Bitter Competition: The Holland Sweetener Company versus NutraSweet
Harvard Business School
9-794-079
Rev. November 13, 2000
Bitter Competition: The Holland Sweetener
Company versus NutraSweet (A)
In late 1986, the Holland Sweetener Company (HSC), based in Maastricht, the Netherlands, was preparing to enter the European and Canadian aspartame markets. Aspartame, a low-calorie, high-intensity sweetener, had been discovered in 1965 by G.D. Searle & Co., a U.S. pharmaceuticals company. After having secured a number of patents on its discovery, Searle had gone on to develop markets for aspartame as a food-and-beverage additive. By 1986, NutraSweet, the operating entity set up by Searle to build the aspartame business, had reached sales of $711 million. Now,
NutraSweet’s patents in the European and Canadian markets were due to expire as of 1987, although the U.S. market would remain protected until December 1992.
Winfried Vermijs, president of HSC, reviewed his company’s strategy for competing in the aspartame business. Price and volume forecasts had been prepared for the European and Canadian aspartame markets. On price, two scenarios were being entertained: “normal competition” and
“price war.” Vermijs wondered which scenario was the more likely.
Aspartame
High-intensity sweeteners had a long history. In Roman times, grape juice was boiled down in lead pans to produce sapa, a sweet compound used for everything from a food additive to an oral contraceptive. Presaging concerns over the safety of modern high-intensity sweeteners, use of sapa unfortunately led to neurological damage or even death. Discovered in 1879, the oldest high-intensity sweetener still in use was saccharin, a petroleum derivative about 300 times as sweet as sugar
(sucrose) of equal weight. In the 1960s, Abbott Laboratories developed cyclamate (30 times as sweet as sugar) but, following studies suggesting a link to cancer, the Food and Drug Administration (FDA) banned cyclamate in 1970. In 1977, the FDA tried to ban saccharin as well, but the resulting public
9-794-079
Rev. November 13, 2000
Bitter Competition: The Holland Sweetener
Company versus NutraSweet (A)
In late 1986, the Holland Sweetener Company (HSC), based in Maastricht, the Netherlands, was preparing to enter the European and Canadian aspartame markets. Aspartame, a low-calorie, high-intensity sweetener, had been discovered in 1965 by G.D. Searle & Co., a U.S. pharmaceuticals company. After having secured a number of patents on its discovery, Searle had gone on to develop markets for aspartame as a food-and-beverage additive. By 1986, NutraSweet, the operating entity set up by Searle to build the aspartame business, had reached sales of $711 million. Now,
NutraSweet’s patents in the European and Canadian markets were due to expire as of 1987, although the U.S. market would remain protected until December 1992.
Winfried Vermijs, president of HSC, reviewed his company’s strategy for competing in the aspartame business. Price and volume forecasts had been prepared for the European and Canadian aspartame markets. On price, two scenarios were being entertained: “normal competition” and
“price war.” Vermijs wondered which scenario was the more likely.
Aspartame
High-intensity sweeteners had a long history. In Roman times, grape juice was boiled down in lead pans to produce sapa, a sweet compound used for everything from a food additive to an oral contraceptive. Presaging concerns over the safety of modern high-intensity sweeteners, use of sapa unfortunately led to neurological damage or even death. Discovered in 1879, the oldest high-intensity sweetener still in use was saccharin, a petroleum derivative about 300 times as sweet as sugar
(sucrose) of equal weight. In the 1960s, Abbott Laboratories developed cyclamate (30 times as sweet as sugar) but, following studies suggesting a link to cancer, the Food and Drug Administration (FDA) banned cyclamate in 1970. In 1977, the FDA tried to ban saccharin as well, but the resulting public