Biitersweet
List three reasons why you would expect NutraSweet to start a price war with Holland Sweetener Company
1. The primary reason I would expect to see NutraSweet rage in a price war against HSC is because they are a dominant player in the market. The company holds and maintains several multi-year contracts with food and beverage companies such as Pepsi and Coke. They maintain these contracts by giving the companies steep discounts of up to 40% off the list price if the manufactures agree to use NutraSweet exclusively In their products, and if the manufactures agree to display NutraSweet’s distinctive red and white swirl logo on their products in their advertising efforts. Coke and Pepsi account for 80% of NutraSweet’s sales, which gives the company low selling power and makes them highly vulnerable to any competition. In the text it is stated that HSC lodged a complaint against NutraSweet with the European Commission because their contracts were considered anti-competitive. This is a signal that HSC would eventually try and get into the soft drink market and should be considered a direct threat to NutraSweet
2. The second reason I would expect NutraSweet to start a price war with HSC is because they have the capital resources to do so. NutraSweet established a process improvement program to increase efficiency of their manufacturing operations. In 1992 the company had claimed to have cut its manufacturing costs by 70% over the previous decade. HSC is a startup company, suggesting that they are going to have high startup costs, and will not be able to control manufacturing costs as well as NutraSweet. In using NutraSweet’s cost savings from operations, this would allow them for a period of time to lower their price substantially. This would make it difficult for HSC to compete overtime and they would eventually have to withdrawal from the market. NutraSweet is also the subsidiary of Monsanto a long time successful producer of agriculture products which has high
1. The primary reason I would expect to see NutraSweet rage in a price war against HSC is because they are a dominant player in the market. The company holds and maintains several multi-year contracts with food and beverage companies such as Pepsi and Coke. They maintain these contracts by giving the companies steep discounts of up to 40% off the list price if the manufactures agree to use NutraSweet exclusively In their products, and if the manufactures agree to display NutraSweet’s distinctive red and white swirl logo on their products in their advertising efforts. Coke and Pepsi account for 80% of NutraSweet’s sales, which gives the company low selling power and makes them highly vulnerable to any competition. In the text it is stated that HSC lodged a complaint against NutraSweet with the European Commission because their contracts were considered anti-competitive. This is a signal that HSC would eventually try and get into the soft drink market and should be considered a direct threat to NutraSweet
2. The second reason I would expect NutraSweet to start a price war with HSC is because they have the capital resources to do so. NutraSweet established a process improvement program to increase efficiency of their manufacturing operations. In 1992 the company had claimed to have cut its manufacturing costs by 70% over the previous decade. HSC is a startup company, suggesting that they are going to have high startup costs, and will not be able to control manufacturing costs as well as NutraSweet. In using NutraSweet’s cost savings from operations, this would allow them for a period of time to lower their price substantially. This would make it difficult for HSC to compete overtime and they would eventually have to withdrawal from the market. NutraSweet is also the subsidiary of Monsanto a long time successful producer of agriculture products which has high