Turn Up The Heat
Faced with increased competition from national brand manufacturers over low prices, retailers might need to focus on more premium, fl avorful options.
It seems there's a little bit of a Barefoot Contessa in all of us, albeit a frugal one. As more consumers attempt to duplicate the restaurant experience at home, they are relying on helpers such as authentic ethnic sauces and marinades to complete their home-cooked meals. And increasingly they are turning to premium private label renditions to save money without sacrificing flavor. But consumers' renewed interest in affordable, flavorful store brands looks to have awoken a sleeping giant in the form of national brand manufacturers.
"We are now seeing the national brands providing more promotional dollars to retailers," says Terri Fubio, manager of private label sales at DelGrosso Foods, based in Tipton, Pa. "This national brand strategy results in increased branded sauce sales and has somewhat stifled the double-digit growth we saw last year in private label."
After posting strong dollar sales increases in 2009 and the first part of 2010, the retail pasta sauce category, for example, leveled off in recent months, Fubio says. Still, the diverse sauce and marinade category continues to benefit from consumers' interest in specialty and ethnic sauces.
Data from The Nielsen Co., New York, show that dollar and unit sales within the private label fish/seafood/cocktail sauce category rose 17.1 percent and 14.9 percent, respectively, during the 52 weeks ending June 12 (food, drug and mass merchandiser stores, including Walmart). Meanwhile, dollar and unit sales of private label Oriental sauces improved 20.8 percent and 16.1 percent; private label Mexican sauces, 9.7 percent and 6.9 percent.
According to Rob Wagner, vice president of U.S. sales for Boisbriand, Quebec-based Mondiv Food Products, retailers could take advantage of heightened consumer interest by offering a variety of products in all three private label tiers: value brands (such as $1 bottles at ALDI); mid-tier national, regional and private label brands; and super-premium national and store brands priced up to $4.99.
Don't be afraid to push the envelope a bit when it comes to new flavors.
Flavor expansion
That said, premium and super-premium items are experiencing the biggest growth in the sauce and marinades category — consumers still want a great meal, but at a fraction of the cost of a restaurant entrée, says Brad Denis, director of private label, Victoria Packing Corp., based in Brooklyn, N.Y.
"They seem to also be willing to try new and creative ethnic offerings such as Marsala and francese sauces," he says.
Even if they understand how to make these sauces themselves, they appreciate not having to take the time to do so, he adds. It is this new consumer who is willing to pay a few dollars more for a great premium item.
Denis notes that The Stop & Shop Supermarket Co. of Quincy, Mass., reaches this type of consumer with its premium Simply Enjoy line, and that the smaller Parsippany, N.J.-based Kings Super Markets chain also accommodates its clientele with high-end private label offerings under the Balducci's Food Lover's Market moniker.
Trying to find the right balance between low cost and high-quality ingredients can be tricky for retailers, says Doug Oaks, national sales manager, retail for Food Service Specialties in Red Wing, Minn. But it's critical that retailers focus on providing new flavors for consumers, he stresses.
"There [are] a lot of new flavors for sauces and requests for different Asian and Indian sauces," Oaks says. "Retailers need to push the envelope a bit because they can only do so many marinaras and basic sauces."
He points out that marinades, glazes and grilling sauces are a big opportunity for retailers as consumers cook more at home. Such offerings could be expanded much more from what is available today.
And some retailers already are trying new things on the pasta sauce side. In January, Target Corp. introduced the Giada De Laurentiis for Target collection, which promises high-quality design and products at a great value, says Tammy Robertson, spokesperson for Minneapolis-based Target. The collection includes $2.99 pasta sauces in several unique flavors and varieties.
"Specifically for our sauces, we're using higher-quality tomatoes — vine-ripened, San Marzano, etc., imported extra virgin olive oil, sea salt rather than table salt," Robertson says, "and replacing high fructose corn syrup with sugar, and reducing the amount of sugar added to the recipes overall."
Speaking of ingredients, all-natural, organic and other similar claims also are becoming important to consumers.
"Today's [guests are] demanding products with simpler ingredient lists, as they are becoming very aware of what is in the food they are purchasing for their families," Robertson says.
But despite all of the sophisticated flavors in the sauce aisle, the traditional meat and mushroom spaghetti sauces are still the mainstays of the category, and need to be available, says Edward Salzano, executive vice president and chief operating officer of LiDestri Foods Inc., Fairport, N.Y.
"Retailers can call them Tomato, Garlic and Onion sauce, for example, but at heart, they are still plain sauces with new spices," he says.
Do take advantage of heightened consumer interest in store brand sauces and marinades by offering a variety of products in all three private label tiers.
