A1 Steaks Sauce

Case Analysis: A.1. Steak Sauce

Case Analysis: A.1. Steak Sauce

        One of Kraft foods' most premier brands is A.1. steak sauce (A.1.) because it has enjoyed substantial sales, excellent margins, and experienced little competition in recent years1.  In 2002, A.1. was the clear leader in the steak sauce category as it held a 54% dollar share in its market; however, while sales had improved in recent years due to pricing increases, the unit and sales volume have recently stagnated, possibly due to reduced beef consumption in the United States.  The brand equity for A.1. was founded in steak as an attempt to launch a “poultry sauce” failed miserably2.  

        Though A.1. enjoyed supremacy in its market- due mainly to the success of the A.1. Original brand- the immediate concern was a direct attack on its steak sauce brand from one of its competitors, Lawry's1.  Lawry's was owned by Unilever and held the majority dollar share in the marinade market.   Their goal was a high sales target and thus launched their own line of steak sauce at a substantially cheaper price and a slightly larger container.  Exhibit 1 shows these comparisons.  Consequently, A.1.'s brand manager was forced to propose a recommendation to respond to Lawry's launch: a blitz campaign involving a two-for-$5 price point, launch on a holiday weekend (10% of A.1.'s sales came from this holiday due to the timing of “peak grilling season”), and a potential placement in one of the largest grocery store chains in the nation. Also, a lesser concern stemmed from A.1.'s recent entry into the marinade market; while holding a minor percentage share in this market, Kraft Foods needed to address its marinade product line for the future.  

        An analysis of the price and cost breakdown (Exhibit 4) shows that the marketing strategy recommendation for A.1. should not match Lawry's “two-for-$5” promotion due to the profit per unit.  A.1.'s profit per unit is roughly 56% higher than Lawry's due to the substantially low price.  In addition, the cost of production for Lawry's steak sauce is double the number of A.1.'s because of the two-for-$5 promotion.  Lawry's would need to almost double their volume sales in comparison to A.1.'s for that holiday weekend to compensate for the extra costs of production and to also create a profit margin similar to A.1.'s.  However, given the research showing the stagnant volume sales of the steak sauce market, nothing suggests that Lawry's could double their volume sales for that holiday promotion, even with the strong Memorial Day advertisement.  The slightly larger size- a 1 oz. increase- should not prove to be an added benefit given the small serving size of customers2.  These factors initially suggest that a response to Lawry's campaign should not be an imprudent one.