Private Label Buyer

Soup's On

April 25, 2008
Retailers and manufacturers are laughing all the way to the bank with private label soup sales.

Maybe the hot and steamy summer months aren’t the most favorable conditions for enjoying a hot and steamy bowl of soup. And a thick ladleful of gravy may be a little too heavy in the humidity. But soon enough the leaves will change, the days will get shorter, the weather will have a nip in the air, and the body will have a growl in the stomach. When that time comes, consumers will be looking forward to meals that fill the belly without emptying the wallet.

From creamy gravies without the lumps to hearty, extra-noodled chicken soups, soups and mixes are the place to be in the grocery store, particularly on the private label side of the aisle. With the exception of a few subcategories, private label soup has seen steady growth for the last 52 weeks ending May 20, 2007. The total private label soup category increased 6.3 percent during that time period, snagging 9.0 percent of the total category, with $367.6 million in sales. Private label ready-to-serve broth rose 17.5 percent, grabbing the same amount of dollar share for the subcategory, and private label ready-to-serve wet soup rose 13.3 percent and holds on to 5.0 percent of the subcategory.

Private label mixes, including gravy, seasoning and dip mixes, also are a hot spot these days, with the entire category for dips gaining 28.2 percent for the same 52 weeks. And private label gravy has grown a solid 7.3 percent.

With the majority of categories and subcategories in private label soups and mixes showing increasing sales and dollars shares, obviously private label manufacturers and retailers are doing something right. With new formulations and more attention to retailers’ own programs, one thing’s for sure: soup’s on.

New Soup for You

When it comes to new products in the private label soup and mix category, consumers are checking labels before they put anything in their carts. They’re looking for products that are healthy and products that are upscale and gourmet. It’s a bonus for them if they can find both in the same can, jar or refrigerated tub.

These days, finding such products isn’t hard. Manufacturers and retailers are honing in on consumers’ desire for healthy products that taste good, and they’re willing to reach out with the best formulations they can.

“We’re seeing a move toward upscale and gourmet soups,” says Sterling Crim, chief marketing officer for Adams Flavors, Foods & Ingredients, Gonzales, Texas. “Consumers desire - and are learning how - to bring a more sophisticated dining experience into their everyday home meals and entertainment,” he adds.

Bringing restaurant-quality meals home means bringing the flavor without having to tip your waitress. But no matter how many new and inventive flavors manufacturers can think up and retailers can market, consumers are simply buying traditional favorites that have been revamped with higher-quality ingredients and packaging.

“Traditional is still best in terms of volume sales,” says Jere Bahner, corporate chef at Kansas City, Mo.-based Old World Spices & Seasonings. “Everybody comes out with unique flavors like pumpkin or sweet potato, and you have to come up with the cutting-edge new flavor. Still, the old reliable continues to sell. Even with regard to ethnic flavors, you’re still talking about tortilla soup and black bean soup as the mainstays.”

Other manufacturers agree, noting that traditional soups with an upscale twist are some of the biggest sellers in the category.

“We’ve done exotic flavors, and while they’re nice and people tend to like them, it’s all about being able to get recurring sales,” says James “Jimmy D” Daskaleas, vice president for Kansas City, Mo.-based Walker Products. “Repeat sales is the name of the game, so we’ve been focusing on upscale comfort foods because that’s what, ultimately, people buy.”

Bahner adds that while traditional soups may be some of the best-sellers, it’s not a bad thing to try and spice up the category, so long as it’s done with careful consideration, and maybe hitching some new products to the old products’ wagon.

“My advice when coming up with that neat, innovative flavor is to stick with what you know and add to that,” he says. “Blend soups and flavors, blend chicken vegetable by adding Asian vegetables and soy and lime flavors for a light and healthy soup. In my view, a new flavor will be more accepted by the consumer if you start with the traditional and move it over just a bit in an unexpected direction for a surprise, and a ‘wow.’”

The Organic Soup

As consumers look toward healthier foods to aid their healthier lifestyles, private label manufacturers and retailers are stocking the shelves with products teeming with natural or organic ingredients.

