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Chilled Soup Gains 8.3% - January 1, 2008

Chilled Soup Gains 8.3%

Some brands are growing faster, but private label still has 88.8% of the category.

by Denise Leathers

Private label continues to drive gains in the refrigerated soup category, which saw dollars climb 8.3% in supermarkets in the 12 weeks ending Nov. 4, according to Information Resources, Inc., Chicago.

But several branded players have been making inroads, scoring higher gains than those of store brands — albeit off small bases. With total annual sales of only $108.5 million over the past year, the upside potential is enormous. After all, total soup sales (including canned) rang up nearly $4 billion in supermarkets this past year.

Canned soup is dominated by mega-brands such as Campbell’s and Progresso. But 88.8% of refrigerated soup dollars in supermarkets in the most recent quarter went to store brands, which gained 9.0% in dollars and 5.9% in units. What’s more, 74.8% of private label refrigerated soup dollar sales had merchandising support during the period, up by 22.6% from a year ago.

Refrigerated soup brands have very small shares — Boston Market, the leading brand, owns only 4.1% of the category. But it posted stronger gains than private label, rising 26.1% in dollars. Some 47.7% of its sales had merchandising support during the recent 12 weeks — the highest of any of the top 10 brands.

A Boston Market spokesperson says its success has been driven by quality ingredients, chef-inspired recipes and convenience — all its soups are ready to eat in three to five minutes.

Several other branded players also have been scoring double-digit gains. But that’s hardly universal — some branded vendors have taken serious hits and appear likely to abandon the category.

Hurting Growth?

Some branded manufacturers say retailers are hurting growth by shunning branded innovation: With private label performing fairly well, they don’t want to risk cannibalizing sales.

Jim Smith, senior vp of sales at The Original Soup Man, New York, says there is room for both private label and national brands, noting that his company’s product caters to a different consumer than most store brand programs.

Retail soup programs run the gamut. The average unit price for the category comes in at $4.65, with private label units averaging $4.73. The difference lies not only in quality but in the unit sizes. Measured by volume, the total refrigerated soup category averages $3.23, with private label at $3.21. Drastic differences in brand data suggest you’re looking at everything from watered-down tomato broth to shark fin soup.

Few dispute that retailers are still testing what will and won’t work in their soup programs. With more brands experiencing success, observers expect private label’s share to drop somewhat over the next year.

Look for accelerating growth from healthier options, including lower sodium, all-natural, vegetarian/vegan and, most notably, organic. Smith sees the organic segment as “low-hanging fruit,” and in line with his target customers’ needs. But organics aren’t for everyone, since the 20%-30% premium can be a barrier.

“We actually cut back from five to three organic soups,” reports Jerry Shafir, president of Chelsea, Mass.-based Kettle Cuisine. He cites the high cost of organic ingredients like tomatoes, peppers and onions.

Boomers Are Key

Whether organic or conventional, bold, ethnic flavors remain popular, reports Shirley Leonard, marketing manager at Medina, Ohio-based Sandridge Food Corp. “As baby boomers age,” she explains, “their taste buds lose potency, and their palates demand something stronger.” Two of the company’s newest flavors, Cactus Chili and Spicy Jumpin’ Bean and Vegetable, fit the bill.

“Unlike other categories in the deli where it’s hard to change flavor profiles,” says Bob Sewall, sales and marketing vp at Blount Seafood, Fall River, Mass., “the soup category lets supermarkets pick up on trends quickly” – a key to competing with restaurants.

But retailers have to change things up often, perhaps with a soup-of-the-month program, observers say. In addition to category mainstays, supermarkets should offer unique or seasonal varieties, or consider having their own signature flavor.

This means updating offerings with new soup flavors, like restaurants do, according to Shafir. Variety is the key to growth.

“Two or three soups won’t cut it,” says Sewall. “The consumer won’t feel that the store is really behind the program. You either go all in or all out.”

Boston Market offers 17 varieties of chilled soups, such as Shrimp Bisque and Chicken Tortilla, and it plans to introduce a Gazpacho this spring. A spokesperson says research shows that having a variety of flavors to choose from increases sales. The flavors don’t tend to cannibalize each other, but rather, increase the incidence of purchase, she says.

Vendors say it’s best to create a separate, destination soup section near the deli or home meal replacement area, complete with signage. Soup Man’s Smith notes that soup is too often merchandised “between the potato salad and the hummus, or wherever there’s room.”

You miss a big opportunity by not giving soup real visibility, says Amy Brooksbank, marketing manager of Portland, Ore.-based Harry’s Fresh Foods. “Consumers are looking for quick and easy meal solutions but might not think of soup unless there’s an attractive display with appropriate signage placed where they can’t miss it. Our sales figures show that where soup is given prominence, sales are strong,” she says.

Merchandising hot and refrigerated soups together makes them easier to find, says Leonard. Shoppers buying hot soup for immediate consumption can also stock up on chilled soup for later, she points out. Brooksbank adds that refrigerated soup sales are at least six times greater when they’re placed with hot soups rather than alone.

Secondary locations are also wise. “Cross-merchandising seafood soups in the seafood department is a win-win,” says Trina Montalbano, national business development manager at Atlantis Foods, Lantana, Fla. The practice builds consumer awareness of soups and produces incremental sales for the seafood department, she explains. Seafood buyers are also less likely to balk at higher price points of seafood-based soups.

New Locations

Some retailers are putting an additional soup station in the meat department where consumers can find protein-heavy options such as beef stew and chili. Other potential sites include the natural/organic section or the international department for Asian-style miso broth-based soups or Mexican-inspired recipes.

Original Soup Man is testing spot merchandisers in the canned soup aisle. “That’s where the action is,” says Smith. He adds that most of the recent growth in canned soups has been at the high end, dovetailing with his line.

While demos remain the most popular merchandising tool for refrigerated soups, cross-merchandising also pays. “We had a couple of retailers include 24 ounces of our spiced pumpkin soup as part of their pre-packaged Thanksgiving meal,” says Blount’s Sewall. You can do this every day with meal deals that include soup.

Multiples pricing and BOGOs also can work, although some vendors prefer more frequent but less deep promotions lest shoppers become trained to buy only on deal. Finally, says Smith, retailers should promote soup year-round, even in summer. After all, refrigerated soup is a good solution even in warm weather, when people don’t like to cook.

—Contributions to this story by Warren Thayer