Embracing the Power of Sauce: Campbell Soup’s Focus on Rao’s
During a recent investor day, Campbell Soup, known for its soup products, shifted the spotlight to its mantra that “Sauce is boss.”
This emphasis revolves around Rao’s, a line of premium jarred pasta sauces featuring flavors like vodka, roasted garlic, and the iconic marinara. Following Campbell’s $2.7 billion acquisition of Sovos Brands, Rao’s has become a pivotal element in the company’s strategy to drive growth and expand its presence in the high-end product market.
“We must maintain our focus on the core. The sauce is paramount,” stated Mick Beekhuizen, head of Campbell Soup’s meals and beverages division, in a discussion about Rao’s. “We must not lose sight of what truly matters.”
Originating from a renowned New York City restaurant established in the 1890s, Rao’s currently generates nearly $1 billion in annual sales with a double-digit growth rate. Campbell anticipates sustained growth in the high single digits, setting an ambitious target for the brand as it matures.
While Rao’s has expanded into various product categories such as pasta, frozen entrees, pizza, and soup, Beekhuizen and CEO Mark Clouse emphasized that sauce will always remain the cornerstone of the brand, driving the majority of its sales. The company estimates that 75% of revenue will stem from sauce, with the rest coming from related segments.
Clouse assured analysts of Campbell’s unwavering commitment to preserving Rao’s quality, prioritizing long-term brand integrity over short-term revenue gains. Rao’s growth potential remains largely untapped, with a 400% revenue increase since 2019 and penetration into half of all U.S. households within the past year, despite offering only 60% of the SKUs compared to Campbell’s mainstream sauce brand, Prego.
In recent years, Rao’s introduced innovative flavors like caramelized onion sauce and the ultra-premium White Truffle Limited Reserve, offered in special packaging at a premium price point. While focusing on sauce innovation, Campbell Soup sees opportunities for growth in ancillary products such as frozen pizza, entrees, and soup within the Rao’s brand.
Amidst economic challenges, Rao’s has positioned itself attractively in the market, appealing to both high-end consumers seeking premium quality and budget-conscious shoppers viewing it as a cost-effective alternative to dining out. The brand’s appeal spans across all economic demographics, with particularly strong growth among millennials, outpacing the overall sauce category.
“We are excited to witness younger consumers embracing this distinctive brand, laying a solid foundation for Rao’s to become a household staple in the future,” shared Beekhuizen with investors.