Nutrasweet Tries Being More Of A Sweetie

For Monsanto's NutraSweet division, the Eighties were a feast. The soda giants bought tons of NutraSweet artificial sweetener, while heavy advertising developed high consumer awareness for the NutraSweet name. The result was operating margins of 20% on sales that hit $933 million last year. NutraSweet also seemed to have a hit for the Nineties with Simplesse, a fat substitute made from egg whites.

Now, the banquet is winding down. NutraSweet Co.'s U. S. patent on aspartame--the technical name for its sweetener--expires in 1992. So rivals are preparing to invade the market for artificial sweeteners with low-priced aspartame. And marketers such as Johnson & Johnson may soon get regulatory approval to sell new, non-aspartame sweeteners. With the pressures building, says C. Gail Greenwald, a food researcher at consultant Arthur D. Little Inc.: "Aspartame will be a commodity in 10 years."

To make matters worse, Simplesse hasn't exactly taken off. Data from researchers Information Resources Inc. indicate that NutraSweet's Simple Pleasures ice cream, made with Simplesse, had tiny 1990 sales of $12 million. NutraSweet won't comment on sales, but it admits Simplesse is losing money.

Still, Robert E. Flynn, NutraSweet's chief executive since June, says he's not worried. Flynn turned around Fisher Controls International, also part of Monsanto Co., in part by major cost cuts. And in February, he laid off 12% of NutraSweet's 1,700-person work force. He eventually hopes to cut aspartame production costs by as much as 60%.

Flynn is also working to patch up relations with customers, which include Coca-Cola, PepsiCo, and Kraft. When aspartame's patent expiration was still years away, NutraSweet gained a reputation for high-handedness as customers were told exactly how to display the NutraSweet logo on their products. More irksome was the stiff pricing. "NutraSweet got a hell of a premium for a long, long time, and we weren't very happy about it," declares Gerald A. McGuire, CEO of Pepsi-Cola General Bottlers Inc. And at Simplesse, users had to agree to 80 pages of restrictions. Flynn concedes his company was a bit overaggressive, but says he is now preaching the gospel of customer service. He adds: "People who don't understand will end up as part of the restructuring costs." In a major departure from the NutraSweet strategy of promoting its name directly to shoppers, Flynn has pledged his $20 million ad budget to direct support of customers' products using NutraSweet.

OTHER FAT SUBSTITUTES. Flynn is even easing prices somewhat. Anantha K. S. Raman, an analyst based in Parsippany, N. J., figures the price cuts will help force operating profits down 7% this year, to $170 million (chart). After 1992 NutraSweet will have one advantage: It won't have the expense of amortizing its aspartame patent. But analysts still expect margins to stay under pressure. Flynn maintains that Nutrasweet's new sensitivity and its brand strength will help land long-term contracts letting him charge 10% more than other suppliers.

At Simplesse, meanwhile, those 80 pages of restrictions have been slimmed to two. But Flynn still faces problems signing up users, who have found fat substitutes of their own for ice cream, salads, and dressings. Indeed, despite all the well-orchestrated publicity, "there's no magic to Simplesse," says John Rutan, marketing chief for Borden Inc.'s dairy division, whose no-fat ice cream relies on a blend of starches and gels. Kraft Inc. has sold back its right to use Simplesse in mayonnaise and made its own fat-free mayo.

Now, Flynn is developing new Simplesse products, such as cheesecake, soups, and frostings, for potential customers. In March, Simple Pleasures rolled out an ice cream made with NutraSweet as well as Simplesse. But if the new efforts don't pay off for Simplesse and Simple Pleasures, says Flynn, "they'll be gone in two years."

Meanwhile, Flynn's researchers are working on a new super potent sweetener. And to reflect a larger product line, Flynn may even change his division's name. But a name change won't alter the challenge of keeping profits fat from NutraSweet's low-cal sweetener.

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