Introduction (graphics not availalbe) 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 $884M annual sales). NutraSweet, a monopolist in the industry, was able to charge premium prices and successfully capture the majority of the pie. Also, the market was expected to grow 15% annually, with a 70% projected sales growth in Europe and Canada. However, since NutraSweet’s original patents were due to expire soon (Europe/Canada market patent expires in 1987 and US in 1992), a new entrant was threatening to enter the lucrative low-calorie sweetener market – HSC. Barriers to Entry Throughout the monopoly period, NutraSweet had successfully built several barriers to entry as a means to protect their leadership within the industry and thwart new entrants. Manufacturing: Aspartame manufacturing required a high initial capital expenditure (plan construction costs $100M), and long lead production time (2-3 years to bring aspartame production to speed). The facility needed to be run at or near design capacity and experienced MES of 2,000 tones annually. Also, as the first mover, NutraSweet had the advantage of increasing their manufacturing efficiencies (manufacturing costs cut by 70% over the years). Patent Protection: NutraSweet owned several crucial patents in the U.S. and other regions. Among them were the use/mix patent for aspartame and their manufacturing process patent. Buyers locked up: The market was dominated by two major customers - Coca-Cola and Pepsi (accounted for ~50% of the aspartame usage). NutraSweet had entered into exclusive multi-year contracts with both of them. This would prevent potential entrants from establishing sales volume necessary to support the minimum efficiency production scale necessary to compete effectively in the aspartame market. Brand recognition: NutraSweet invested heavily in building their U.S. brand with the introduction of a “branded ingredient” campaign, which required an extensive advertising investment ($30M annually) and resulted in 98% brand recognition.
A monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. A monopoly sells a good for which there is no close substitute. The absence of substitutes makes the demand for the good relatively inelastic thereby enabling monopolies to extract positive profits. It is this monopolizing of drug and process patents that has consumer advocates up in arms. The granting of exclusive rights to pharmacuetical companies over clinical a...
The soft drink industry in the United States is a highly profitably, but competitive market. In 2000 alone, consumers on average drank 53 gallons of soft drinks per person a year. There are three major companies that hold the majority of sales in the carbonated soft drink industry in the United States. They are the Coca Cola Company with 44.1% market share, followed by The Pepsi-Cola Company with 31.4% market share, and Dr. Pepper/Seven Up, Inc. with 14.7% market share. Each company respectively has numerous brands that it sales. These top brands account for almost 73% of soft drink sales in the United States. Dr. Pepper/Seven Up, Inc. owns two of the top ten brands sold. Colas are the dominant flavor in the U.S carbonated soft drink industry; however, popularity for flavored soft drinks has grown in recent years. The changing demographics of the U.S population have been an important factor in the growing popularity of these flavored soft drinks. The possible impact of this factor will be addressed later in the case.
Due to the ever increasing use of aspartame, researchers have discovered that aspartame has been closely associated with the function of the brain. In the human brain, there is a blood-brain barrier that acts as a system of specialized capillary structures that are designed to prevent toxic substances from entering the brain. Prior to birth and during the first 12 months of life, the blood-brain barrier is incomplete. The protective enzymes in a baby’s brain are still immature, and therefore are unable to effectively detoxify the excitotoxins, toxins that bind to certain receptors and may cause neuronal cell death when they enter the brain. This would mean that in the case o...
The main problems that are affecting the company were the high level of labour turnover, below target production rates, high levels of scrap, the employees had little input in the decision making, therefore resulting in low motivation and job satisfaction, and didn't have enough feedback on there performance. Added to this was the conflict between the supervisors and employees in the production and packing areas, and the grading and payment levels wasn't satisfactory to the employees.
...ions in Europe and the United States, making chocolate competitive for the more extensive overall public.
Researchers at the Massachusetts Institute of Technology (MIT) observed 80 people who suffered brain seizures after eating or drinking products with aspartame. The Community Nutrition Institute declared: "These 80 cases which fit the FDA definition of imminent risk to public health, which requires the FDA to immediately withdraw the product from the market."
