Premium Essay

Hsvsmon

In: Business and Management

Submitted By pinard
Words 939
Pages 4
Holland Sweetner versus Monsanto[1]

Aspartame is a low-calorie sweetner marketed by Monsanto under the name of NutraSweet. It was a major impetus to the rapid growth of Diet Coke and Diet Pepsi during the 1980s and 1990s. A scientist at the G. D. Serle & Co. first discovered aspartame in 1965; Serle received a patent for the product in 1970. US regulators did not approve its use in soft drinks until 1983. In 1985, Monsanto acquired Serle—and with it a monopoly on aspartame. Monsanto’s patents expired in 1987 and 1992 in Europe and the United States, respectively. In 1986, Holland Sweetner was formed through a joint venture of Tosoh Corporation and Dutch State Mines. Its sole purpose was to challenge Monsanto in the aspartame market. It began by building a plant in the Netherlands to compete in the European market. The “big prize,” however, was the US soft-drink market, which was to open up at the end of 1992. Initially, Holland Sweetner was quite optimistic about capturing a large share of the US market. To quote their vice present of marketing and sales in referring to Coke and Pepsi, “every manufacturer likes to have at least two sources of supply.” To Holland Sweetner’s surprise, they never became a big player in the US market. In 1992, just before Monsanto’s patent expired, Coke and Pepsi signed long-term contracts with Monsanto for the continued supply of NutraSweet. The big winners in this contract negotiation were Coke and Pepsi who realized about $200 million a year in savings. Monsanto remained the major supplier to these companies, while Holland Sweetner was “left pretty much out in the cold.” Envision a pricing problem between Monsanto and Holland Sweetner in 1992 that led to the Monsanto contract. Assume (1) the cost to Holland Sweetner of entering the US market, $25 million, has been incurred; (2) Monsanto and

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