Soup Simmers Down

After several years of strong growth, the soup segment seems to be losing some steam. But store brand opportunities still can be found in healthier shelf-stable and premium refrigerated offerings.

As a hot, relatively inexpensive stomach-filler on a cold day, soup would seem to be the perfect comfort food during economically challenging times. But after several years of strong growth, retail soup sales took a bit of a dive in 2010 — at least on the shelf-stable side.

Data from The Nielsen Co., New York, show mainly dollar and unit sales declines for the total shelf-stable bouillon, canned chili, canned soup and shelf-stable stews subsegments, as well as for dry soup mixes and bases, during the 52 weeks ending Dec. 25, 2010 (food, drug and mass merchandiser stores, including Walmart.) Declines occurred on most of the store brand shelf-stable side, too. (See the table, p. 28).

According to a report from Mintel International, a global market research firm, the soup segment has been hindered of late by competition from other convenient foods such as frozen and refrigerated meals, sandwiches and even leftovers. The report, "Soup — US — January 2010," notes that foodservice also poses a threat, as more foodservice operators opt to promote soup as a way to expand sales.

The Mintel report adds that refrigerated soup has been the fastest-growing subsegment, enjoying 145 percent growth between 2004 and 2009. The segment is still in its infancy, the firm reports, and its explosive growth tapered off somewhat during the recession.

Hot and healthful

Despite the competitive challenges, retailers can drive growth in both store brand soup and the total category by tapping into some major consumer trends in product development. David Browne, a senior analyst at Mintel, says consumers are most interested right now in claims related to health and wellness.

Jeff Williams, consumer marketing manager, soup for Platteville, Wis.-based Bay Valley Foods, agrees.

"The health and wellness trend continues, not just in the soup category, but throughout the grocery store," he says. "Health and wellness and innovation are key areas where store brands can set themselves apart versus national brands."

But Browne notes that health and wellness represent a rather "large umbrella," including what Mintel calls "health by subtraction" — products that are low in sodium, low in fat, lighter and that sort of thing. He says his company has noted much innovation on this side, particularly in shelf-stable soups.

Rebecca Stofko, marketing manager for Austin, Ind.-based Morgan Foods, adds MSG and high-fructose corn syrup to the list of currently undesirable ingredients.

And natural ingredients and organic formulations also are of high consumer interest, says Michel Vézina, director, manufacturing business development for Anjou, Quebec-based Meilleures Marques/Best Brands.

But natural ingredients need not translate into an all-natural claim, Browne says.

"In some cases, it may not be all-natural, but it's really marketing MSG-free and that kind of thing," he says. "There has been an evolution, especially with the big players like Campbell — in marketing its Select Harvest products — with marketing what is in it and what is not."

As for ingredients that do make their way into soup, Browne points to vegetables as a positive draw. Moreover, he says retailers should clearly show the health-minded benefits on the product's label — much like ALDI and Target are doing on the front of their respective Fit & Active and Archer Farms Simply Balanced packaging.

"I think the main takeaway is that consumers are very eager to seek out products that are clearly labeled [as more healthful]," he says. "To give you some perspective, 68 percent of consumers in our survey said they look for sodium content, and it's very important to their purchase decisions."

Meet other trends

Outside the health and wellness arena, Stofko points to heightened interest in broth and stocks in aseptic packaging.

"While cans are the dominant structure within the wet soup category, alternative packaging continues to grow, driven by growth within aseptic broth," she says.

Vézina agrees that packaging's major volume on the shelf-stable side is found in cans, but he says Tetra Pak's packaging is gaining volume year after year.

As for refrigerated soups, Browne notes that health and wellness attributes are not as important as premium appeal.

"We're more often seeing premium-positioned products, products that are even restaurant brands such as Panera or chef-inspired," he says, "not to mention a whole host of retailer brands that are positioned as premium. So they are not necessarily going to be low-fat or low in sodium, but consumers are buying them believing they are richer and better-tasting."

Here, convenience-minded innovations also stand to drive growth, Browne adds. He points to easy-open containers and portable microwavable packaging for the workplace as examples.

Rethink pricing, merchandising

To jumpstart soup sales, retailers also could tweak promotional and merchandising strategies a bit.

Stofko notes that the big national brands have been slashing prices, narrowing the gap between themselves and store brands. Retailers, in turn,

have been cutting prices to gain a competitive advantage or to react to other retailers' price cuts.

"These price cuts and heightened promotions don't appear to be working," she says, "as both dollar sales and unit sales have been off. However, the question is, 'Would the situation be worse without these efforts?'"

Source: The Nielsen Co. Food, drug and mass merchandiser stores, including Walmart, for the 52 weeks ending Dec. 25, 2010 (prepackaged, UPC-coded products only).

Note: Nielsen includes refrigerated and frozen soups under the "Frozen Remaining Prepared Foods" category, which also incorporates frozen plain pasta, frozen sauces and gravies and frozen taco filling. Dollar sales for the total Frozen Remaining Prepared Foods category were $937.2 million (up 3.6 percent over the previous 52-week period), while private label reached $243.1 million (up 7.5 percent). Unit sales were $265.2 million and $72.0 million, respectively, reflecting gains of 4.0 and 10.4 percent over the previous 52-week period.

That's a question certainly worth evaluating.

Williams, meanwhile, believes that stronger merchandising support could help store brand soup combat the aggressive support of the national brands. Soup's versatility, as an ingredient in another dish, a meal part or a main course, definitely opens up oodles of merchandising opportunities for retailers willing to get a bit creative.

And retailers that find ways to communicate to shoppers soup's convenience, ease of use and relevance to their lives also stand to grow both their brands and the category.

"We believe the soup category will continue to be relevant and important in consumers' lives as an easy meal," Williams adds.

Don't "hide" positive attributes by limiting them to the ingredient statement — call them out on the label.

Do consider health-minded initiatives such as reducing sodium and other undesirable ingredients.

Do think outside the can when it comes to packaging; consider aseptic and other alternative formats.

Don't rely solely on price-related promotions to drive soup sales; get a bit creative on the merchandising side instead.

The Scoop on Soup

According to "Soup — US — January 2010," a report from global market researcher Mintel International:

• Consumers aged 55 to 74 represent the fastest-growing soup consumer segment and are most likely to have the largest stockpile of soup products at home.
• Hispanic consumers lag the average in soup usage, boasting only a 57 percent household penetration compared to 82 percent overall.
• Weekday lunch is the most popular eating occasion for soup, followed by weekend lunch and weekend dinner.
• Women tend to buy better-for-you soup that is low in sodium and provides a serving of vegetables, suggesting an interest in overall health.
• Men tend to look for soup products that are high in protein, suggesting they are seeking products that provide satiation or support pre-/ post-workout activities.