A.1. Steak Sauce is the premier selection for consumers’ steak grilling needs.

A.1 Steak Sauce
Positioning
A.1. Steak Sauce is the premier selection for consumers’ steak grilling needs. With its rich, intense flavor, no other sauce can compare to the superior quality that A.1. has provided for decades.
Find below a perception map. The brands are categorized based upon price and quality. A.1. is of the
highest quality and also priced as the most expensive steak sauce. Lawry is new in the market and
customers have not had a chance to fully explore its goodness – Lawry is still perceived as been of lower
quality than A.1.
 Quality perception was determined by customer buying behavior i.e. which brand is most
patronized and has the most market share
Marketing Program
A.1 product line includes Bold and Spicy, Roasted garlic: A.1. Smoky Mesquite. A.1. Carb Well steak
sauce with 1 gram of carbohydrate per serving.
Product Strategy (First to Market Product Strategy)
A.1. is differentiated from its competitors because of the high brand equity it enjoys. A.1 was the
first to market and enjoys the advantage as the original steak sauce producer. A1 has
approximately 54% of the market share and is the perceived as the bar for what a high quality steak
sauce should be. Consumers maintain an exceptionally strong association between A.1. and beef
products, particularly steak. “Nine out of ten steak houses serve A.1.” (Kerin and Patterson 631).
A.1.
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Price Strategy
A.1. sells for $4.99 per 10 ounce bottle, compared to $4.79 for Heinz 57, $3.99 for Lawry and $3.49 for
private labels. A.1. uses psychological pricing methods i.e. price is based on perceived quality rather
than cost plus or target return pricing. A.1. enjoys an 83% gross profit margin on its steak sauce.
A.1. also uses a seasonal discount strategy by offering coupons during holidays like Memorial day and 4th
of July.
Promotion Strategy:
A.1. spent approximately 15% of its revenue on advertising. Consumer promotions made 5% of A.1’s
revenue.A.1. used television spots with advertising running throughout the year. Also, Free Standing
Inserts with 50cents off were used four times a year. A strategic partnership was formed with the beef
producers to further promote the use of A1 on beef.
National network radio advertising air prior to the three major summer holidays – Memorial Day,
Independence Day and Labor Day. In addition, print advertisements run in grilling issues of the popular
Sunday newspaper supplements, USA Weekend and Parade.
Distribution Strategy:
A.1. primary distribution channel are the grocery stores. A.1. retains the largest percentage of shelf
space within grocery stores because this has a direct correlation with the sales level of an item. A.1. is
available at virtually every grocery store in the United States.
Financial Data and Projections:
Past Sales Data
Kraft’s brands span five consumer sectors: snacks, beverages, cheese and dairy, grocery convenient
meals, The Company has 187 manufacturing and processing facilities worldwide. In North America, it
has 64 facilities, and outside of North America, it has 123 facilities located in 44 countries.
A1 is managed under the grocery brands in Kraft foods. A1 makes approximately 3% of Kraft Foods Sales
and his one of its larger brands. Below is the revenue from A1 brand for the last 3 years:
Five year projection for A.1 Steak Sauce
A.1 steak sauce is part of the $3.2 billion U.S. condiment market. The market is composed of eleven
segments, led by Mexican sauces, ketchup, barbecue sauce and mustard. Growth in the market is driven
by taste trends, influenced by international and regional flavors, as well as fresh formats of traditional
products. Mindbranch.com states that, “Condiment sales will continue their pattern of slow growth as
manufacturers continue to cater to the varied and changing tastes of American palates. The smaller
condiment categories such as hot sauce will continue to provide the most growth, as these products
Net Revenue
2007 $165,240,000.00
2006 $153,000,000.00
2005 $164,322,000.00
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have not reached the state of maturity of segment leader’s ketchup and mustard. Suppliers will have to
encourage sales through secondary retail outlets like drug stores and convenience stores to further
grow those core condiment products. Changes in the market will directly correspond to evolving
consumer tastes, and increased marketing and co-branding will encourage consumers to try new
products”. (Data retrieved from mindbranch.com).
Barbecue sauce makes up approximately 10% of his market which is $320million. Below is the estimated
5 year projection for A1 Steak Sauce including price and cost inflation of 5%?
COMPETITORS IN THE STEAK SAUCE MARKET
Kraft Foods’ Competitors. While it competed with virtually all the leading food companies, Kraft’s most
direct competitors were General Mills, Unilever, PepsiCo and Nestle.
Unilever. As Kraft’s competitor in categories such as salad dressings, mayonnaise, and marinades,
Unilever owned the Lawry’s brand, and was planning to launch the Lawry’s steak sauce as a direct
competitor to A.1.
The main characteristics that set A.1. Steak Sauce apart from the new Lawry’s steak sauce are its long
history and brand equity. Dating back to 1830, it was the preferred sauce of royalty and is known as one
of the premier brands in the Kraft Foods portfolio. Although the new Lawry’s steak sauce uses similar
ingredients and has a taste and texture similar to A.1., A.1.’s brand awareness will continue to hold its
loyal customers close to the brand.
Product Sales Data Year 1 Year 2 Year 3 Year 4 Year 5
Unit prices $4.99 $5.04 $5.09 $5.14 $5.19
Unit costs $0.85 $0.89 $0.94 $0.98 $1.03
$0 $0 $0 $0 $0
Market size $320,000,000 $352,000,000 $387,200,000 $425,920,000 $468,512,000
Scenario 1: Based on target operating income
Unit sales 33,114,228 41,295,109 46,456,998 49,037,942 51,618,887
Dollar sales $165,240,000 $208,123,222 $236,480,011 $252,113,967 $268,036,954
Operating income $137,149,200 $171,341,048 $193,031,068 $203,958,056 $214,812,000
Market share 51.64% 59.13% 61.07% 59.19% 57.21%
Scenario 2: Based on target market share
Unit sales 33,114,228 43,308,777 48,722,374 51,429,172 54,135,971
Dollar sales $165,240,000 $218,271,903 $248,011,450 $264,407,762 $281,107,200
Operating income $137,149,200 $179,696,126 $202,443,813 $213,903,632 $225,286,845
Market share 51.64% 62.01% 64.05% 62.08% 60.00%
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Instructions
Lawry steak sauce recently announced it is going to run an Independence Day promotion where a bottle
of Lawry steak sauce will be 2.99. A.1. sells for $4.99 per 10 ounce bottle . Should A1 go neck to neck
with Lawry’s steak sauce? Use financial information from the case to build your argument. I will not
accept a point unless it is backed up with financial data (either from the case or external research). To
get full credit your submission should have an introduction, 3 arguments for or against and a
conclusion. One of your arguments should include the effect of a change in price on A1’s gross margin.