Case Recap A.1. is the leader in the steak sauce industry and is one of the premier brands in the Kraft Foods offerings. The steak sauce giant “has little competition, substantial sales, and excellent margins” (Kerin & Peterson, 2010). The customers of A.1. are loyal and the market share of over 50% shows this. The problem facing A.1. is that Lawry’s has decided to launch a new steak sauce during the Memorial Day Weekend which is one of the holidays for the steak sauce industry due to the increase in grilling activities that take place. Lawry’s is owned by Unilever and is known for its seasonings and marinades. Lawry’s will launch its new steak sauce which has similar characteristics to the A.l. steak sauce, in both taste and appearance, and charge less per bottle as well as try to take over A.1.’s Memorial Day sales by offering a two-for$5 promotion through the supermarket Publix. This creates a problem for A.1. because the holiday weekend earns approximately 10% of its annual revenue. The question that Kraft Foods faces is how should the company react to the launch of Lawry’s steak sauce?

Problem Identification The problem for Kraft Foods is figuring out how to react to the launch of the new Lawry’s steak sauce. The company has focused both time and resources on a marinade line for A.1, spending $10 million on advertising and $5 million on consumer promotion spending. “The marinade line was projected to lose about $7 million in operating profit in 2003, though this was an improvement from a $10 million loss in 2002. The total brand’s 2003 budget called for profit on the A.1. portfolio to increase 10 percent from the previous year” (Kerin & Peterson, 2010). The launch of the Lawry’s steak sauce comes at a peak time for A.1. sales and the company cannot afford to lose profits from the sales of the sauce during the holiday weekend.

Root Problem Components While the problem that A.1. faces is what to do about the launch of Lawry’s new steak sauce during the Memorial Day Weekend, there are several key issues that are at the root of this problem. The first key issue is timing. Lawry’s has timed the launch of its new steak sauce on April 1st which does not give A.1. a great deal of time to respond to the launch and the promotion offering during Memorial Day Weekend. They need to make a quick decision about how they are going to react to the launch by Lawry’s. Another key issue is cost. A.1. already needs to increase profits this year in order to make up for the marinade line and its losses. Any money spend on promotion and advertising outside of the budgeted amount will cost the company valuable money and potentially reduce profits.
The final key issue is the projected gain and or loss that could occur by the response that A.1. initiates due to the Lawry’s steak sauce launch. Depending on the route that the company takes, it could mean potential gains or losses for the company.

SWOT Analysis
Strengths
• 54% market share
• Limited competition
• Customer loyalty: 9 out of 10 steak houses served A.1.
• Brand equity Weaknesses
• Price is higher than competitors
• Product extension has been unsuccessful
• A.1. is known for being a steak sauce. This makes it difficult for an extension on its product line
• Serving size is extremely small
Opportunities
• Use of coupons/promotional pricing to attract/retain customers
• A.1. could use promotions and marketing research to build upon its relationship with its consumers
• A.1. could strengthen its relationship with its distributors and suppliers and expand its distribution network
• Use of relationship with distributors to retain exclusive promotion during the holiday weekend Threats
• Lawry’s launch of its steak sauce is an immediate threat to A.1.
• A.1. could possibly lose its exclusive relationship with Publix
• A.1. could potentially lose sales during the Memorial Day Weekend
• Lawry’s promotional price is a threat to A.1.
• Lose of shelf space
Evaluation of alternatives The first response that A.1. could have to the Lawry’s steak sauce launch would be to match the company’s price during the Memorial Weekend or even go lower than the 2-for-$5 by possible advertising a 2-for-$4 promotional price. This strategy brings up several advantages and disadvantages. The first advantage would be that A.1. would send a message to Lawry’s that they are ready to counter any attacks from Lawry’s. This is a substantial price decrease and this says that A.1. is willing to do what it needs to do in order to make Lawry’s unsuccessful in the steak sauce industry. Another advantage of this response would be that the company would retain its relationship with Publix and the exclusive advertising that they have. The last advantage would be that A.1. would retain market share and possibly gain sales during the Memorial Weekend by competing with the other brands. The consumers that shop those brands usually buy them due to price and if A.1. is offered at a competitive or lower price those shoppers may make the switch to A.1. A major disadvantage of this strategy would be the potential decrease in profit margin for the holiday weekend. The company would see a significant decrease by offering its product for $2.50 or $2.00 instead of the usual holiday pricing of $4.49. Another disadvantage might be loss of sales due to customer perception. Some consumers simply buy products because they feel that superior products have a superior price. The company may have to keep up the promotional pricing during 4th of July to remain competitive with Lawry’s. Instead of lowering its price to compete with Lawry’s Memorial Weekend promotions, A.1. could work with its remaining distributors and suppliers to gain exclusive advertising during the major steak sauce holidays. A.1 and Kraft Foods have significant relationships with distributors and suppliers across the country and the company can use its influence to create contracts which allow A.1. exclusive advertising during this time. The advantage would be that the company would create contracts with its remaining distributors and suppliers so that it would not have to face the same issue that it is facing with Publix. A disadvantage associated with this strategy could be that the suppliers and distributors may feel threatened by A.1. using its pull to gain an advantage over its competition. A.1. could also increase promotions during the Memorial Day Weekend. The company could offer in store promotions for customers who purchase its steak sauce. It could give away grills, grilling accessories etc, to encourage customers to buy its steak sauce.

Recommendation My recommendation is that A.1. focuses on retaining its relationships with its distributors and suppliers and makes exclusive agreements with them. If the company focuses on lower its price, the profit margin would not be significant enough to earn the profits in which it needs to have. Plus this strategy is only a quick fix and will not have a long term effect. If the company builds and grows its relationships with the suppliers and distributors, A.1. would have exclusive promotional opportunities during its peak seasons as well as retaining shelf space in the stores which sell the product. I would also recommend conducting the Memorial Day Weekend promotion in conjunction with the strengthening of its supplier/distributor relationships. This will attract consumers to buy A.1. for a chance to win a grill and other items. If a consumer was on the fence as to which product to buy, they would potentially lean toward A.1. because they may gain a prize just for buying the product during the holiday weekend.