Splenda vs. Equal
The producers of Equal have recently accused the producers of Splenda that they are using false advertisement when they say that Splenda is "made from sugar" and is "all natural". A lawsuit was recently brought up by the producers of Equal, against the producers of Splenda, which is going to take place in front of a jury in a Federal District Court in Philadelphia.
The market for artificial sugar sweetener is incredibly competitive now-a-days. Before Splenda was introduced into the market in 1999, Equal dominated the market with over 6,000 consumer products like Diet Coke and Diet Pepsi, two of the largest buyers of sugar sweetener in the world. Now, Splenda is the number one artificial sugar sweetener dominating 62% of the market.
Splenda and Equal are both substitutes of one another. In other words, if the price of Splenda rises the demand for Equal will rise as well, and vise versa. Sugar sweeteners are also relatively inelastic. So, knowing this information, what do you think will be the effect on Equal if the producers of Splenda are sued due to false advertisement? How will this affect the market for artificial sugar sweeteners? Will many consumers switch over to Equal? Why or why not?
8 comments:
In my opinion, what Equal is trying to do is to change consumers preferences so that consumers will change to their products. This is practical and doable way to incease market share. However, this case is special. Because Equal is claiming that Splanda is braging in their commercials. This is not a very strong persuasion to change the preferences of consumers. We know that commercials are, most of the time, exaggerating. I won't stop buying Splenda because it is not being honest in its commercial. No one's being honest in commercials. However, if Equal's point was that the Splenda is bad for health, I would probably change my preference, or say to buy Equal instead of Splenda.
I think that some people may change over to equal because they may not like the fact that Splenda has been accused of false advertising. On the other hand, I do not think that a large amount of people will switch on account of the advertisements though because then Splenda, since it is not advertised as all natural anymore, will be advertised as just about the same thing as Equal. So in the end, I think that consumers may look at them as very similar in products as they once may not have and therefore may not have too much preference on which brand to choose from.
I believe that maybe in the short run people will stop buying Splenda and start buying Equal because of the false advertisement, but in the long run people might just as well switch back. You also have to take into account that many companies like Pepsi are using Splenda in their drinks so it may affect that economy as well for a short while. You must also consider that people just might have the preference of Splenda over Equal considering the different taste if there is one for example. I do not use either product. Lastly, many commercials are exaggerating so I am not so surprised that Splenda is being accounted for it, I guess. It would be like saying that Herbal Essences is better than Pantene Pro-V, but in the easiest sense they do the same thing: clean your hair, so I do not see the difference in these two sugar sweeteners.
I believe that as Melissa said the short term effects of splenda will decrease because of this false advertisement. This will hurt Splenda in many ways from the amount that consumers buy at the store of this product, to the possibility of companies that use splenda in their product switching to another brand. Sugar is an inelastic product however, so after this trial many people and companies will most likely switch back to Splenda for reasons such as they like the taste better. This is because Sugar is relatively cheap so the consumers will buy what the prefer regarding on the small price difference.
I agree with Kelly and Melissa. In my opinion it will only hurt Splenda in the short run, and the will go back to they way they were producing in the long run. Obviously people were drawn to splenda over equal because of the health benefits and taste and they will be more likely to go back after a law suit is settled.
There is obviously a reason that consumers were drawn to Splenda's products in the first place. Consumers are influenced by all kinds of advertising, but I think that they choose which product they like better. If Equal is suing Splenda for false advertisement, people may fall back and retreat to their old habits of purchasing Equal products. Because they are substitutes, it would only hurt Splenda if they lost the case. Consumers will have no problem switching to the other product.
I also believe that it will only hurt Splenda in the short run. After time passes and individuals forget about the false advertisement, they will go back to their old ways. Obviously people were more attracted to the healthier benefits Splenda produces; therefore, Equal may attract those individuals in the short run, but they will soon go back to Splenda because of the better incentives.
Equal is taking a large risk filing this lawsuit. If they win they may or may not get some of the market back, but if they lose they spent resources on the court case that could hurt revenue for their year. It could possibly help them if they are convicted of false advertisement, but I'm not sure if they are doing the right thing. They should try finding new investors and be more competitive in the market. They shouldn't have to sue competition to be successful. Sounds like a desperate move to stay in the market.
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