A.1.

Analysis 1

A.1. Situation Analysis

University of Phoenix

MKT/551

February 5, 2009
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A.1. Steak Sauce is a division of Kraft Foods Incorporation, acquired in 2000 from Nabisco

(Kerin and Peterson p.630). A.1. Steak Sauce, founded by King George’s Chef, Henderson

William Brand, in England in the year 1830, was introduced into the North American market in

the early 1900s (Kerin and Peterson p.630). A.1. Steak Sauce is the leader in its industry;

however, the firm is facing a challenge from Lawry’s, an organization that traditionally

dominates the spice and seasoning industry, who announced the launch of its new steak sauce in

April of 2003. A.1. should determine the organization’s potential reactions to this new threat and

follow up by selecting the alternatives that would produce the greatest benefit with the least

disadvantages.

Situation

Lawry’s, a branch of Unilever, is known in the United States as “the leading provider of

marinades, premium spice and seasoning blends, and other flavorings” is launching a new steak

sauce with a similar taste and appearance to A.1.’s product (Kerin and Peterson p.634). Lawry’s

is looking to charge $3.99 per 11-ounce bottle, which is in direct competition with A.1.’s price of

$4.99 for a 10-ounce bottle (Kerin and Peterson p.635). Additionally, Lawry has formed an

alliance with the supermarket Publix to run an exclusive Memorial Day advertisement with a

two-for-$5 promotional price point (Kerin and Peterson p.630). Holidays sales, such as those on

Memorial Day, are extremely significant sources of revenue for A.1. comprising 10 percent of

the company’s full-year volume (Kerin and Peterson p.631). The introduction of Lawry’s Steak

Sauce into the market is creating new issues forcing the firm to determine which competitive

techniques are most suitable in reaction to Lawry’s attack.

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Industry Analysis

A.1. Steak Sauce performs business in a mature industry, dominated by a few large

competitors. For A.1. it is important to avoid complacency, slow response time, and to remain

knowledgeable in regard to current competitors and market analyses in a mature industry. The

company is accountable for 54 percent of the steak sauce sales in dollars with the largest branded

competitor, based upon revenue, being Heinz 57 (Kerin and Peterson p.634). Heinz 57,

however, only generates 16 percent of the steak sauce sales in dollars (Kerin and Peterson

p.631).

Steak Sauce Market Shares, 2002

Dollar Share Volume Share (lbs)

A.1. 54% 46%

Heinz 57 16% 13%
Private Label 14% 19%
Others 16% 22%
Total 100% 100%
Retail Shelf Pricing 2003

Retail Shelf size/ oz Retail shelf price(oz)

A.1. Steak Sauce $4.99/ 10oz $0.50

Heinz 57 $4.79/ 10oz $0.48
Private Label Steak Sauce $3.49/ 10oz $0.35
Lawry’s Steak Sauce $3.99/ 11oz $0.36
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The previous graphs display the main steak sauce competitors present in 2003,

categorized on market share and price. A.1. is of the highest quality is priced as the most

expensive steak sauce. Heinz 57, which offers similar qualities, is priced more evenly with A.1.

than Lowry’s, which also offers similar qualities The private label steak sauces are generally the

lowest quality and price. A.1. Steak Sauce has been able to maintain customer loyalty due to

strong brand equity for over 150 years. Several other large and established corporations have

also entered into this market throughout the years, including Unilever and Heinz and have

created an environment of competitive pricing. This industry also requires a large initial

investment due to economy of scale.

Strategy

Corporate Level Strategy

Kraft Foods Incorporation’s strategic actions flow around the central vision of satisfying

its consumers through providing healthy and convenient food products( a). “Our vision tells the

world – our employees, customers, consumers, and the communities where we make and sell our

products – what we care about” (Vision and Values 1). The corporation structures itself around

these six main values (vision and Values 1):

• Innovation

• Quality

• Safety

• Respect

• Integrity

• Openness
 A.1. Analysis 5

Business Level Strategy

As a division of Kraft Foods Incorporation, A.1. Steak Sauce has its own strategies that

side with the corporation’s goals. A.1. satisfies consumers through providing them with a

product that is set apart through its high quality and strong brand equity. This is a distinctive

value for the firm.

SWOT Analysis (Kerin and Patterson).

Strengths

• A.1. is distinguished from competitors through the high quality and brand equity

associated with the product that this firm is offering.

• The company holds a first mover advantage as the original steak sauce producer

• Consumers maintain an exceptionally strong association between A.1. and beef products.

• “Nine out of ten steak houses serve A.1.”

• The company has a large market share.

• A.1. is the brand leader and is in a stable position.

• Due to the fact that the firm utilizes Kraft Foods Incorporation’s distribution network, the

supply of A.1. is easily widespread.

• Strong financial position of Kraft Foods and A.1. is also a strength.

Weaknesses

• One of the weaknesses of this brand is the fact that consumers strongly associate the
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product with steak. This makes the prospective for successful brand extensions

considerably difficult.

• A.1.’s past efforts to expand into the poultry category were extremely unsuccessful.

