Givaudan Flavors

1801 Words Sep 15th, 2013 8 Pages
PROC 5830 – Pricing
Case Study Title: Givaudan Flavors

1. Major Facts / Major Problems: * Givaudan is a major supplier of flavors to Tastyco, one of Givaudan’s largest customers. * Geoff Morales has been the Tastyco account manager for three years, during which Geoff has increasingly grown volume and returned large profits for Givaudan. Geoff has not had to compete with other flavor suppliers and has been able to charge Tastyco high prices for both new and existing flavors. * Givaudan’s R&D team has been working directly with the R&D team at Tastyco in a number of technical areas, including conducting “Flavor 101” training. * Tastyco has a new Purchasing Manager – Susan Challis – who recently contacted Geoff
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* Geoff presents these issues to his boss, Michael Alpharo, and suggests a price reduction on most of the existing flavors by 25%. Michael rejects a price reduction by explaining that while there is profit on variable costs, the fixed costs of manufacturing sites and the expertise of flavorists still needs to be covered. He also points out the investment in technical innovations and flavors library which shouldn’t be given away for free. * Michael asks Geoff to put together some options to allow Givaudan to continue working profitably with Tastyco. To fully understand the value presented, Geoff schedules meetings with three Tastyco executives – Jack Collins, Rick Miller, and Claire Hillman – to realize the true value Givaudan offers to Tastyco.

2. Possible Solutions: For the purposes of these solutions, I assume the conversations with the three Tastyco executives – Jack Collins, Rick Miller, and Claire Hillman – have all taken place and have provided some insight into the perceived value of Givaudan at Tastyco. The solutions proposed below may be presented to Geoff’s boss as potential paths forward.

- Solution A: Supported by feedback and perhaps direct inaction from the from the Tastyco executives, Geoff could develop a presentation that justifies the differential value provided by Givaudan and further