A1 Stake Sauce Case Analysis

A1 Steak Sauce: Lawry’s Defense

PROBLEM STATEMENT

We (A1 Steak Sauce) are a brand with little or no competition in the steak sauce market. Our product currently has the majority dollar and volume market shares in the steak sauce category. However, I do understand that our unit and volume sales have remained flat. Our promotions during Memorial Day and 4thof July are essential for our brand because approximately 10 % of full year volume of our steak sauce sold during these holiday weeks only (Annexure B, holiday season profit of $12,072,144 per year). Based on our sales force, advertising competition is intense during summer holidays because retailer such as Publix ropes only one brand for discount sales in a particular grocery category. Unilever has announced an April 1 launch of its own steak sauce brand of Lawry’s. As we hear now that Lawry’s has approached Publix for the Memorial Day ad with a two for $5:00 prices. Now Publix asks our sales managers to either match Lawry’s ad or lose our shelf place. You might be wondering why and how should we react to this market situation.

CONFIDENTIAL

KEY ISSUES

We must defend our product in its current situation against Lawry’s new steak sauce that it decides to launch in April. Lawry’s 11-ounce bottle is priced at $3.99. In addition, they are planned to launch an aggressive advertising campaign of $20 million with Publix’s promotional ad for Memorial Day weekend with a two for $5 deal.

Our sales from the Memorial Day weekend promotional ad account approximately 10 % of full year volume of yearly revenues. We must come up with a way to generate enough sales to increase our market share by 10% as well as increase our volume/unit sales. I have come up with a few options to react to Lawry’s plan as below:

• Option 1: Do nothing

• Option 2: Implement a 2 for $5

• Option 3: Implement a 2 for $4 promotion

TARGET MARKET

In the US, our brand’s target market consists of educated adults who purchase groceries in retail mass merchandise stores. Due to high quality, our sauce is considered as a premier steak sauce and price is inflexible to the customers who not only enjoy beef, but also enjoy the process of grilling and cooking. As you are aware with data, our brand has accomplished a loyal consumer base that prefers quality to quantity.

PRODUCT POSITION

Our sauce has been a leader in the steak sauce market with over a 50% share. In 2002, we have generated $150 million in sales with a retail price of $4.99, produced in a 10-ounce bottle. Our Sauce has been able to position in the market by maintaining a superior brand image of quality with strong brand loyalty, substantial sales, excellent profit margins and low competitor rivalry.

ANALYSIS

Option 1: Do Nothing

The first option I have analyzed is to maintain our brand’s status quo. We are currently the market leader in the steak sauce segment and I believe the new launch will not allow Lawry’s brand to immediately overtaking our position. I see the barriers of new entry are high because of brand loyalty, most of our loyal customers will not move just for the cheaper priced product. However, I agree that any customers attracted to Lawry’s product would result in a loss of profit in our market share.

In Annexure B, it shows that the 10% loose of market share to Lawry’s product results in a $6,081,162 loss in profit. However, the loss would be more if we do not consider free drop inserts (FSI) coupons of 50 cents each to the households during the holiday season and we must agree that the FSI have a positive impact in our sales, especially during summer holidays (Annexure C). This profit loss is not as massive as the two for $5 promo but any loss could hurt our presence in the market. Nevertheless, we intend to increase its operating revenue by 10% because of the loss of sales from the Marinade product introduction, we must have to counteract to Lawry’s product introduction to meet its projected operating profits.

Option 2: Two for $5.00 Deal

This option to analysis is to match Lawry’s promotion with the implementation of a two for $5 promotion deal as Lawry plans to attract the market with lower cost steak sauce with an 11-ounce bottle. With the implementation of their two for $5 promo, Lawry plans to obtain 10% of the market share, which would cause a loss to our profit. I believe Lawry will be able