Introduction (graphics not available)Holland Sweetener Company (HSC) plans to enter the low-calorie, high-intensity sweetener market which is currently dominated by NutraSweet. Below we first analyze our target industry. We then examine what type of response HSC should expect from NutraSweet when entering this market. We will also analyze some probable scenarios that could come true and we will try to estimate the probability of each scenario. Based on our analysis, we will recommend HSC to plan its entry into this market. Industry Analysis The low-calorie, high-intensity sweetener market has been dominated by a major player, NutraSweet, with annual sales of 711 million dollars and approximately 80% market share (the total market in 1986 represented $884 million in annual sales). NutraSweet, an industry monopoly, has managed to charge higher prices and capture the majority of the pie. Additionally, the market is expected to grow at an annual rate of 15%, with sales expected to grow by 70% in Europe and Canada. However, with NutraSweet's original patents set to expire soon (the patent for the Europe/Canada market expires in 1987 and the US patent expires in 1992), a new entrant threatened to enter the lucrative low-calorie sweetener market – HSC. NutraSweet has successfully built several barriers to entry in order to protect its leadership within the industry and thwart new entrants. Manufacturing: Manufacturing aspartame required a high initial capital outlay (expect construction costs of $100 million) and a long production lead time (2-3 years to ramp up aspartame production). The facility was expected to operate at or near design capacity and experience a TSS of 2,000 tonnes per year. Additionally, as a pioneer, NutraSweet has had the advantage of increasing its manufacturing efficiency (manufacturing costs have been reduced by 70% over the years). Patent Protection: NutraSweet held several crucial patents in the United States and other regions. Among them were the patent for the use/mixture of aspartame and their patent for the manufacturing process. Buyers are locked in: the market was dominated by two major customers: Coca-Cola and Pepsi (accounted for approximately 50% of aspartame use). NutraSweet had exclusive multi-year contracts with both of them. This would prevent potential entrants from establishing the sales volume necessary to support the minimum efficient production scale necessary to compete effectively in the aspartame market. Brand recognition: NutraSweet invested heavily in developing its US brand with the introduction of a "branded ingredient" campaign, which required a significant advertising investment ($30 million per year) and resulted in brand recognition. from the brand to 98 %.