A1 Case Analysis

Situation Analysis: The senior brand manager of A.1. Steak Sauce and Marinades, Chuck Smith, has recently received troubling news. Lawry's, a top brand under the Unilever portfolio, is dominant in the spice and seasoning industry and is planning an attempt to diversify by introducing a new product, steak sauce, into an untapped market of theirs. Unilever is one of Kraft's (A.1.'s parent company) top global competitors. Their product is said to be similar in taste and appearance to A.1.'s, while also using many of the same ingredients. They plan to launch their product in a little over three months, for the Memorial Day Weekend holiday. This, along with Lawry's proposed penetration pricing strategy to offer two 11 ounce bottles for $5 against A.1.'s $4.49 special price (generally $4.99 but reduced with $0.50 coupon in FSI's) for one 10 ounce bottle, potentially poses major problems for A.1. (Their pricing strategy could additionally be considered as predatory, if they plan to keep the prices at the anticipated levels long term, this however is probably unlikely.) Memorial Day Weekend sales typically accounted for 10% ($15 million) of the annual sales for your brand.

A.1. holds an extremely strong position in the industry, as you are currently the steak sauce category leader in market share, both dollar share (54%), and volume share in pounds (46%). Your research manager, Jennifer Miller, has come to the conclusion that considering A.1.'s strong brand equity, initial product testing showing the inferiority of Lawry's product, and an order-of-entry model, the Lawry's new product could only reach a maximum of 10% of the category already dominated by A.1. I know that Lawry's launching and aggressive promotion pricing strategy comes to you as quite a surprise, and that you're now under major pressure to make a few key decisions, in a relatively short period of time.

Problem Definition: Mr. Smith, you and your cross-functional business team must decide the method of defense you will use against Lawry's upcoming plans. You have multiple options to consider, the main two being to 1) take no action at all or 2) to match Lawry's anticipated sales promotion. In addition to these primary alternatives, you could also offer your product at a lower price than Lawry's with a 2-for-$4 promotion strategy just for the holiday, as suggested by your sales manager Steve Johnson.

Analysis of Alternatives/Quantitative Analysis: A.1. can choose to take no defensive action against Lawry's upcoming launch and simply rely on their strong brand equity, which would yield the results shown in Appendix B. These results assume that even if Lawry's does acquire the maximum 10% that was determined by the order-of-entry model, the majority of it will not come from a loss by A.1., but from others in the category, with A.1. not losing more than a total of 3% in a worst-case scenario.