Heinz 57 $4.79/ 10oz $0.48
Private Label Steak Sauce $3.49/ 10oz $0.35
Lawry’s Steak Sauce $3.99/ 11oz $0.36
The previous graphs display the main steak sauce competitors present in 2003, categorized on market share and price. A.1. is of the highest quality is priced as the most expensive steak sauce. Heinz 57, which offers similar qualities, is priced more evenly with A.1. than Lowry’s, which also offers similar qualities The private label steak sauces are generally the lowest quality and price. A.1. Steak Sauce has been able to maintain customer loyalty due to strong brand equity for over 150 years. Several other large and established corporations have also entered into this market throughout the years, including Unilever and Heinz and have created an environment of competitive pricing. This industry also requires a large initial investment due to economy of scale.
Strategy
Corporate Level Strategy
Kraft Foods Incorporation’s strategic actions flow around the central vision of satisfying its consumers through providing healthy and convenient food products( a). “Our vision tells the world – our employees, customers, consumers, and the communities where we make and sell our products – what we care about” (Vision and Values 1). The corporation structures itself around these six main values (vision and Values 1):
- Innovation
- Quality
- Safety
- Respect
- Integrity
- Openness
Business Level Strategy
As a division of Kraft Foods Incorporation, A.1. Steak Sauce has its own strategies that side with the corporation’s goals. A.1. satisfies consumers through providing them with a product that is set apart through its high quality and strong brand equity. This is a distinctive value for the firm.
SWOT Analysis (Kerin and Patterson).
Strengths
- A.1. is distinguished from competitors through the high quality and brand equity associated with the product that this firm is offering.
- The company holds a first mover advantage as the original steak sauce producer
- Consumers maintain an exceptionally strong association between A.1. and beef products.
- “Nine out of ten steak houses serve A.1.”
- The company has a large market share.
- A.1. is the brand leader and is in a stable position.
- Due to the fact that the firm utilizes Kraft Foods Incorporation’s distribution network, the supply of A.1. is easily widespread.
- Strong financial position of Kraft Foods and A.1. is also a strength.
Weaknesses
- One of the weaknesses of this brand is the fact that consumers strongly associate the product with steak. This makes the prospective for successful brand extensions considerably difficult.
- A.1.’s past efforts to expand into the poultry category were extremely unsuccessful.
- Individuals require only a small portion size of steak sauce to apply to their meal
- Consumers typically use A.1. on a sporadic basis (Thompson 1).
- This information combined with the reality that only small portion sizes of the product are used is a substantial weakness.
Opportunities
- A.1. Steak Sauce has the opportunity to develop many strategic alliances or joint ventures with other firms.
- The company also has the ability to expand upon its current relationships with distributors and suppliers, and to extend its current distribution network.
- A.1. could also attempt to develop its relationship with its consumers through marketing research and targeted promotions.
- The organization has several advantages over Lawry’s that could be used to A.1.’s advantage.
Threats
- The Launch of Lawry’s Steak Sauce is the immediate threat.
- A.1. cannot afford to lose their weekend sales over the Memorial Day holiday.
- Lawry’s has directly threatened A.1. through price competition.
- The company is facing the threat of losing a vital partnership with Publix supermarket due to the introduction of Lawry’s.
- The steak sauce industry and the beef industry are directly connected; therefore, the price and media attention which beef is receiving directly affects the steak sauce industry.
Strategic Alternatives and Evaluation
A.1. has multiple options to consider. The company must determine the competitive techniques needed to counter the Lawry’s launch whether these are offensive tactics or defensive techniques A.1. could further develop its distribution channels with its suppliers and distribution channels such as restaurants and grocery stores. Additionally, the company could develop a new marketing strategy in order to compete against Lawry’s.
Offensive Tactics
If A.1. Steak Sauce chose to execute a frontal assault on Lawry’s, this would incorporate matching its competitor in significant categories. A.1. would need to lower its price to match that of Lawry’s and mimic the promotion and distribution techniques of its competitor. A.1. could also choose to react with a flanking maneuver; which would determine the area Lawry’s is weakest in, and then attack this market segment. Finally, the company could employ the encirclement technique where A.1. would overwhelm Lawry’s with product variety, price, availability, and distribution.
