Givudain Flavors

PROC 5830 – Pricing

Student Name: Case Study Title: Givaudan Flavors Case Study

1. Major Facts / Major Problems: (List them)

Taken Directly from the Case Study

• Geoff Morales had been the Givaudan account manager for Tastyco for three years.

• He rarely had to compete with other flavor suppliers and was able to get premium prices for basic and custom flavor products.

• Givaudan flavorists worked closely with Tastyco R&D Group on new products.

• Tastyco Purchasing Manager, Susan Challis, informed Givaudan that they had decided to implement new purchasing policies to include negotiating “Strategic Supplier Agreements” with several flavor suppliers.

• Price Pressure from the new procurement strategy

• Achieving SSA status will allow Givaudan to have first shot at our new flavors projects, but it also means you will probably have to sharpen the pencil on some of the existing flavors.

• Several of Tastyco beverages that Givaudan supplied flavors for have moved into their “productivity program” leading Tastyco to look at cutting their supplier’s costs.

• There is a known working history between the companies which is supported by Tastyco Team Lead. Givaudan R&D group has worked with Tastyco Beverage R&D group that included “Flavors 101” Training for Tastyco R&D team and managers. Talk of making it an annual event.

2. Possible Solutions: (What is your approach to solving the problems listed above? Explain)

- Solution A: As Geoff pointed out, he needs to present his value proposition to the leadership team at Tastyco; this may head off competitive pressure, he can then over “al la Cart” pricing to exclude the value added activity from the commodity pricing

- Solution B: Audit the internal cost structure a Givaudan and find out what the true contribution margin, fixed and variable costs including a full SWOT analysis.

3. Possible Solutions: (Discuss the advantage/disadvantage of solutions listed above)

- Advantage A: The advantage of...