rice; ethnic; spanish

* "Soup wars" reaped mixed results.
* Sodium content is important.
* Bold flavors drive rice segment.

* Brand names still have clout in side dish segment.This time last year showed good growth in many of the soup and side dish markets, as the recession was helping boost sales of categories that are seen as basic staples and everyday simple foods. But, the recession could only help these markets so far, and the combined impact of consumers' needs for frugality, self-inflicted market damage by soup manufacturers and creeping private label have dampened sales figures.

Soup Woes
The ready-to-serve (RTS) soup segment is still hurting from the advertising war between Campbell and General Mills. The ads, which called out suspect ingredients in each competitor's soups, appears to have succeeded mainly at reminding consumers, already wary of added sodium in processed foods, that the soup aisle should be approached with caution. There does appear to be a market for healthier soupsógiven that the Select Harvest launch was a success by itself. However, the rest of the RTS segment and the soup category, as a whole, suffered.

Condensed soup has suffered from some of the same negative perceptions as RTS soup, most notably the perception--and in many cases the reality--of excessive sodium content. In this environment, Campbell, the dominant condensed soup leader, has lowered sodium levels in more than 90 soup varieties since 2005, in many cases with the use of sea salt. These efforts, however, have not entirely insulated the condensed soup segment from rising health concerns and have not brought growth to the market.

Ramen, which accounts for more than half of dry soup sales, has driven nearly all dry soup segment sales growth. While convenience and value pricing has made ramen a popular meal choice among time-starved and budget-conscious young adults, sales growth could not be sustained in 2010. This is an indication that low prices have not entirely shielded ramen from concerns about sodium content that have plagued the soup category, as a whole. Many ramen, dry soup and bouillon products are particularly high in sodium, and leading brands have not been as aggressive as RTS wet and condensed soup competitors in providing low-sodium alternatives.

Zesty Rice Rises
Dry rice continues to dominate the rice segment, accounting for just over 50% of sales. Rice mixes also comprise a sizable portion of the segment, with 2010 sales of some $535 million (36% share). While sales of rice grew nicely in 2008, this growth tailed off in 2009, and sales fell in 2010. The sector benefited from consumers looking for convenient and cheap ways to feed the family; however, the beneficial impact of the recession has now waned.

In Mintel's latest rice report, many of the rice brands saw sales declines, with a couple of notable exceptions being Knorr Lipton Fiesta Sides and Zatarain's. Of all the brands in the segment, these two had the highest increases, and the link between the two is that they offer bolder flavors than traditional white rice. Old El Paso is looking to tap into the popularity of zesty flavors with its new Fiesta Rice, which is seasoned rice with corn and bell peppers and can be microwaved in 60 seconds or less. Based on Mintel's exclusive consumer survey, these marketers are taking a smart approach to the market, as 24% of Hispanics said they are eating more flavored rice compared to a year ago.

Key Points: Mac and Cheese
Having benefitted from frugal consumption during the recession, the dry macaroni and cheese segment is at its highest point since 2004, up from a low of $643 million in 2006. The sector has been boosted by innovations, like Kraft's microwaveable Easy Mac--the original version of which has helped sustain the segment over the years.

Licensed characters are a big part of this segment, but they sometimes have short popularity cycles and are susceptible to the ever-changing loyalties of children. This is simply a fact of the market, and manufacturers need to recognize that the "character of the moment" will likely continue to have an ever-shorter shelflife. Marketing will need to become increasingly nimble to stay relevant.

Organic and Natural
New introductions of wet soups, both RTS and condensed, have outnumbered those of dry soups over the last five years by three or four to one, a margin which equates, roughly, to the market share relationship between the two forms.

While the total number of soup launches fell slightly in 2010, the decline was the result of a 30% drop in dry soup launches. The number of wet soup launches held steady. Dry soup brands may be missing an opportunity to introduce new products that improve health perceptions and expand the selection of flavor experiences.

