Recommendation for Defense - A.1. Steak Sauce

From: Carly Redmond-Durst

To: Dr. Hirmal Barksdale

Date: Tuesday, February 14, 2017

Subject: Recommendation For Defense - A.1. Steak Sauce

I. Situation Analysis

(i) Industry

Exhibit A shows that current market share for Kraft’s A.1. Steak Sauce is over half of the industry at 54%. The next leading competitor is Heinz at 16% (Exhibit A). The industry is dominated primarily by A.1. Steak Sauce and has been for years.

However, Lowry’s is introducing a new steak sauce into the industry with very similar ingredients, look and taste.

● $305,555,554 industry sales approximated for 2003

● 102,778,124 units sold approximated for 2003

● There is competition for the Publix Memorial Day advertisement due to this product line extension

● Publix ad will be for 2-for-$5 bottles of Lowry’s steak sauce

● Lowry’s is expected to acquire 10% of market share at most (A.1 Case, 2004)

● New customers will more likely focus on price than taste when choosing

(ii) Company

Kraft’s A.1. Steak Sauce was first sold in the early 1900’s where it quickly became the industry leader with higher brand awareness than any other sauce to this day (A.1. Steak Sauce Case, 2004). A.1. Steak Sauce and Marinades is the portfolio we are working with.

● A.1. portfolio is budgeting to grow by 10% in operating profits

● Currently holds 54% share of market

● Current line of Marinades is not profitable

● Marinade profits are increasing, but still net negative

● The marinade line has 10% of market share

● Marinade category growing by 15% each year

● Publix wants A.1. Steak Sauce to match Lowry’s promotional pricing so they can keep the ad space

● 10% of yearly sales are sold each holiday week

● A.1. customers are very brand loyal

● Current variable cost of $0.60 per unit (A.1. Case, 2004)

● Sell to retailers for $3.49 (Exhibit A)

● High contribution margins - 482% Markup on cost for A.1

● Variable Marketing Expenses: