Essay About Dominant Brands And Unilever’S Lawry

A1 Steak Sauce
Situation Analysis  IndustryAs of 2002, there are two dominant brands in the steak sauce category, A.1. and Heinz 57, with a combined dollar share of 70%.  The ‘Private Label, and ‘Other’ brands share the remaining 30%.Steak Sauce Shelving and Market Shares, 2002 Items CarriedShelf FacingsDollar ShareVolume ShareA.1. Original3654%46%A.1. Flavors48Heinz 572416%13%Private Label1314%19%Other Brands5816%22%Category Total1529100%100%Retail margins are approximately 30% in the steak sauce category; retailers only rarely reduce their margin on a percentage basis for in-store promotions – the manufacturer must reduce its margin to enable money-off promotions at the retail levelAs of Spring 2003, Unilever’s Lawry’s brand is about to launch a steak sauce to compete directly with A.1.Lawry’s currently has a 50% market share in the marinade category and is looking to capitalize on its success with the new sauce Financial Results, 2002 ($ in Millions) KraftUnileverTotal Revenue$29,723 $48,270 Operating Income$6,114 $5,041 Income After Taxes$3,398 $2,441  CompanyKraft Foods is the largest food company in the U.S.Kraft spends 15% of its operating revenue on consumer marketing efforts/advertising10% of A.1. sales occur over the week of Memorial Day and July 4th (each)A.1. brand planning four free standing inserts (FSIs) in 2004, spending $1M in each of four quarters ($0.50 off coupon)Failed launch of A.1. branded marinade product in 2001, successful re-launch in 2002A.1. Steak Sauce & Marinade Operating Profit ($ in Millions) 20022003Annual MetricsA.1.MarinadeTotalA.1.MarinadeTotalRevenue$150 $15 $165 $150 $25*$175 Operating Profit$60 ($10)$50 $62 ($7)$55 *2003 Marinade revenue assumed with new product launch  TrendsThe marinade category is growing by 15% per yearRevenue remains flat in the steak sauce categoryProblem DefinitionLawry’s is launching a new steak sauce brand which will compete directly with A.1. and will be priced significantly lower ($4.99 vs. $3.99 per bottle) and ($0.50 vs. $0.36 per oz.)Steak Sauce Retail Everyday Shelf Pricing, 2003 Retail Shelf PriceSize            (oz.)Retail Shelf Price/oz.A.1.$4.99 10$0.50 Heinz 57$4.79 10$0.48 Private Label$3.49 10$0.35 Lawrys$3.99 11$0.36 Lawry’s is negotiating with Publix supermarkets for the upcoming Memorial Day 2003 ad with a “2 for $5” promotional price point, which is half of the retail price of A.1.  Management needs to quickly decide whether they want to match the Lawry’s promotional price.Alternatives and EvaluationAlternativeDescription / RationalizationRisksDo NothingA.1. has strong brand equity and should not be diminishedOrder-of-entry model suggests only 10% share for Lawry’sRetention of margins and brand equityLawrys price promotions could erode market share and margins if we are forced to match pricing laterDevelop A.1. Line ExtensionLower priced alternative to original A.1. that compares to Lawry’s brand directlyPrevent margin and brand erosionPrevious launch of poultry product was a failureCould diminish brand or cannibalize salesMatch Lawry’s PricingReducing the price of A.1. to match Lawrys regular retail and promotional pricingPrevents losing market share and success of Lawry’s brandSignificant margin reductions and possible erosion of brand perception with long-term consequencesBeat Lawry’s PricingAggressively undercut Lawrys pricing to prevent any market share erosion Might stifle or even cause failure of Lawry’sUnilever has deep pocketsWill likely counter our pricing maneuvers Price Reduction but not MatchLower the price or offer aggressive couponing to avoid losing significant margin or market share to LawrysAllows for more competitive pricing without greatly diminishing A.1. brandMargin erosion could be permanent and will likely prevent meeting corporate profit goalsRecommendation and Justification