Holland Sweetener Essay

1717 Words Apr 28th, 2008 7 Pages

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
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This is where NutraSweet would defend its current market leading position. By leveraging its brand equity, deep margins and entrenched customer relationships, NutraSweet could afford to offer generous financial terms in exchange for exclusive, multi-year contracts with the industry’s largest customers. Such a strategy would lock-out Holland Sweetener and make it difficult to find customers to purchase the volume necessary to support a 500-tonne plant. NutraSweet’s ability to leverage its deep margins made discounting a significant threat to the HSC. Although HSC made claims that it could produce aspartame with less cost and more flexibility, the generic aspartame producer still needed to compete against NutraSweet’s gains in operational efficiencies, the strong NutraSweet brand in the U.S. and established relationships with the industry’s largest customers.
NutraSweet may also be expected to continue its pursuit of a differentiation strategy to protect its high margins. It could extend its understanding and application of building a strong U.S. brand to Europe and Canada. The benefits of this approach, however, may only be realized after years of significant investment to reduce buyer power and protect price premiums. Scenario Analysis
Scenario 1: Price war As we mentioned above, any new entrant in this industry needs to land either

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