Convenience and ease of preparation (microwaveable and ease-of-use) continue to dominate the list of packaging claims and, collectively, have appeared on the packages of well over half of new soup products launched in the last five years. Where manufacturers have reacted to consumer needs that reflect an increasingly frugal mindset, the number of new soups that claim to be premium has declined over the last two years, while economy soups have reached a new high.

As might be expected, both the number of new organic soup products and organic sales through natural stores have declined in the last two years. However, this belies growth of natural/more healthy in FDMx, where sales of brands such as Kitchen Basics, Swanson Natural Goodness and Campbell's Chunky Healthy Request (condensed wet and RTS) have all grown--thus indicating consumers will buy soup with the right message. (See chart "Souping It.")

Pacific Natural Foods seemed to summarize all the perceived consumer needs in one broth, Pacific Natural Foods All Natural Chicken Broth, which is made with low-sodium, grain-fed chicken, contains no hormones/antibiotics and uses organic seasonings. Despite the fact that side dishes span a wide range of segments, many of the same themes emerge in new product introductions, and Mintel notes innovation in private label, health/organic, convenience, ethnic and premium.

What is Happening with Store Brands?
Private label accounts for just over 14% of FDMx soup sales and grew 0.4% in the year to October 2010. While this may sound like minimal growth, and it is, more interesting is the fact that no single major manufacturer grew sales in this period--showing private label was still the major mover through 2010. However, even within the soup category, there are still mixed fortunes, and private label could not fight off the impact of the recession in RTS wet, condensed wet and refrigerated soups. There were gains in dry soup and RTS broth and strong private label growth in the small category of frozen soup.

In the side dish market, where private label would be expected to be a major and growing factor, it only has a 12.1% share of the $1.2 billion sales. The lack of a stronger store brand position allows name brand manufacturers to maintain pricing levels, as consumers are not opting for the lower-cost options offered by private label. As is the case with soup, the fortunes for private label in the side dish category are mixed; they have not kept up with the brands in sales of the major categories (rice, and mac and cheese), yet have out-performed the brands in baked beans, refrigerated, frozen and shelf-stable side dishes, and stuffing mixes.

While private label growth for side dishes has been slightly higher (and for soup, slightly lower than total FDMx sales growth in the past year), the difference is not significant. So, as the recession appears to ebb, it would seem there are consumers who will stick with store brands. For some more dynamic segments, the immediate danger of store brands becoming significant players is still relatively low.

Store Brands vs. Name Brands
For all of the side dish segments, except prepared salad, respondents indicate they normally buy name brands. There are fewer name brand prepared salads, and retailers market their own products aggressively, with prominent shelf space next to high-traffic areas (i.e., deli). This raises awareness and helps store brands effectively compete with name brands. In many cases, the percentage of those buying name brands is 2-3 times greater than store brands. The gap is widest for rice mixes, pasta mixes and stuffing mixes. It is interesting that these are all mixes involving more than one or two ingredients, which makes it more challenging to get right. Given the tough economic times, it would be expected that private label would be a more attractive option. However, it appears name brand manufacturers have identified price points that appeal to consumers who want to treat themselves a little bit, by buying name brands.

Among people who buy store brand side dishes, most expect to stay with these brands as the recession eases, with relatively few planning to switch back to brands. Mintel's consumer research shows among store brand buyers, around a third are buying more store brands with the recession; a similar number expect to stay with store brands, when the recession ends. (See chart "Branding the Way.")

More Taking Soup to Work or School
Soup crosses the lines, when it comes to household income. While there are marginally fewer higher-income households that eat soup, among those who do, there are relatively few differences in soup eating habits across income groups. Higher-income households are marginally more likely than others to eat soup as part of a family meal at home, and more likely to eat is as a snack with others. Interestingly, among those in soup-eating households earning $50K or more, 20-30% take soup to work/school, peaking in the middle/upper-income groups of $75K-$99.9K.

The frugality associated with bringing soup to work or school is appealing to soup eaters at all income levels. Those with household incomes of $100K or more are nearly as likely as those with incomes below $25K to say they have increased the occasions when they take soup to work or school.pf

For more information on this category, type "soup" or "side dishes" into the search field at www.PreparedFoods.com.