Just like “Big Brother” from A Brave New World, the government is allowing manufactures to pump people full of a dastardly artificial sweetener. What is this killer sweetness, and why is it still allowed to be distributed throughout the United States? The devilish sweetener is hidden in everyday foods that most people would not even think to be worried about. The culprit can be found in foods like diet soft drinks, milk, sugar-free candies, and even sneaked its way into children’s vitamins. This toxic sweetener has been linked to multiple symptoms. The biggest risk caused from continuous usage is death but due to the high grossing income that big businesses make from the synthetic death sugar, it is allowed to still be
Analysis of these forces shows that the retail market for standard chocolate bars is rather static and highly competitive. Although the threat of new entrants and supplier power are both really low, the power of buyers, threat of substitution and rivalry are major difficulties for firms active in this industry. In the Fairtrade market nevertheless, the picture looks a bit different. Due to the relative small volume of the Fairtrade chocolate market compared with standard chocolate bars, new competitors can easily enter the market and establish new product lines, etc. Many producers, long established in the standard chocolate market, e.g. Néstle’s KitKat, can easily enter the Fairtrade market because they possess the financial and knowledge resources. Such brands are able to offer Fairtrade products at a much lower price due to large economies of scale and an established customer base. Additionally, as the number of private label Fairtrade products increases, this increases competition on the one hand, but also brings new opportunities for Business to Business sales for chocolate producers as Divine on the o...
The beverage industry is highly competitive and presents many alternative products to satisfy a need from within. The principal areas of competition are in pricing, packaging, product innovation, the development of new products and flavours as well as promotional and marketing strategies. Companies can be grouped into two categories: global operations such as PepsiCo, Coca-Cola Company, Monster Beverage Corp. and Red Bull and regional operations such as Ro...
Abby Willow once said, “The average American adult consumes 11.7 pounds of chocolate every year- that's the weight of about 6 pairs of shoes!” With so much consumption of chocolate by Americans, it is crucial for the numerous brands to advertise their products in a manner that could potentially dominate their competition in sales. There are endless ways for a company to draw the attention of an audience in order to take over the competition of chocolate sales. Advertising is a key aspect as to how successful a brand may be when compared side-by-side to a similar product. While Snickers and Reese’s Peanut Butter Cups are similar, they are also different; the differences are significant because they demonstrate how some competitors choose to go above and beyond for their advertising while others opt to take a route that is of a more simplistic nature.
Despite the fact that Krispy Kreme’s same-store sales are increasing every quarter, the company is not in control of the specialty foods industry. Starbucks Coffee, Krispy Kreme’s leading competitor, has been experiencing astonishing sales that surpass even Krisp...
...has already been assumed to be pursued by the $17 million loan they received from the European Investment Bank to use toward the 500-tonne aspartame plant project. HSC should entertain a normal competition instead of a price war in order to really learn the industry before going directly against NutraSweet’s in a price war. The more strategic move of HSC is to not directly compete against NutraSweet in a price war because in my opinion, NutraSweet is the expert and HSC is the amateur in the respect of HSC has a lot to learn before it could try to go to war with NutraSweet. Overall, I feel that if HSC would try to directly compete with NutraSweet in a worldwide market and not just in Europe and Canada that they will lose because NutraSweet already has developed brand loyalty and the company ventures off into other forms of capital like signing with Coke and Pepsi.
During the 1990s, PepsiCo launched new products and engineered a global re-branding campaign in an effort to grow sales volume; reinvigorate their stagnant brand; and to close the increasingly large sales and market share gap between itself and its primary competitor, Coca-Cola. In 1993, Pepsi jump-started its marketing efforts by adding two brands to its portfolio: Crystal Pepsi and Pepsi Max. Crystal Pepsi, which was initially offered in the United States, failed to earn the company more than 2 percent volume share. Pepsi Max, which was launched in the United Kingdom, proved more successful, but because one of its primary ingredients was an artificial sweetener not yet approved by the Food and Drug Administration, it wasn't brought to market in the United States.
Experimentation with the new market for carbonated beverages on the decline coke has done experiments in new flavors and healthier alternatives to try to stay competitive. As well as investing in “Keurig Green Mountain is a K-Cup maker but has a new Keurig Cold that can deliver Coca-Cola through the new system.” (Cooper, 2014)
The largest competitors in this market are Coca-Cola and Pepsi. The fact that they spend approximately 2.5 billion dollars a year in the marketing campaign, which makes it hard for a new competitor to enter the market and gain visibility. Another factor that inhibits new competitors is the fact that both Coke and Pepsi have built a high level of customer loyalty and brand image. Both Coca-Cola and Pepsi are generous with their retailers giving them margins of 15-30%. These relationships, build loyal retailer groups. One other strength of these top soda producers is the fact that they have non-compete agreements with their bottlers which would require new competitors to find or create their own