Do consider using creative labels and/ or custom caps to draw attention to store brand sauces and marinades.
Sitting pretty
In addition to augmenting the flavor variety within their store brand sauces and marinades, retailers are concentrating much more on the art of good package design.
"Where they were once just drab, plain packaging, they now have become more innovative in their approach to good design, packaging materials and elucidating what product is inside the package," Denis says.
For retailers able to invest in specialized glass containers, unique jar molds and high-gloss paper or sleeve labels can be key to helping products stand out on the shelf, Wagner says, particularly if they are competing in the premium tier.
But not all retailers have
a high-enough volume to support specialized glass, Salzano says. In that case, "new labels (as well as custom caps) can help keep a product fresh," he says.
Wegmans, he notes, "romances" its products by explaining where the ingredients originated
and how the sauces were crafted. The Rochester, N.Y., retailer also provides meal solutions on the label and/or in its own magazine.
In Canada, some retailers are using product size as another form of
differentiation to cater to grab-and-go consumers, says Allan Kliger, president of Victory's Kitchen, based in Toronto. They are displaying 4-ounce dipping sauces next to their in-house pizza products, for one, and offering larger versions of the leading dipping sauces.
Pouches are popular in Canada and European grocery stores, but haven't performed as well in the United States, Salzano says. He notes that LiDestri Foods dressed up mainstream and premium pasta sauces in pouches for one of its clients, but they didn't go over well with shoppers.
However, Wagner says it's only a matter of time before an innovative retailer such as Whole Foods or Trader Joe's embraces pouches and uses them for store brands.
"They will start the trend, and other retailers will follow," he says. "Pouches have too many benefits to be ignored: They are easier to transport and store, microwave and better for the environment because they leave less of a carbon footprint than glass and cans."
Don't begin the product development process without a clear picture of the desired end result.
Create brand loyalty
Although packaging is important, retailers also must give store brand sauces and marinades their fair share of merchandising and promotion to truly succeed here. They can create a win-win situation with national brand manufacturers by integrating their store brands into a cohesive sauce and marinades merchandising program, Kliger says, or by bundling complementary products from a merchandising standpoint, which will help develop the overall category.
On the promotional side, Fubio points to a unique idea from a large regional retailer. The retailer runs an annual store brand challenge that allows shoppers to purchase a jar of a national brand pasta sauce and get the store brand equivalent for a penny.
"It's an easy way for the consumer to try the comparable store brand sauce, and in many cases, this is all it takes for the consumer to realize the flavor and quality of the store brand matches and sometimes even exceeds the national brand," she says.
Similarly, Stop & Shop promotes its Simply Enjoy premium sauce line by running sales on multiple jars, such as three jars for $10, Denis says.
"Consumers jump all over it," he says. "The consumer sees a great value and or reason to try something new due to value, then finds out the premium offering is fantastic and then becomes brand-loyal once the item is back to full retail."
Plan for success
While many retailers want to either freshen up their existing pasta sauce lines or introduce a world-class line, often they begin the process without a clear picture of the desired end result, Fubio says, and enter into the product development process with more questions than answers.
"While the information-gathering stage is a critical step to developing a successful strategy, it should be completed early in the process so as to reduce the likelihood of having a weak execution plan, which drives costs up while prolonging their product launch," Fubio stresses.
Retailers could avoid these mistakes by having a firm, documented strategy in place before inviting potential suppliers to bid on the business, she adds.
Other times, retailers have "tunnel vision," Salzano says, and want to focus only on price instead of upgrading quality.
"Private label pricing, in general, has gone down so much that it puts the future of private label at risk due to shrinking margins," Wagner adds.
"National brands are pricing their items three for $5, for example, so retailers feel they have to react to that," he says. "We're trying to convince retailers to instead upgrade their quality and promote an image that private label doesn't have to be priced below the national brands."
Despite current pricing challenges, the future looks bright for store brand sauces and marinades.
"As [retailers] get better at developing their private label strategies and setting concrete goals for private label market share growth, private label pasta sauce sales will increase," Fubio says.
Top 5 Markets for Sauce/Gravy Mix
- Pittsburgh, Pa., Metro
- Tulsa, Okla., Metro
- Buffalo, Niagra Falls, N.Y., Metro
- Louisville, Jefferson County, Ky., Metro
- Grand Rapids, Wyoming, Mich., Metro
Regions with the largest percentage of people with a tendency to buy store brand tomato paste/tomato sauce, reported by Core Based Statistical Areas (CBSA) defined by the U.S. Office of Management and Budget.
Source: Buxton Co., Fort Worth, Texas.