Passing the salt around the dinner table is an American ritual--right up there with playing catch on the front lawn or setting an apple pie on the windowsill to cool before dinner.

Yet, tradition is exactly what may be causing the condiment industry to stall. As many components of the food and beverage industry are innovating to both lead and keep up with changes in consumer taste and behavior, the condiment industry continues to play catch-up, and there is no hint it will soon be leading the pack.

Condiment sales grew just 3% in current prices during 2002-2007, reaching nearly $5 billion, according to the Mintel report, “Condiments, U.S., July 2008.” However, the market is expected to flatten, growing just 0.5% each year through 2012. Besides the current recessionary woes, condiment sales are expected to hesitate further, due to lack of innovation in the marketplace and a consumer base moving away from quick-service restaurants and toward home-cooked cuisine.

Condiments represent a category where the basics rule. However, the industry needs to determine how to streamline packaging or creatively enhance recipes to create excitement in a marketplace that has long survived on just the essentials.

Pickles in a Pickle

Four leading segments define the condiments industry: pickles/relish/olives, ethnic sauces, mustard/ketchup and meat sauces.

For pickles/olives/relish, sales of olives are progressing, as manufacturers launch packaged offerings that emphasize place of origin, unique ingredients and upscale processing. However, sales have stagnated, as pickles/olives/relish attract a limited audience. For these products, little can be done in terms of flavor innovation, stifling consumer interest beyond traditional use.

However, one company is seeking to expand its appeal. While pickles are mostly used as a condiment, Mt. Olive Pickle Co. has fueled sales recently through positioning pickles as a snack. The company has repacked its best SKUs in single-serve, portable containers--suitable for snacking or toting along as small condiments for picnics or tailgates.

Ethnic Sauces Groomed by Thai Cuisine

Ethnic sauces are positioned well, as consumers have become more sophisticated in their food choices and more willing to experiment with foods from different cultures. Sales have progressed steadily, as new ethnic flavors become mainstream and offer incremental sales growth opportunities in ethnic sauces.

One of the best examples that occurred during the period of this report is the growth of Thai sauces. In the early 2000s, Thai restaurants grew in popularity around the country, spurred by support from the Thai government. Consumers embraced the bright flavors and unusual spices, and that interest transitioned to the home.

Cuisines expected to move into home consumption include Indian, Korean and Greek, as a growing awareness of these cuisines will manifest itself in a demand for more ready-to-use products.

Ethnic sauce sales are also driven by the rise of celebrity chefs on television and in book publishing. For example, the Iron Chef line of Asian cooking sauces allows consumers to replicate recipes seen on television in their own homes. Frontera Grill, a Chicago restaurant, offers a popular line of products. Consumer-packaged ethnic sauces allow consumers to have more variety for in-home experimentation and alternatives to dining out.

Organic Ketchup to the Rescue

Mustard and ketchup did not fare well in the early part of this decade, when popular health trends took hold of the food industry. One response was to launch all-natural and organic varieties, but manufacturers are also addressing another concern about the high sugar content of regular ketchup. They have launched reduced-sugar variants, while niche players are turning to agave nectar as a sweetener. One example was presented in November 2007: Organicville Ketchup is USDA organic-certified, sweetened with agave nectar, has no added sugar and is gluten-free.

Packaging changes have played a strong role in new product development for mustard and ketchup. Heinz enjoyed success by innovating the “top down” design, creating a new standard in condiment packaging. The company also launched the “fridge door fit” package in 2006, encouraging consumers to buy a larger size that demands premium fridge space. To drive sales, Heinz sought to have it positioned at eye level in supermarkets.

Where's the Beef?

Meat sauces suffer from the proliferation of pre-marinated meats, which largely negates the opportunities for meat sauce condiments like Worcestershire sauce. The other impeding factor is the cost savings that consumers can experience by using dry seasonings to flavor their meat, such as rubs that create a barbecue flavor and, therefore, negate the need for a stand-alone sauce.

Premium or gourmet sauces are driving segment growth, a trend emerging specifically for steak sauces. Sauces based on well-known restaurants, like Sweet Baby Ray’s, are marketed as gourmet and growing the most. Celebrity chef endorsements and cuisine reality shows are also raising public awareness of these brands, helping to drive sales.

Hot Sauces Still Hot

Interest in hot/Cajun sauces that began in the early part of this decade continues to be strong, as small manufacturers keep generating excitement through brands that thrive on the strength of exclusive recipes and bold flavoring.

This is not the case with other sauces, such as cocktail sauce, chili/hot dog sauce or tartar sauce, which are limited by their use. Marketers need to find ways to make these brands more versatile, in recipes or through special promotions that show how they can be expanded for use in different cuisine.

Supermarkets Dominate Market

Condiments are predominantly available in supermarkets, which accounted for 98% of 2007 sales. However, sales have been lackluster; during 2005-2007, for instance, sales of condiments increased only 1.4%. This channel is threatened by mass merchandisers like Target, Costco and Wal-Mart, which are appealing more to consumers looking for shopping trips that encompass a wide variety of needs, particularly grocery.

The loss of condiment market share to these channels for supermarkets is slight--just 0.6% during 2005-2007; however, this is expected to grow, as mass merchandisers expand their food aisles to offer a more diverse product selection.

Supermarkets can compete through private label brands. In 2007, these house brands accounted for 17% of total sales, providing a higher margin to retailers. However, the price difference between private label and premium offerings can be dramatic. For example, the Safeway brand peach/pineapple salsa retails at $2 per 16oz bottle, while Desert Pepper, a premium brand famous for its exotic flavors, retails at $4.39 for the same volume--a premium of nearly 120%. As supermarkets make more aggressive attempts to distinguish themselves from competing mass merchants, total sales may deflate.

Kraft, Heinz Battle for Top Share

The condiment market is divvied up by a multitude of players, from private label brands to mass manufacturers; however, Kraft and Heinz represent the top market share. Competition for condiment sales between the two companies is increasing, as Kraft is gradually losing market share to Heinz, due mostly to the latter’s innovations in packaging and organics.

However, the greatest growth came from private label brands, which represented 17% of condiment sales in 2007 and yielded sales growth (3.7%) well above market average during 2007-2008. Private label had stronger showings in some segments than others. For instance, for pickles, olives and relish, private label maintained a 26.8% share, but in barbecue sauce, private label commanded only a 6.6% share. Private label grew sales in all segments except meat sauces.  pf

This article contains information from the Mintel report “Condiments, U.S., July 2008.” Please visit http://reports.mintel.com for more information or call Mintel at 312-932-0400.

Website Resources:

www.PreparedFoods.com -- Enter “condiments” in the search box to find a host of articles and information on the segment
http://reports.mintel.com -- Mintel reports
www.menshealth.com/eatthis/condiments/Basic_Condiments.php -- One health magazine chimes in with an “Eat This, Not That” report on condiments