A1 Case Analysis
TO: Chuck Smith
FR: Consultant # 001708049
RE: The Lawry Defense
DA: February 15th, 2003
A1 Steak Sauce is, and will continue to be, a dominant entity in the steak sauce industry and a key brand of Kraft Foods. With $150 million in revenue last year, an outstanding 83% profit margin, and half of the industry market share, A1 is unlikely to be shoved from the market. Despite being priced well above competitors, A1 still has a 46% volume market share, indicating fierce customer loyalty. Having successfully dominated the mature steak sauce industry as a quality leader, A1 brand sought to expand its product lines, and found a suitable opportunity in the marinades industry. This venture struggled at first, but was able to generate $15 million in revenue and a 10% market share last year. Although A1 Marinades produced a $10 million loss in 2002, the category is expected to grow at 15% per year, and should begin producing profits in the near future with a consistent marketing strategy.
The introduction of Lawry’s new Steak Sauce is a threat that warrants attention. Lawry’s leads the marinade industry with a 50% market share. It seems that their new steak sauce product is a response to the A1 invasion of the marinade market. They are introducing the product at $3.99, a whole dollar below A1, and launching an aggressive $20 million marketing campaign to go with it. Perhaps the most concerning aspect of Lawry’s entry is their attempt at an exclusive promotion with Publix on Memorial Day, offering 2 for $5, which would cripple one of A1’s most lucrative days of the year. The brand is projected to claim as much as 10% market share
The A1 team must now reevaluate the competitive environment and form a new marketing strategy with several objectives in mind: 1) Maintain profits and market share. 2) Preserve A1’s position as the leading quality steak sauce in the market. 3) Prevent Lawry’s from taking A1 market share and becoming a significant competitor.
Alternatives
There are multiple directions A1 can take in approaching the Lawry dilemma:
Do nothing.
Match Lawry’s Memorial Day promotion.
Launch a new promotion that will ensure expected profits and yield Lawry’s promotion less effective.
I will discuss the implications of each alternative, but I assert that Alternative C would be the most beneficial in supporting A1’s objectives.
Alternative A: Ignore Lawry’s market entry and promotional attack, and rely on A1’s high consumer loyalty and wide profit margins to maintain market share on its own.
Lawry’s