1) How would you characterize the A1 Steak Sauce business?
In 1830, Henderson William Brand, chef to England’ King George developed a sauce that so delight the king he proclaimed it to be “A1”. The product was first sold in North America in the early 1900s. Kraft Foods acquired A1 in 2000 as part of its acquisition of Nabisco. Kraft Foods was the largest food company in the United States and second largest in the world. Kraft Foods most direct competitors were General Mills, Unilever, Pepsico and Nestle.
In 2002, A1 had a 54% dollar share of the Steak Sauce Market Shares with an 83 percent gross profit margin. Distribution of A1 stretched across the United States with the product available in every grocery store. Kraft Foods spent 15 percent of its operating revenue on A1 advertising. Revenue on A1 Steak Sauce was about $150 million and operating profit was approximately $60 million. A1’s 2003 plan anticipated flat revenue and slight profit growth.
2) Why is Lawry’s launching a steak sauce product? Explain.
In 2002, Lawry’s was owned by Unilever one of Kraft Foods leading competing food companies with brand sales in excess of $100 million and a strong position in seasoning and marinades. In early 2003, Unilever announced plans to launch a Lawry’s Steak Sauce with a ship date of April 1st and a price per bottle $1.00 less than A1. Unilever’s decision to launch a steak sauce product was based on disappointing financial results in recent years. Unilever launched a new strategic plan program called “Path to Growth”. A key element of this program was rationalizing its brand portfolio focusing on the largest global brands. The company challenged all of its brands including Lawry to reach annual sales of at least one billion dollars.
3) Should A1 Steak Sauce defend itself against the Lawry’s launch? If not, why not? If yes, why and how? Discuss. Jennifer Miller, Smith’s research manager statement of “you know A1 has the strongest brand equity in the category, it’s virtually untouchable.” I don’t agree and feel her comment is unrealistic, nothing is untouchable. I would recommend that A1 defend against Lawry’s Steak Sauce launch scheduled for April 1st, otherwise A1 could find they are losing market shares and trying to play catch up. In my opinion A1 has a choice to compete head-to-head with Lawry’s 2 for $5.00 deal launching on April 1st or sit back and hope that consumer don’t switch to the Lawry’s Steak Sauce. Either way A1 will have to spend money to remain dominant and competitive in the steak sauce market.
4) What are the competitive and financial implications of defending or not depending against the Lawry’s launch? Lawry is scheduled to launch their new steak sauce of April 1st at $1.00 less than the A1 sauce and Publix is ready to give Lawry the Memorial Day week promotion which is normally 10 percent of A1 Annual Sales. If Lawry, does gain 10 percent of the steak sauce market and customers like the taste, willing to pay the reduced price regardless of taste or can’t really tell the difference in taste from A1, customers might continue to buy the Lawry’s Steak Sauce for the $1.00 cheaper bottle. Lawry’s Steak Sauce launch could allow them to gain and increase in Lawry’s share in the steak sauce market.
5) What did you learn from your analysis of this case? Explain. A1 Steak Sauce was invented in 1830 and first sold in North America in the early 1900s. In 2003, over 100 years later, A1 Steak Sauce finally had potential competition with the launch of Lawry’s Steak Sauce. I feel that Kraft Foods should have planned for such a contingency that to me was inevitable. If they had planned, the company could have properly budgeted, maybe with a contingency type fund within the marketing department. For example, today where are reel-to-reel tapes, 8 track tapes and cassette tapes, all have become outdated with improvements in technology. To further illustrate in the food industry, try to find “Pitter Patter” peanut butter cookies made by Keebler which were out marketed by Nabisco’s “Nutter Butter” peanut butter cookies. Nothing is untouchable or lasts forever!
Courtney from Study Moose
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