HSC) needed to determine whether or not to compete in the aspartame business. This paper will
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Giving up the less lucrative part of the market may have other benefits as well. NS may be able to use HSC as a strategic compliment because HSC, as a new entrant, will find the fringe market appealing given its size and situation. So HSC will enter, but once it has entered it has an incentive to deter other small potential entrants. By letting in one or two low-end players the dynamics of the game change from dominant vs. fringe, to fringe vs. fringe. In this game the price war does not affect the whole market, it only affects the smaller markets of tabletop and food products, and HSC carries the cost burden of the price war. As I mentioned in the introduction, I am assuming that the two versions of aspartame are identical products. Instead this argument manipulates the rules of the game via quantity, contracts, and size. The other way to try and differentiate a product, other than through product attributes, is with a strong brand. While NS has established a great brand, the actual value of that brand is in question. NS scores high in market research tests on recognition, but does that actually equate to high loyalty? For example aspartame’s largest market, diet soft drinks, the consumer’s decision to buy is driven more by the downstream brand names like Diet Coke and Diet Pepsi rather than product ingredients. As the Classic Coke debacle taught us, consumers are driven to purchase soft drink products as a

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