A.1. could lower the inducement for attack by altering the prices of its steak sauce making them artificially low thus reducing Lawry’s expectations for future profits within the steak sauce segment.
Defensive Tactics
A.1. may be able to raise structural barriers in reaction to Lawry’s entry by impeding its competitor’s means of attack through raising entry barriers. A.1. would build exclusive agreements with its suppliers and distributors and/or participate in backward vertical integration. A.1. would then reduce unit costs through increasing scale economies. A.1. would produce various new products, thereby expanding its own product line and closing off any entry points into the market.
Supply Chain
A.1. needs to explore the possibility of strengthening relationships with the assorted suppliers for their firm by forming exclusive alliances with established suppliers to create a disadvantage for Lawry’s. A.1. needs to bolster affiliations with the distributors of A.1., such as grocery stores and restaurants further assuring that A.1.’s shelf placement is ideal and that A.1. maintains a large percentage of the shelf space within their product category. A.1. needs to work with these stores to secure end cap displays, predominantly in the beef section of the stores. A.1. expands distribution throughout various restaurants to raise consumer’s exposure to the product as well as forming alliances with major restaurant chains for the placement of A.1. on each table within the venue. The company should explore partnering with restaurants such as Ruby Tuesday, Applebee’s, or Dave and Busters to form a specific segment of the menu centered around beef flavored with A.1. sauce.
Promotion
A.1. should also explore offering a free giveaway with each bottle of A.1. Steak Sauce purchased, such as grilling tools, pending the submission of their information to the company. Lawry’s will be launching their new steak sauce on April 1, 2003 which coincides with March Madness of college basketball. This is a great opportunity to promote A.1. Steak Sauce. By sponsoring barbeques outside the basketball venues and/or outside of large grocery store chains, such as Publix, particularly over the Memorial Day weekend, and throughout March Madness A.1. could secure valuable marketing to promote its product. A.1. could distribute menu booklets, full of recipes using A.1., to consumers who participated in these events, and offer an optional mailing list to notify customers of future promotions. A.1. can also consider, through their existing relationship with beef suppliers, offering free samples of their steak sauce to individuals in supermarkets in the same manner as Costco.
Assessment of Alternatives
Offensive Tactics Assessment
Executing a frontal attack on Lawry’s would not be advisable. A.1. is currently the leading brand in the steak sauce industry. Reducing the price of A.1. would diminish consumer’s perception of the quality which is a key characteristic of the brand. A.1. has a unique positioning of high quality and brand awareness, and the company is therefore able to charge a higher price for this product. Past evaluations have shown that A.1.’s promotion and distribution techniques have been extremely successful in the past.
Defensive Tactics
Raising structural barriers would provide some benefits to A.1. Steak Sauce. The company would face fewer challenges in signing exclusive agreements with distributors and suppliers than its competitors because of its extensive history within this industry. A.1., however, needs to exercise caution in performing this task to guarantee that its own brand image is not stained. A negative impact could occur if distributors and suppliers began to feel threatened by A.1. Steak Sauce. While it is possible that some line extensions of A.1. are successful, venturing down this road is not advisable. Lawry’s is particularly successful in the spice and seasonings market making it extremely difficult for A.1. to develop offerings within this business and dominate this segment to close off this entry point. All examinations show more benefit for the firm if A.1. continues to concentrate efforts on alternate strategies.
There are several ways in which A.1. Steak Sauce could elevate consumer’s exit barriers. Using psychological approaches to make switching brands appear too risky A.1. can convince consumers that they are dependent upon its product. A.1. should develop loyalty programs to enhance incentive for frequency of use and breed emotional encouragement for customers as well. A.1. should sponsor sports teams or other venues that occur at the same time as prime barbeque season further developing its customer relationship management program with the goal of gaining valuable data about its consumers and increasing customer retention. If A.1. acquires further knowledge about its consumer base and implements this information correctly, the company will ensure more consumer satisfaction.
