Bitter Competition: The Holland Sweetener Co. vs. NutraSweet (A) - Case Solution

Memo – To Winfried Vermijs (January 31, 1986)

Executive Summary – The Holland Sweetener Co.

The single most important problem faced by the Holland Sweetener Company (HSC) as it decided to enter the European and Canadian aspartame market is how NutraSweet is going to respond.

The primary cause of this problem is that the dominant incumbent, NutraSweet, can either enter a price war with HSC or accommodate to compete normally, and NutraSweet’s reaction will affect HSC’s profitability.

To address this problem, HSC should analyze the pros and cons of each scenario for NutraSweet, decide on which scenario is more likely to happen, and plan the course of action accordingly.

Our analysis shows that NutraSweet is more likely to enter a price war with HSC. HSC should leverage the less costly and more flexible production method to keep costs low.

It should also go after customers who are unhappy with NutraSweet’s restrictive contracts, stress its European origin to make a name in the European market, and seek out opportunities for blending with other artificial sweeteners as this trend is expected to strengthen.

Situation Overview

The most important problem facing the Holland Sweetener Company is to assess the likelihood of a normal competition versus a price war.

This is the most important problem because the price and volume forecasts under these two scenarios are different, leading to different profitability.

The primary actionable cause of this problem is…