Food‘Sauce is boss’: How Campbell Soup is turning Rao’s...

‘Sauce is boss’: How Campbell Soup is turning Rao’s into its next $1 billion brand

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For a company known for soup, Campbell spent much of its recent investor day reminding people that “Sauce is boss.”

The phrase centers around Rao’s, a line of jarred pasta sauces that includes vodka, roasted garlic and its iconic marinara. The crown jewel of its recent $2.7 billion purchase of Sovos Brands, Rao’s is a key part of the New Jersey company’s efforts to accelerate growth and increase its exposure to premium products.

“We need to make sure that we stay focused on the core. The sauce is really important,” Mick Beekhuizen, who heads Campbell Soup’s meals and beverages division, said in an interview where he discussed Rao’s. “We cannot take our eye off the ball on what really matters.”

Rao’s, which traces its roots to a legendary New York City restaurant that dates back to the 1890s, currently has just under $1 billion in annual sales and is posting double-digit growth. In the long term, Campbell predicts growth to moderate to the high single digits, an enviable target for a maturing brand.

While Rao’s has branched out into pasta, frozen entrees, pizza and soup, Beekhuizen and CEO Mark Clouse said it will always be sauce — the foundation of the brand — that will command the lion’s share of its sales. The company estimated 75% would come from the sauce, with the remaining from adjacent categories.

Rao's, Sovos Brands

Optional Caption

Retrieved from Sovos Brands.

 

Clouse told Wall Street analysts that Campbell would be “relentless” in protecting the brand’s quality. “I’d much rather have that long term than compromising to get a couple extra million of revenue that is going to undermine the brand,” he said. 

Rao’s has barely tapped into what’s possible when it comes to its growth prospects, executives said, despite revenue increasing 400% since 2019. The product has been purchased in the last year by half of all U.S. households and its SKUs are only 60% of those offered by Prego, Campbell Soup’s mainstream sauce brand.

In 2023, Rao’s introduced a caramelized onion sauce. Earlier this year, it debuted White Truffle Limited Reserve, an ultra-premium version that comes in special packaging. A 19-ounce bottle of the White Truffle sells for $17 on Rao’s website, compared to $9 for a 24-ounce bottle of the caramelized onion. A bottle of traditional Prego typically retails for about $4.

To be sure, while Rao’s innovation at Campbell Soup is going to focus on the sauce, Beekhuizen said there is ample room to grow so-called ancillary products, too. He highlighted frozen pizza, frozen entrees and soup as three growth areas where Rao’s currently has a small market presence. 

I don’t want to rush and I want to make sure that when we get products out there, that the consumer loves our product,” Beekhuizen added. “That’s important across our portfolio, but within Rao’s, it needs to be that elevated experience.”

Rao’s has found itself in an attractive position in the marketplace as consumers cut back on spending due to inflation. Higher-end consumers are attracted to Rao’s because of its premium appeal, while lower-income shoppers see it as a cheaper option than dining at an Italian restaurant. 

The brand, according to Campbell Soup, is growing among all economic demographics. Rao’s is especially thriving with millennials where it’s growing nearly three times faster than the rest of the sauce category.

“We are thrilled to see younger consumers embrace this ultra-distinctive brand and believe this provides a strong foundation for us to build Rao’s into a household staple in the future,” Beekhuizen told investors.



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