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Givaudan Flavors

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Submitted By lulu13709
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Pages 8
PROC 5830 – Pricing
Case Study Title: Givaudan Flavors

1. Major Facts / Major Problems: * Givaudan is a major supplier of flavors to Tastyco, one of Givaudan’s largest customers. * Geoff Morales has been the Tastyco account manager for three years, during which Geoff has increasingly grown volume and returned large profits for Givaudan. Geoff has not had to compete with other flavor suppliers and has been able to charge Tastyco high prices for both new and existing flavors. * Givaudan’s R&D team has been working directly with the R&D team at Tastyco in a number of technical areas, including conducting “Flavor 101” training. * Tastyco has a new Purchasing Manager – Susan Challis – who recently contacted Geoff to advise him that Tastyco has decided to implement new purchasing policies this year, including negotiating Strategic Supplier Agreements (SSA) with several suppliers. Under the new purchasing policy, several suppliers will have to submit competitive bids for flavors, allowing Tastyco to recognize cost savings. * Achieving SSA status would allow Givaudan to have the first shot at new flavors projects, but Susan has indicated it also means reducing prices on existing flavors. * Tastyco has been in initial discussions with two Givaudan competitors – Nan Ya and NonObtainium. Both suppliers have indicated they can provide similar products for lower prices than Givaudan; however Tastyco agrees NonObtainium cannot live up to Givaudan’s standards. * To date, Nan Ya has hired a former Givaudan employee and is receiving positive customer reviews, has met Tastyco’s flavor brief requirements to the same extent as Givaudan, and has spent $200M to build manufacturing plants in Europe and Asia. * Geoff argues the strength of Givaudan’s R&D in producing innovative flavors and new technologies to Tastyco free of charge

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