Case Studies on US sugar substitute industry.
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Using the cases below, please help with notes on the following questions:
Bitter Competition: The Holland Sweetener Company versus NutraSweet (F)
Bitter Competition: The Holland Sweetener Company versus NutraSweet (G)
Case F:
Questions
1. We see HSC gearing up quickly to enter the US market. Evidently the announcement of the Gravelines plant did not dissuade HSC from expanding. Any comments on HSC's actions?
2. How do you gauge the tone of the statement emanating from HSC?
Case G:
Questions
3. As HSC, how do you view the latest developments in the US market?
4. Why have Coke and Pepsi signed up again with NutraSweet, rather than waiting for HSC's extra capacity to come on stream?
5. What is going on in the tabletop segment?
a. NutraSweet is breaking the peace by going after Sweet 'N Low users. Is this a good move?
Final Questions
6. How effective as a strategist has NutraSweet been in the game as described in the case?
7. How effective as a strategist has HSC been?
8. What transformation in HSC thinking about NutraSweet's fight/accommodate decision in Europe/Canada can you observe?
9. How did this influence the HSC thinking about NutraSweet's fight/accommodate decision in the US?
10. Does HSC have to try to sell to Coke and Pepsi?
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Solution Summary
The Solution uses the "HBC Bitter Competition: The Holland Sweetener Company versus NutraSweet" case to address questions about the strategy of the sweetener companies.
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STEP 1
On seeing HSC gearing up to enter the US market.
The announcement of the Gravelines plant did not dissuade HSC from expanding. On a simplistic level HSC capacity after the expansion would be 2000 tonnes total. HSC supplied 30% of the EU market, 5 % of the Canadian Market and that meant sales of about 440 t. This meant that about 1560 tons were to be sold in the US market. Now the US market was estimated to be about 8000 tons, so even if HSC sold its 1560 tons in the US market, there would still be market of 6440 tons left for NS Ajinomoto.
On the tone of the statements emanating from HSC:
The tone of the statements emanating from HSC is optimistic. The company is confident of capturing 10 - 20 % of the market. That should meet the quantity objectives of the company. In addition, the statements emanating from HSC are aggressive towards NS for example Ken Dooley said "[We are] looking forward to moving the war into the US". The optimistic statements are justified because the capacity expansion is important for economies of scale and to maintain a competitive cost, however, the "war" is not warranted. If NS Ajinomoto decides to go on war with HSC, it would be HSC that would lose the battle.
STEP 2
On Developments in the US market:
From the perspective of HSC the development in the US market does not auger well for it. HSC, which has a variable cost of $30 per pound, had hoped that NS would thrive in the large US market without triggering a price competition. NS on the other hand having a variable cost of $17 per pound has a tactical advantage if there is a price war. First, the contracts that NS made with Pepsi and Coke at around $30 were designed to out compete HSC in that segment. Second, the launching of cutthroat competition in ...
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