A.1.Steak Sauce: Lawryвђ™s Defense

Lawry is launching a new steak sauce product nationally with an April 1 start ship and is asking for the Memorial Day ad at Publix, with a two-for-$5 promotional price point. How should A.1. respond to Lawry’s launch? Should A.1. defend itself against the launch and if so, what should A.1. do?

A.1. had little competition, substantial sales, and excellent margins with a long history. A.1. was the leader in the steak sauce category with a dollar share of more than 50 %. Heinz 57 was A.1.’s largest branded competitor but nit directly competing against A.1.

Kraft’s revenue on A.1. Steak Sauce was about $150 million in 2002 and operating profit was approximately $60 million. A.1 had worked to broaden the brand beyond steak sauce. The brand launched a line of marinades in 2001 in order to enter the fast-growing category. At the end of 2002, Kraft’s revenue on the A.1 line was $15 million, and the line had a 10% share of the marinades category. A.1.’s 2003 budget called for $10 million of advertising spending on the marinade line and $5 million of consumer promotion spending. The marinade line was projected to lose about $7 million in operating profit in 2003 from a $10 million loss in 2002. Despite the 2000 introduction of competitive marinades line by Clorox and Kraft, Lawry’s continued to lead the marinades category with a 50% share, and the marinades category was growing by 15% annually.

In early 2003, Unilever announced plans to launch a Lawry’s steak sauce. The Lawry’s steak sauce line included just one item: an 11-once product packaged in a plastic bottle with a two-for-$5 promotional price point compared