While no one enjoys recessions, the makers of private label sauces have to be smiling a little bit about one aspect of the country’s recent economic downturn - the worse the economy got, the less people ate out. Forced to turn to their own pots and pans in what once may have been their seldom-used kitchens, consumers hit upon using store-bought ready-made sauces to spice up their home cooking attempts.
As a result, sauce sales have been up and look likely to maintain their category growth. Indeed, look for 4.2 percent compound annual growth through 2015 in the ethnic sauces category alone, predicts Mintel International Group Ltd., Chicago. U.S. sales in that subcategory of sauces rose 4.8 percent in 2009, Mintel estimates.
Sauces that are hot with consumers today embody exotic flavors from Asian, south of the border and elsewhere. Convenience needs to be a key selling point for them as well. Shoppers want one-step usage, looking for sauces that simply pour onto foods rather than ones that are part of larger recipes. Popular products also increasingly address health concerns by advertising they’re lower in sodium or use natural or organic ingredients, sauce purveyors and analysts agree.
“Spicier, ethnic and healthier items were the driving forces in the category,” reports research firm Euromonitor International, Chicago. Sales of sauces, dressings and condiments rose 3 percent in 2010 to $17.8 billion with volume growth for the category of 2 percent, well above the 0 percent compounded annual growth rate seen for the category from 2005 through 2010, Euromonitor reports.
“Americans grew to love ethnic foods through restaurant experiences,” Euromonitor states in a report on sauces issued in September, 2010. “They also showed increased appreciation for spicier foods…Spicier and ethnic flavors such as chipotle then migrated from foodservices to the home as consumer looked to recreate the unique new flavors that they had tried in restaurants.”
One factor that might throw some lumps in the sauce pot this year is rising commodity prices and the subsequent stress they put on margins.
“A cold winter in the state of Florida and in Mexico led to a smaller tomato harvest in early 2010,” Euromonitor notes in its report. That translated into rising tomato prices.
Ann Stettner, a co-owner of Greenville, N.Y.-based Wild Thymes, a branded and private label sauce maker, adds that she recently was quoted a price on garlic by a supplier “and it was astounding how much it had gone up.” Commodity price increases anywhere from 30 to 100 percent are becoming common, she says.
With forecasts of rises in everything from tomato to garlic prices, sauce makers could find margins squeezed. Retailers try to keep a 20-30 percent price difference between their private label sauces and national brands. In pasta sauce, for example, that’s meant holding prices in the $2.99 to $3.99-a-jar range. Rather than raise that, some retailers have opted instead to take jar sizes down from 26 ounces to 24 ounces.
Another potentially sour taste note in the sauce this year could be continued promotional spending by national brands trying to buy back market share lost in the recession. While overall spaghetti sauce sales rose a scant 0.21 percent in dollar terms for the 52 weeks ended Oct. 3, 2010, according to Chicago-based data supplier SymphonyIRI, sales of private label pasta sauce rose 4.24 percent, for example, showing the buying shift to private label.
Sauce makers at the Private Label Manufacturers Association annual show in November were loathe to discuss discounting of national brands that they compete against but they acknowledged it was happening. Indeed, a scan of supermarket ad fliers in November showed several retailers advertising national brand pasta sauces on special for as little as two jars for $3 which more than wipes out any private label pricing advantage.
American ethnic food tastes were broadening even before the recession and today span the culinary globe. “In the old days, it was just Chinese flavors Americans came to enjoy,” Stettner notes. “Then it was other Asian [flavors]. Now its Indian food that has made a move, and Korean food and anything from south of the border. Thai food also is huge.”
Asian remains hot, agrees Mike Klanac, senior director of marketing with The Carriage House Companies, Inc., Fredonia, N.Y. “The hottest trend in the Asian category is Pan-Asian. Most Americans are familiar with Chinese and Japanese food but a recent wave of Pan-Asian cuisines has begun to surface. While Thai, Vietnamese, Indian and Korean cuisines are leading the charge, Filipino, Laotian, Malaysian and Indonesian cuisines also show strong growth,” he says.
While sauce flavors are trending toward the exotic, preparation needs are not. “What’s doing well now are things that are really simple, things that are ready-to-eat sauces, not component sauces,” says Stettner.
Another supplier, Victoria Packing Corp., Brooklyn, N.Y., is trying to capture that easy-to-use wave with its line of what it calls simmer sauces, sauces such as a marsala sauce and a cacciatore sauce that can be poured over veal, chicken, fish or pork and then cooked together, explains Brad Denis, national sales manager.
Victoria also is offering a low-sodium tomato sauce, aware of consumer concerns about sodium in prepared foods. The processor achieves a lower sodium sauce by not using tomato paste in its recipe. Paste is high in sodium, Denis explains.
Two Guys Food Group, Bergenfield, N.J., also touts lower sodium levels in its tomato sauce which also is gluten-free and has no added sugar. The fewer ingredients and the simpler they are, the better to appeal to a growing base of consumers, notes Scott Stark Two Guys’ CEO.
Euromonitor echoes his sentiments. “Shoppers are also seeking out products which make natural claims with clean labels that list a few recognizable and pronounceable ingredients rather than a long list of unpronounceable chemical additives,” its sauces report notes.
Showing It Off
When it comes to merchandising, cross promoting sauces with related products definitely helps sales as does couponing, suppliers agree. And glass remains the packaging of choice for pasta sauces and others where consumers want to be able to clearly see the product.
Retailers such as Wegman’s, Albertson’s and Safeway are doing the most effective jobs in selling their private label sauces, industry watchers say. Costco also is doing an effective job, offering larger 40-ounce jars.
In addition to sending coupons for private label sauces to holders of shopper loyalty cards, retailers also are offering recipes and holding in-store samplings to encourage sauce purchases.
While grocery retailers will often aim their promotions at female shoppers, “it’s actually men who regularly head for the sauce aisle to see which sauces are new and different,” says Klanac. Retailers can use their sauces as the hook to draw more male shoppers, he advises. “Entice male shoppers into stores through their soft spot - outdoor cooking. For example, line up your hot sauces. Pyramid them in order of heat, placing them across your display shelf above the barbeque area,” he says. “Signs are exceptionally important to the display.”
Expect the category to continue strong in 2011 and beyond, predicts Euromonitor. “The cooking from scratch trend is expected to remain relevant even as the U.S. economy makes a slow recovery,” it notes.
“Consumer demand for products that make cooking easier and more flavorful, such as sauces, dressing and condiments, will remain strong.”
That’s news that should have sauce suppliers toasting their good fortune with their own sauces.