1) How would you characterize the A1 Steak Sauce business?
In 1830, Henderson William Brand, chef to England’ King George developed a sauce that so delight the king he proclaimed it to be “A1”. The product was first sold in North America in the early 1900s. Kraft Foods acquired A1 in 2000 as part of its acquisition of Nabisco. Kraft Foods was the largest food company in the United States and second largest in the world. Kraft Foods most direct competitors were General Mills, Unilever, Pepsico and Nestle.
In 2002, A1 had a 54% dollar share of the Steak Sauce Market Shares with an 83 percent gross profit margin. Distribution of A1 stretched across the United States with the product available in every grocery store. Kraft Foods spent 15 percent of its operating revenue on A1 advertising. Revenue on A1 Steak Sauce was about $150 million and operating profit was approximately $60 million. A1’s 2003 plan anticipated flat revenue and slight profit growth.
2) Why is Lawry’s launching a steak sauce product? Explain.
In 2002, Lawry’s was owned by Unilever one of Kraft Foods leading competing food companies with brand sales in excess of $100 million and a strong position in seasoning and marinades. In early 2003, Unilever announced plans to launch a Lawry’s Steak Sauce with a ship date of April 1st and a price per bottle $1.00 less than A1. Unilever’s decision to launch a steak sauce product was based on disappointing financial results in recent years.
Unilever launched a new strategic plan program called “Path to Growth”. A key element of this program was rationalizing its brand portfolio focusing on the largest global brands. The company challenged all of its brands including Lawry to reach annual sales of at least one billion dollars.
3) Should A1 Steak Sauce defend itself against the Lawry’s launch? If not, why not? If yes, why and how? Discuss.
Jennifer Miller, Smith’s research manager statement of “you know...
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