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.
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...
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."
In her book Marion Nestle examines many aspects of the food industry that call for regulation and closer examination. Nestle was a member of the Food Advisory Committee to the Food and Drug Administration (FDA) in the 1990’s and therefore helps deem herself as a credible source of information to the audience. (Nestle 2003). Yet, with her wealth of knowledge and experience she narrates from a very candid and logical perspective, but her delivery of this knowled...
The fruit juice and health drinks market has, over the past couple of years, seen a massive growth both in terms of sales and of the increasing demographic of customers that are choosing to purchase the products, especially at the expense of carbonated drinks. In 2006 the estimated value of the total market was £2.77 billion at retail selling price, having grown from 30.7% in 2002 (Key Note, 2007). Innocent Drinks are the markets biggest player with a market share of around 62% , selling in excess of 600,000 drinks every week (Barnett, 2005) The business is currently valued at £100 million. Not only content with being the largest distributor of smoothies the business has branched out to start the selling of "thickies" a yoghurt based drink which promises to be a hugely innovative idea and also water based fruit drinks aimed at children.
The Holland Sweetener Company versus NutraSweet is company’s competing in the aspartame industry. Aspartame, a low-calorie high intensity sweetener, can be used as a substitute for sugar because it is sweeter and does not cause tooth decay, but has been found to cause other health hazards. My analysis will describe the aspartame market and the strategies of the Holland Sweetener Company to enter into the European and Canadian markets. One key player and dominance of the market is acquired by NutraSweet, but when there patent is up in Europe and Canada, Holland Sweetener would move swiftly into the market. The analysis answers the question of what Winfred Vermis, the president of HSC, should expect from the powerful competitors NutraSweet? Will NutraSweet respond to the Holland Sweetener Company with price wars or normal competition once they realized that they are trying to be the main supplier in Europe and Canada?
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.
aspects: Carbonated soft drinks industry's structure, evaluation of driving change factors in this industry and finally analysis of key strategic factors it is faced with.
The bargaining power of Coca-Cola’s finish suppliers is low due to several reasons. Most of the ingredients needed to make soft drinks are basic items that can be purchased almost anywhere. Flavor, color, caffeine, sugar and packaging, etc. are easily available and have low cost. The standard ingredients of raw materials which do not have substitutes. The supplier industry must maintain a good relationship with the buyers in order to continue to have their
...ions in Europe and the United States, making chocolate competitive for the more extensive overall public.
The executive director from CSPI informs people “Because aspartame is so widely consumed, it is urgent that the FDA evaluate whether aspartame still poses a ‘reasonable certainty of no harm,’ the standard used for gauging the safety of food additives,” He also gives helpful advice by saying “Consumers, particularly parents, shouldn’t wait for the FDA to act. People shouldn’t panic, but they should stop buying beverages and foods containing aspartame.”
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 CSD (carbonated soft drink) industry is one that is very competitive. A few firms dominate this industry, most notably Coca Cola and Pepsi Cola. This is due to substantial barriers to entry. Cadbury-Schweppes, producer of products such as 7up and Dr. Pepper is the third leading company in this industry. Due to the dominance of Coca Cola and Pepsi, Cadbury-Schweppes faces the daunting task of having to fight for market share and survive in this fiercely competitive industry. Using economic analysis for support, Cadbury-Schweppes will need to use its strengths in the non-cola categories to compete in this CSD industry.
Red Bull has becoming hugely successful and operates within the global soft drink marketplace. Within the soft drink industry its niche is the ‘energy drink’ market, of which Mateschitz was largely responsible for creating. Red Bull currently is the leading energy drink across the entire globe. It holds 70% of the market worldwide (Gschwandtner, 2004). Once the drink was passed by health ministries, Red Bull entered the Austrian market, soon thereafter then moved into Germany, United Kingdom and the USA by 1997.
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)