• Individuals require only a small portion size of steak sauce to apply to their meal

• Consumers typically use A.1. on a sporadic basis (Thompson 1).

• This information combined with the reality that only small portion sizes of the product

are used is a substantial weakness.

Opportunities

• A.1. Steak Sauce has the opportunity to develop many strategic alliances or joint

ventures with other firms.

• The company also has the ability to expand upon its current relationships with

distributors and suppliers, and to extend its current distribution network.

• A.1. could also attempt to develop its relationship with its consumers through

marketing research and targeted promotions.

• The organization has several advantages over Lawry’s that could be used to A.1.’s

advantage.

Threats

• The Launch of Lawry’s Steak Sauce is the immediate threat.

• A.1. cannot afford to lose their weekend sales over the Memorial Day holiday.

• Lawry’s has directly threatened A.1. through price competition.

• The company is facing the threat of losing a vital partnership with Publix

supermarket due to the introduction of Lawry’s.

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• The steak sauce industry and the beef industry are directly connected; therefore,

the price and media attention which beef is receiving directly affects the steak

sauce industry.

Strategic Alternatives and Evaluation

A.1. has multiple options to consider. The company must determine the competitive

techniques needed to counter the Lawry’s launch whether these are offensive tactics or defensive

techniques A.1. could further develop its distribution channels with its suppliers and distribution

channels such as restaurants and grocery stores. Additionally, the company could develop a new

marketing strategy in order to compete against Lawry’s.

Offensive Tactics

If A.1. Steak Sauce chose to execute a frontal assault on Lawry’s, this would incorporate

matching its competitor in significant categories. A.1. would need to lower its price to match

that of Lawry’s and mimic the promotion and distribution techniques of its competitor. A.1.

could also choose to react with a flanking maneuver; which would determine the area Lawry’s is

weakest in, and then attack this market segment. Finally, the company could employ the

encirclement technique where A.1. would overwhelm Lawry’s with product variety, price,

availability, and distribution.

A.1. could lower the inducement for attack by altering the prices of its steak sauce making them

artificially low thus reducing Lawry’s expectations for future profits within the steak sauce

segment.

Defensive Tactics
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A.1. may be able to raise structural barriers in reaction to Lawry’s entry by impeding its

competitor’s means of attack through raising entry barriers. A.1. would build exclusive

agreements with its suppliers and distributors and/or participate in backward vertical integration.

A.1. would then reduce unit costs through increasing scale economies. A.1. would produce

various new products, thereby expanding its own product line and closing off any entry points

into the market.

Supply Chain

A.1. needs to explore the possibility of strengthening relationships with the assorted

suppliers for their firm by forming exclusive alliances with established suppliers to create a

disadvantage for Lawry’s. A.1. needs to bolster affiliations with the distributors of A.1., such as

grocery stores and restaurants further assuring that A.1.’s shelf placement is ideal and that A.1.

maintains a large percentage of the shelf space within their product category. A.1. needs to work

with these stores to secure end cap displays, predominantly in the beef section of the stores. A.1.

expands distribution throughout various restaurants to raise consumer’s exposure to the product

as well as forming alliances with major restaurant chains for the placement of A.1. on each table

within the venue. The company should explore partnering with restaurants such as Ruby

Tuesday, Applebee’s, or Dave and Busters to form a specific segment of the menu centered

around beef flavored with A.1. sauce.

Promotion

A.1. should also explore offering a free giveaway with each bottle of A.1. Steak Sauce

purchased, such as grilling tools, pending the submission of their information to the company.

Lawry’s will be launching their new steak sauce on April 1, 2003 which coincides with March
 A.1. Analysis 9

Madness of college basketball. This is a great opportunity to promote A.1. Steak Sauce. By

sponsoring barbeques outside the basketball venues and/or outside of large grocery store chains,

such as Publix, particularly over the Memorial Day weekend, and throughout March Madness

A.1. could secure valuable marketing to promote its product. A.1. could distribute menu

booklets, full of recipes using A.1., to consumers who participated in these events, and offer an

optional mailing list to notify customers of future promotions. A.1. can also consider, through

their existing relationship with beef suppliers, offering free samples of their steak sauce to

individuals in supermarkets in the same manner as Costco.

Assessment of Alternatives

Offensive Tactics Assessment

Executing a frontal attack on Lawry’s would not be advisable. A.1. is currently the

leading brand in the steak sauce industry. Reducing the price of A.1. would diminish consumer’s

perception of the quality which is a key characteristic of the brand. A.1. has a unique positioning

of high quality and brand awareness, and the company is therefore able to charge a higher price

for this product. Past evaluations have shown that A.1.’s promotion and distribution techniques

have been extremely successful in the past.