“The greatest impact of organic food production is finding suitable ingredients to meet the consumers’ specifications,” says Roland K.C. Au, president of Summerfield Foods Inc., Santa Rosa, Calif. “Organic soups and broths are a value-added product, and with the chains buying directly from the manufacturer, the price differentials between national brands and private label have been dramatic.” Au cites Pleasanton, Calif.-based Safeway and Wal-Mart Stores, Bentonville, Ark., as two of the largest examples of this.

“While low-carb was a shallow, short-lived fad, organics is a trend that has gained momentum for the last 30 years, and is likely here to stay,” says Dave Esh, president of Beanies of Lancaster, Lancaster, Pa.

Being a new factor that could add another brick to the food pyramid, organics presents a wide-open field of opportunity for private label soups and mixes. Consumers are asking for more organic products while retailers want to set themselves apart from the national brands.

“Organic broths and soups have emerged as a growth segment, yet they appear to be in their infancy,” notes Richard Cagley, senior brand manager for Bay Valley Foods, Green Bay, Wis. “We expect organic private label to continue its growth curve for quite some time.”

“You’ve got to be asleep at the wheel if you don’t recognize that the organic demand is here,” says John Battendieri, manager of private label sales for the SunOpta Fruit Group, Los Angeles. “And it’s important that retailers recognize this. It’s not the case for every single retailer, but those retailers who do cater to - or who are located in areas that demographically make sense - they need to be there [with organic products].”

There’s something to be said for upscale private label soups, but that’s not to say that second- or third-tier products are remaining silent. In fact, the idea of having more than one tier of private label product is a boon for the soup category, giving retailers a chance to set themselves apart as the place to go for a variety of soup products, and offering consumers products that appeal to them on different levels.

Renee Collins, marketing manager for Austin, Ind.-based Morgan Foods, notes that in the canned soup segment, reducing the sodium in the formulations has been a big hit with consumers and is having a positive impact on sales. Reducing the amount of sodium in the formulas has broadened the demographic of consumers who eat soup. Now it is not only convenient and inexpensive, it’s also healthier.

“Reducing the sodium levels attracted new consumers who didn’t typically buy soup because of the excuse that while it was a convenient meal, it was too high in sodium,” Collins says. “[The reduced-sodium formulation] has eliminated that excuse, and we’re seeing additional consumers.”

Collins adds that private label soup manufacturers are stacked up against strong competition when it comes to the national brands, with the category dominated by strongholds Campbell’s and Progresso. And with one-stop-shopping becoming increasingly popular, it’s more important than ever that the retailer set itself apart, particularly in pricing and merchandising.

“Everybody is up against the one-stop-shops in the marketplace,” Collins says, “but the retailer can offer what the consumer is expecting, or even something unique, whether it’s a premium lineup or a well-executed merchandising program. Canned soup is a strong brand-driven category, and with Campbell’s and Progresso controlling a majority of the market, store brands can set themselves apart by having a solid merchandising plan, offering dollar formulations and premium products that will all add up to a more diverse soup program for retailers.”

Talk Soup

Manufacturers agree that private label soups and mixes have a bright outlook, with blue skies and hot sales for hot soups and mixes ahead.

“The category will grow because the consumer is hungry for more organic products,” says Summerfield Foods’ Au. “The category also will experience expansion because of the new varieties of soups that are being introduced to the upscale consumer.”

Bay Valley Foods’ Cagley concurs, noting that “soups remain relevant for both consumers and retailers and continue to be on-trend for convenience, health and variety. The branded players, including store brands, continue to innovate, which maintains excitement and awareness in a large and growing category.”

But to keep the steady incline going, retailers must take a step beyond just maintaining what they’ve already got. Private label soups are an area where retailers can distinguish themselves, notes Walker Products’ Daskaleas. “Everyone knows what a Campbell’s chicken noodle soup is, but they may not know what Costco’s soup is like. And if [consumers] get a trust level with that, they’ll continue to buy it.”

Also, keep the consumer in mind when looking at new products, says Adams Flavors, Foods & Ingredients’ Crim. “Be sure to understand that your consumer wants to eat at home and to be more successful in the kitchen. They will respond to your reinvention of a more dynamic soup category if it’s offered and promoted,” Crim explains. “It’s imperative not to compromise quality ingredients and flavors for price in order to be successful in this category. Think of the impact on sales and profit if your stores are successful in getting your customers to eat at home just one more meal a week.”

Any way you ladle it out, private label soups and mixes is one steamy segment.