Nutrasweet Case Analysis
There are quite a few reasons for Nutrasweet to be afraid of the entrance of the Holland Sweetener Company (HSC) which would drive them into a price war with each other. For Nutrasweet, the issues I will bring up are applicable to any competing company entering the market under these circumstances. The first issue that Nutrasweet faces is the expiration of its patents. While Nutrasweet got good penetration into the market via its patents, when HSC looked to enter the market the patents that Nutrasweet held were coming to their end which would open up the doors for newcomers.Markets in Canada and Europe were largely untapped and would open up to competitors once the patents expired. The next problem that Nutrasweet faces is the complaint filed against them by HSC and Angus Fine Chemicals.
Their complaint was that Nutrasweet had made secret contracts with the soft drink producers making the market “anti-competitive”. If HSC were able to win this complaint, it would leave the contract mainly up to a bidding war between companies which lead us into the next price war cause. HSC has a joint venture with a Japanese company by the name of Tosoh.Tosoh has a patented process for manufacturing aspartame that will supposedly make the production for aspartame cheaper and more flexibly. The reading stated that these claims were disputed, though they pose a threat regardless. With these three reasons, it would be wise for Nutrasweet to try its best to hold onto the markets it has and its patents for as long as it can. They will find themselves in a price war that poses a real threat of them not coming out on top.
Nutrasweet Case Analysis Essay Example
There are also many reasons why it would be prudent of Nutrasweet and HSC to enter the market as competitors, but not attempting to ruin one another.First is a look at the sweetener market as a whole. If aspartame is the best sweetener out there (or at least most favorably looked upon by the FDA), and these two large companies in the worldwide market the opportunities for other companies to enter would be much smaller. It would allow for each company to not have to worry as much about other aspartame manufacturers undercutting them as they both have proprietary processes in their manufacturing that give them a competitive advantage. They are able to spread out their fixed costs over a large amount of product, thus keeping their costs low and prices low.Another reason for Nutrasweet to engage in normal competition is the threat of new entrants in the market. The end of the article looks at other blends of sweeteners that are slated to be produced.
Some of them have properties that make it better than aspartame. If buyers are not set on using aspartame for their applications they may be swayed to purchase one of these newcomer chemicals. Nutrasweet may look into working with one of these new companies/chemicals in order to improve upon its product and gain market penetration by simply offering a better product.The last reason I expect Nutrasweet to enter into normal competition would be PepsiCo, Coke, and the European market. I have to imagine that Nutrasweet lost the exclusive contract with the soft drink manufacturers. Getting the contracts would then come down to other factors. It appears that with the collaboration with Tosoh, HSC can produce aspartame for a cheaper rate.
Nutrasweet needs to make itself stand out in other areas in order to get the contracts. Nutrasweet has some work to do in order to stay on top, but with the other technologies out there it does not appear that they can do it with price.