Defensive Tactics

Raising structural barriers would provide some benefits to A.1. Steak Sauce. The

company would face fewer challenges in signing exclusive agreements with distributors and

suppliers than its competitors because of its extensive history within this industry. A.1.,

however, needs to exercise caution in performing this task to guarantee that its own brand image

is not stained. A negative impact could occur if distributors and suppliers began to feel
 A.1. Analysis 10

threatened by A.1. Steak Sauce. While it is possible that some line extensions of A.1. are

successful, venturing down this road is not advisable. Lawry’s is particularly successful in the

spice and seasonings market making it extremely difficult for A.1. to develop offerings within

this business and dominate this segment to close off this entry point. All examinations show

more benefit for the firm if A.1. continues to concentrate efforts on alternate strategies.

There are several ways in which A.1. Steak Sauce could elevate consumer’s exit barriers.

Using psychological approaches to make switching brands appear too risky A.1. can convince

consumers that they are dependent upon its product. A.1. should develop loyalty programs to

enhance incentive for frequency of use and breed emotional encouragement for customers as

well. A.1. should sponsor sports teams or other venues that occur at the same time as prime

barbeque season further developing its customer relationship management program with the goal

of gaining valuable data about its consumers and increasing customer retention. If A.1. acquires

further knowledge about its consumer base and implements this information correctly, the

company will ensure more consumer satisfaction.

Supply Chain

As discussed previously, strengthening its relationships and creating exclusive

agreements with the distributors and suppliers is a possibility through non-hostile avenues. For

example, A.1. should focus on building a better-quality communication network between itself

and its distributors and suppliers so finding what each other needs is better understood. It is

necessary to retain the largest percentage of shelf space within grocery stores because this has a

direct correlation with the sales level of an item. The company should perform research to find

which location within the shelf layout is most advantageous for its product, and then request that
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the distributors grant this position. A.1. can guarantee that the placement of its product is in high

traffic areas and are easily accessible. During the attempt to acquire deeper partnerships with

restaurants, A.1. should highlight the fact that “nine out of ten steakhouses serve A.1. and the

sight of A.1. Steak Sauce on a table prompts seventy percent of consumers to think about steak.

The company should point out to the restaurant managers that patrons with steak orders result in

higher revenue for the restaurant (A.1. Sauce Derives Its Name From Utterance of a King, 15).

Promotion

The company traditionally uses about 15 percent of its operating revenue on advertising

(Kerin and Peterson p.633). Therefore, A.1. has a robust budget to utilize in promoting its

product. A.1.’s advertising goals should focus to increase frequency, reach, and penetration.

Providing grilling tools as a giveaway would communicate the message that A.1. is the leader in

the steak sauce category as well as provoke psychological responses from consumers. With this

offer the consumer would imagine the smell of a steak on a barbeque and the taste of A.1. Steak

Sauce on their meat. Requiring the customers to submit personal information before receiving

the giveaway would assist in bolstering the company’s consumer-relationship management

database. Conducting barbeques outside of college basketball games and supermarkets

throughout March Madness and over the Memorial Day weekend would promote abundant

exposure for A.1.. The grilling would expose consumers to the sight, smell, and taste of A.1. on

a mass scale and after the event the smell of a barbeque may evoke the memory of A.1. giving

the company more value for the dollar Providing individuals with menu booklets, A.1. could

increase the frequency of its message through the consumer using A.1. in more of their home

cooking. By offering the option to opt-in to a newsletter to consumers A.1. could conduct direct

marketing to individuals who have expressed prior interest in its product. Providing free samples
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of A.1., through its relationship with beef suppliers, at supermarkets will sparking more interest

from the hesitant consumers since many consumers insist upon experiencing a product before

committing to purchase it.

Conclusion

It becomes clear, through the analysis of each alternative, which options A.1. Steak Sauce needs

pursue with the pending threat from Lowry’s. The company needs to raise structural barriers

through the creation of agreements with distributors and suppliers using caution and elevate

consumer’s exit barriers. The firm will build better and deeper relationships with the members

of its supply chain. A.1. will assure that its product is present on key shelf locations, specifically

near the beef section. The firm should also promote its steak sauce to various restaurants to

increase visibility. A.1. needs to perform the sponsorship of athletic events that are primarily

taking place during peak grilling season. A.1. also needs to perform barbeques outside of the

venues holding March Madness events and outside of the supermarkets to spur consumer

awareness. Finally, A.1. needs to consider using the grilling set giveaway using the Brand

imprinted on the handles to those tools to keep the marketing objective of continued brand

awareness.
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References

"A.1. Sauce Derives Its Name From Utterance of a King." Metropolitan News-Enterprise

18 Nov 2004 15. 13 Apr 2007 <http://www.metnews.com/articles/2004/rem

iniscing111804.htm>.

Kerin, Roger, and Robert Peterson. Strategic Marketing Problems: Cases and Comments.

11th Edition. Upper Saddle River, NJ: Pearson Prentice Hall, 2007.

Thompson, Stephanie. "Steaking Out The Parking Lot." Brandweek 19 Mar 1999 1. 13

Apr 2007 <http://findarticles.com/p/articles/mi_m0BDW/is_13_40/ai_54266889>.

"Vision and Values." Kraft Foods. 10 Apr 2007. Kraft Foods International. 10 Apr 2007

<http://www.kraft.com/profile/vision_values.html>.