Supply Chain
As discussed previously, strengthening its relationships and creating exclusive agreements with the distributors and suppliers is a possibility through non-hostile avenues. For example, A.1. should focus on building a better-quality communication network between itself and its distributors and suppliers so finding what each other needs is better understood. It is necessary to retain the largest percentage of shelf space within grocery stores because this has a direct correlation with the sales level of an item. The company should perform research to find which location within the shelf layout is most advantageous for its product, and then request that the distributors grant this position. A.1. can guarantee that the placement of its product is in high traffic areas and are easily accessible. During the attempt to acquire deeper partnerships with restaurants, A.1. should highlight the fact that “nine out of ten steakhouses serve A.1. and the sight of A.1. Steak Sauce on a table prompts seventy percent of consumers to think about steak. The company should point out to the restaurant managers that patrons with steak orders result in higher revenue for the restaurant (A.1. Sauce Derives Its Name From Utterance of a King, 15).
Promotion
The company traditionally uses about 15 percent of its operating revenue on advertising (Kerin and Peterson p.633). Therefore, A.1. has a robust budget to utilize in promoting its product. A.1.’s advertising goals should focus to increase frequency, reach, and penetration. Providing grilling tools as a giveaway would communicate the message that A.1. is the leader in the steak sauce category as well as provoke psychological responses from consumers. With this offer the consumer would imagine the smell of a steak on a barbeque and the taste of A.1. Steak Sauce on their meat. Requiring the customers to submit personal information before receiving the giveaway would assist in bolstering the company’s consumer-relationship management database. Conducting barbeques outside of college basketball games and supermarkets throughout March Madness and over the Memorial Day weekend would promote abundant exposure for A.1.. The grilling would expose consumers to the sight, smell, and taste of A.1. on a mass scale and after the event the smell of a barbeque may evoke the memory of A.1. giving the company more value for the dollar Providing individuals with menu booklets, A.1. could increase the frequency of its message through the consumer using A.1. in more of their home cooking. By offering the option to opt-in to a newsletter to consumers A.1. could conduct direct marketing to individuals who have expressed prior interest in its product. Providing free samples of A.1., through its relationship with beef suppliers, at supermarkets will sparking more interest from the hesitant consumers since many consumers insist upon experiencing a product before committing to purchase it.
Conclusion
It becomes clear, through the analysis of each alternative, which options A.1. Steak Sauce needs pursue with the pending threat from Lowry’s. The company needs to raise structural barriers through the creation of agreements with distributors and suppliers using caution and elevate consumer’s exit barriers. The firm will build better and deeper relationships with the members of its supply chain. A.1. will assure that its product is present on key shelf locations, specifically near the beef section. The firm should also promote its steak sauce to various restaurants to increase visibility. A.1. needs to perform the sponsorship of athletic events that are primarily taking place during peak grilling season. A.1. also needs to perform barbeques outside of the venues holding March Madness events and outside of the supermarkets to spur consumer awareness. Finally, A.1. needs to consider using the grilling set giveaway using the Brand imprinted on the handles to those tools to keep the marketing objective of continued brand awareness.
References"A.1. Sauce Derives Its Name From Utterance of a King." Metropolitan News-Enterprise 18 Nov 2004 15. 13 Apr 2007 <http://www.metnews.com/articles/2004/rem iniscing111804.htm>.
Kerin, Roger, and Robert Peterson. Strategic Marketing Problems: Cases and Comments. 11th Edition. Upper Saddle River, NJ: Pearson Prentice Hall, 2007.
Thompson, Stephanie. "Steaking Out The Parking Lot." Brandweek 19 Mar 1999 1. 13 Apr 2007 <http://findarticles.com/p/articles/mi_m0BDW/is_13_40/ai_54266889>.
"Vision and Values." Kraft Foods. 10 Apr 2007. Kraft Foods International. 10 Apr 2007 <http://www.kraft.com/profile/vision_values.html>.