Introduction and Background
A-1 steak house is the product line of Kraft Foods that is the second largest food company in the world. A-1 steak sauce was initially developed in 1830 for King George by Henderson William. The king was delighted with the sauce he declared it to be A-1 because the sauce was so tasty. A-1 was first sold in North America in the early 1900’s. The company acquired A-1 steak sauce in 2000. In 2002, the company was known to be the one and only steak sauce supplier in terms of sales. In addition to that, the company had high brand awareness for its product. The major product line of A-1 steak sauce includes steak sauce and marinades.
Market
Steak sauce industry in United States is said to be $300 million dollar industry. In the recent years, the steak sauce industry has grown with an enormous number because of the increase in prices. Along with that, volume and unit sales have been flat over the past years. The company has successful in acquiring loyal customers over the years. Furthermore, major steakhouse beef consumption has been stabilized over the years.
A-1’s Market Share
Currently, the company holds 46% of the volume in terms of market share along with 54% of dollar sales. In 2002, the company had $150 million and was operating with $60 million. Most of the company’s sales are held during the Memorial Day and July 4th; more than 10% of its profits comes during these days.
Problem Statement
The major problem faced by the company was the lower prices of steak sauces offered by the competitors. Further, the product that was being offered by a competitor was more or less the same in terms of packaging and ingredients. Another problem faced by the company was the strong financial background of the competitor. Third problem faced by the company was related to maintaining its share in the market along with matching the competitor’s pricing. The last problem faced by the company pertaining to failure to expand the market and lack of growth in the steak sauce market. In addition to that, the company was facing a loss of $7 million in terms of operations along with maintaining a growth of 10%.
Analysis:
A1 steak sauce had very little competition, excellent margins and substantial sales. The major competitor of the company was Unilever that was planning to launch the steak sauce same as A1 steak sauce. Unilever was planning to launch it under a different brand name known as Lawry’s. The promotional and marketing strategy of Unilever included launching the sauce on the Memorial Day weekend and the promotion was to be done by Publix Store. After the news, the marketing department of the company had to decide about the new advertising and promotional strategy to protect its product.
Qualitative Analysis
The steak sauce launched by the competitor, Lawry had low price as compared to A1 steak sauce and the packaged bottle was 1 ounce bigger than it was. Furthermore, the competitor had planned to launch a similar product to A1 just to gain profits from it. In order to implement their plan successfully, the competitor had dropped its five free standing inserts in 2003. Along with that, the company had spent around $20 million on the promotion and advertising of the product.
Competitive Advantage and Core Competencies
Competitive advantage can be defined as the characteristics or attributes developed by a company that makes that company stand-out among its competitors. The company can make itself out-perform by some natural resources that they have, or by developing competencies that differentiate the companies from their rivals. For A-1 steak sauce, the competitive advantage of the company is a big merchandiser with accessibility of their products in every store. Further, the company has got high brand awareness for its A-1 steak sauce. Moreover, the distribution of the product has stretched to almost all club stores in the United States. Moreover, another big competitive advantage for A1 steak sauce is that its brand is preferred by most of the restaurants in the town.
In addition to that, core competencies of the company include the company’s ability to position its brand differently by only putting emphasis on the category of meat seasoning. Along with that, the company has successfully built up strong relationships with the suppliers and retailers as well.
Should A1 defend itself against the launch by Lawry? If so then why and how A1 should do it? If the company decided not to defend then what will be the reason behind it?
Being a competitive brand in the market, A1 steak should take some measures and act towards the launch of steak sauce by Lawry. The major reason behind defending itself is that A1 steak sauce has ...................................
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