Holland Sweetener Essay

1708 Words7 Pages
Introduction

The Holland Sweetener Company (HSC) is planning to enter the low-calorie, high-intensity sweetener market which is currently dominated by NutraSweet. Below we first analyze our target industry. Next we look at what kind of response should HSC expect from NutraSweet upon its entry into this market. We will also analyze few likely scenarios that could play out and we will try to estimate the likelihood of each scenario. Based on our analysis, we will give a recommendation for HSC to plan their entry into this market.

Industry Analysis

The low-calorie, high-intensity sweetener market has been dominated by one major player, NutraSweet, with annual sales of $711M and about 80% market share (the total market in 1986 was
…show more content…
However, soft drinks manufacturers were its major customer (80% of the total aspartame consumption) with table-top product as the secondary (15% of total aspartame consumption) . Notably, the soft drinks industry was dominated by two major players – Coca Cola and Pepsi Cola, accounting for 60% of the soft drinks market. Usually, this would have led to a strong buyer power, however, NutraSweet had the advantage due to its monopolistic position as the sole provider of aspartame. This power could easily dissolve once the patents expire and alternative producers enter this industry.

Figure 1 – Aspartame Sales Distribution in 1986
Rivalry
In 1986, rivals presented a limited risk to the company due to NutraSweet’s monopolistic position in the production of aspartame. However, the development and subsequent introduction of alternative low-cal high intensity sweeteners, combined with the trend of blending, presented a major risk for NutraSweet’s product. Also, as the patents for aspartame expire in the different regions NutraSweet will face competition from alternative producers of aspartame as well.
NutraSweet’s Anticipated Response to HSC’s entry
NutraSweet’s monopolistic position allowed it to earn generous margins by charging a price premium. Consequently, Vermijs should anticipate an aggressive
Get Access