A Premier Brand in the Kraft Foods Portfolio

Date:                  June 25, 2013

To:                  Chuck Smith, Senior Brand Manager

From:                 Consulting Firm

Subject:          A.1. Steak Sauce Alternative Tactics Recommendation

Situation Brief: 

As a premier brand in the Kraft Foods portfolio, A.1.Steak Sauce has a long history of market success dating all the way back to the 1800’s.  Understanding that the brand has experienced substantial sales and excellent margins, harnessing a commanding dollar share of more than 50 percent with virtually little completion in recent years, it is no wonder that A.1.Steak Sauce has enjoyed the honor of crowd “favorite” in the steak sauce category.

While securing the frontrunner position in any market presents a variety of strategic challenges, it only represents one side of the coin. The other side of that coin is maintaining market position by defying competition. The imminent challenge by Lawry’s -entering the steak sauce market with a better-priced product- represents a “strategic attack” on the A.1.Steak Sauce brand and positioning in the current steak sauce category. Facing an aggressive promotion pricing strategy from one of the markets strongest competitors, our team recommends that the A.1.Steak Sauce brand embrace the challenge rather than resist it.  The A.1.Steak Sauce brand should consider capitalizing on promoting its new A.1. Steak Sauce Marinade during the seasonal holiday promotions.

Overview Analysis:

There are several concerns associated with the current challenge by Lawry’s in the steak sauce market.  The following issues identified have been analyzed for your review.

• A.1. Steak Sauce’s Position in the Category & its Strengths Vs. Competition

Findings:  A.1. Steak Sauce has the highest brand awareness out of any of the steak sauce lines.  With an established reputation as the expert in the steak sauce category, the company enjoyed annual sales in 2002 of $150 million and an operating profit of approximately $60 million, as well as forecasting a 10% increase in 2003 sales.  The company occupies the top position in the steak sauce category with a 54% dollar share and 46% volume share. (Appendix A, B)  While the brand celebrates top sales in the steak sauce category, the volume demand and production has been flat for several years now.  This trend is not expected to change.  A.1.’s brand extension strategy to explore different products opportunities (A.1. Marinades) was unsuccessfully launched in 2001 with little success and then re-launched in 2002.  The new marinade product captured 10% market share in the marinades category, but managed to net a $10 million loss. The Marinade line is anticipated to grow by 15% annually, which should ultimately benefit the A.1. Steak Sauce brand. (Appendix C, D)  

A.1. Steak Sauce has no real competition from the other Private Label brands in relationship to taste and quality.  However, the A.1. Steak Sauce brand is being challenged by a new market substitute called Lawry’s Steak Sauce.  Lawry’s has developed a line extension from marinades to steak sauce.  While they hold the top position in the marinade category, with a 50% market share and annual sales well in the excess of $100 million, they are new to the steak sauce category.  In an attempt to persuade consumers, the company is introducing a better-priced product similar in taste and quality of the A.1 Steak Sauce and supporting that launch with an aggressive $20 million advertising campaign focused on the peak summer season of sales- May, June, and July.

• Why is Lawry’s Launching a Steak Sauce Product?

Findings:  In a move to leverage its success in the Marinade category, Lawry’s is launching a steak sauce product to extend its brand and capture a percentage of market sales in the steak sauce category.  The “order-entry” model suggest that Lawry’s steak sauce product will obtain a maximum of 10% market share with an aggressive advertising spend and low price point.

• Should A.1. Steak Sauce Defend Itself?

Findings:  A.1. Steak Sauce brand is one of the premier brands in the Kraft Foods portfolio, performing well above the rest of the competition in the steak sauce category. (Appendix B)  By successfully differentiated itself from the competition and creating customer value through meaningful association in the market, the brand has tremendous power to leverage strategically against competition.  The A.1. portfolio must meet its revised profit target of 10% above last year’s operating profits. (Appendix D)