Steak Sauce: Lawry’s Defense

A.1. Steak Sauce: Lawry’s Defense

MEMORANDUM

DATE: Wednesday, April 10, 2013

TO: Chuck Smith

FROM: 001-77-4912

SUBJECT: A.1. Steak Sauce Case

A.1. Steak Sauce is a premier brand of Kraft Foods Inc. It was developed in 1830 and has been a leader in the steak sauce market with over a 50% share. In 2002, A.1. captured $150 million in sales with a retail price of $4.99, produced in a 10-ounce bottle. A.1. Steak Sauce has been able to excel in their market position by maintaining a superior brand image with strong brand loyalty, substantial sales, excellent margins and low competitor rivalry. A.1.’s main competitor is Heinz 57 which holds 16% of the market but did not compete with A.1.’s strong appeal and flavorful taste.

In its current situation, A.1. Steak Sauce must defend its product against Lawry’s new steak sauce that it decides to launch in April. Lawry’s retail price will be $3.99 in the production of a 11-ounce bottle. Lawry plans to launch an aggressive advertising campaign of $20 million as well as being placed in Publix’s promotional ad for Memorial Day weekend with a 2 for $5 promotion. The sales from the Memorial Day weekend promotional ad accounts for 10% of A.1.Steak Sauce’s yearly revenues. A.1. steak sauce must come up with a way to generate enough sales to increase their market share by 10% as well as increase their volume/unit sales. A.1. has come up with a few options to react to Lawry’s plan which is listed below:

Implement a 2 for $5

Implement a 2 for $4 promotion

Do nothing

A.1. must be able to respond to Lawry’s competitive launch while at the same time maintaining its brand loyalty, sales, and stance in the marketplace. My suggestion for A.1. Steak Sauce is to raise entry barriers, improve the supply chain, and add a coupon for their Marinade product line. A.1. must bring in $62,000,000 in operating profits with any option that is chosen. My conclusion on this decision has been analyzed through the pros and cons of the listed options above which will delineate why my recommendation is best and make sure that A.1. is meeting their projected operating profits as well as stabilizing their sales.  

Implement a 2 for $5/2 for $4 promotion

The first option to analyze is to match Lawry’s promotion with the implementation of a 2 for $5 promo. Lawry plans to attract the market with it’s lower cost steak sauce in a 11-ounce bottle. Lawry will be able to steer customers to their product through this promotion because consumers will more than likely buy the cheapest steak sauce for the upcoming holiday.