A.1. Steak Sauce is a brand of Kraft Foods with little competition in the steak sauce market. The product currently has the majority dollar and volume market shares in the steak sauce market. However, unit and volume sales have remained flat. In February of 2003, A.1. becomes aware of new competition entering the steak sauce market. Lawry’s, which is owned by Unilever, has announced an April 1 launch of its own steak sauce. Lawry’s has approached Publix and requesting the Memorial Day ad with a two-for-$5 price. Publix is requesting that A.1. match Lawry’s pricing or A.1. will lose its place in the ad.
Alternatives and Analysis
A.1.. could mount a frontal attack on Lawry’s. This would require A.1.. to lower its price to at least match Lawry’s sale price of two-for-$5 for the Memorial Day weekend.
oIf A.1.. entered into a frontal attack, Lawry’s would understand that A.1.. was prepared to strongly defend its market shares. oBy lowering the price, A.1.. would guarantee its place in the Memorial Day ad for Publix and other grocery store chains. oA.1.. could retain approximately the same market share it currently has. Although it might lose some market share to the new Lawry’s steak sauce, it could gain market share from other brands.
oA.1.. could suffer a decrease in brand equity with the price reduction as consumer perception of the steak sauce might change. Consumers expect a high quality product in A.1.. which is why the company has been able to charge a higher price. oA.1..’s contribution margin would change from 83% to 66% (Exhibit A #1) on the Memorial Day weekend. oThe company could be requested to continue this sale on other major holidays including 4th of July and Labor Day.
A.1..’s representatives could strengthen its relationships with its suppliers and distributors. The company could negotiate exclusive contracts with certain, valued suppliers. It could develop connections with its...