July 2011/Prepared Foods -- Soup is not a category that springs to mind as fast-moving and dynamic; however, beneath the vast exterior of the $4+billion market, there are significant sector shifts. The dominant categories of ready-to-serve (RTS) wet soup and condensed soup are losing sales to dry soup and RTS broth. The overall pecking order is unlikely to change anytime soon, but change certainly appears afoot.
The big picture shows that, after several years of modest gains, FDMx (food, drug and mass merchandiser stores, excluding Wal-Mart) sales of soup ground to a halt and started to decline in 2009-2010. Sales fell around 4.2% in 2010 to just under $4.2 billion, as a range of factors buffeted the market. It is important to recognize the slow but steady growth in soup category sales between 2005-2008 was driven in large part by rising food prices. The average price paid per unit rose about 10% over that period, according to SymphonyIRI data, with the biggest jump (a little more than 4%) coming in 2008. However, since then, growth came in the context of broader increases in food prices and the onset of the 2007-2009 recession.
In addition to the FDMx trends, it is telling that in Mintel’s broader market estimates (total U.S. sales, as opposed to FDMx only), growth has been more robust, and it was only in 2010 that contraction of the market was seen. In this environment, soup sales also appear to have benefited from increased economizing among consumers, with a return to home cooking and eating at home. At the same time, there has been the expected channel switching; non-FDMx channels, including Walmart and discount stores, have benefited.
The final piece of the background story is the negative advertising war between category leaders—Campbell’s flagship red-and-white offerings and General Mills’ Progresso brand—that started in late 2008 and lasted for about a year. The unintended consequence of the negative ads, which called out undesirable ingredients in competitors’ soups, was to turn off consumers already growing wary of the high-sodium content in many packaged foods.
Convenience Dominates, All-natural and Organic Grow
Convenience and ease-of-preparation are defining themes for the packaged soup market. “Microwaveable” features on the labeling of 62% of new product claims in 2010 and “ease-of-use” on 35%. Collectively, these have appeared on the packages of well more than half of new soup products launched in the last five years. “Time/speed” (12%) and “convenient packaging” (7%) claims are also frequently featured.
The soup category has reacted to the recession and changing consumer needs, and 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 the recession has come and is starting to fade, Mintel has noted across many categories an increased consumer interest in value. While lower prices are certainly part of the value equation, ensuring consumers understand the benefits of buying a more expensive option does open up sales opportunities.
Somewhat less common than convenience are claims related to ingredients. No additives/preservatives and all-natural have become increasingly common claims in the last two years, indicating these qualities are becoming expectations for some soup consumers—more of a must-have and less of a differentiator. The initial success of Campbell’s Select Harvest line provides an indication of the broad interest in all-natural soups.
The number of new soup products claiming to be organic, however, has declined in the last two years. This result is consistent with the sales trend in the natural food retail channel, where sales of non-organic products have outpaced organic since 2008. Especially in a difficult economic climate, consumers who might otherwise be convinced to pay a premium for organic are finding lower-priced, all-natural products to be acceptable alternatives. Nevertheless, while FDMx soup sales fell, the value of sales through natural channels made modest gains—despite the recession (driven in part by growth of Pacific Foods and Amy’s Kitchen, while Hain Celestial sales declined).
Focusing on What is Missing
Increased focus on sodium/salt and health, from both government and consumer groups, has put soup (and many other prepared foods) in the spotlight. Manufacturers reducing sodium in their products run the risk of backlash from consumers who associate sodium with taste, while at the same time being the pariah of those driving the health platform. Despite the need to walk this delicate line, claims of low-/no-/reduced-fat, -sodium, -calories, -trans fat, -allergens and -cholesterol have been mainstays of the category throughout the 2006-2010 review period. This, to a large degree, reflects Campbell’s and Progresso’s efforts to reduce levels of these components in their soups. In addition, gluten-free claims have become more common, as they have in other food categories, with the rise in awareness of celiac disease and wheat allergies.
Indeed, when it comes to health claims, most soups put more focus on what they do not contain or what has been reduced than on more positive health benefits.
New Flavor Experiences
Despite the launch of numerous new flavors, chicken, vegetable and tomato are the perennial favorite soup flavors, and they have held the top three spots on the list for the last five years. The numbers of new product launches with other flavors are relatively small by comparison; while 20% of new soup product launches in 2010 were chicken-based, most flavors outside the top five (chicken, clam, beef, vegetable, tomato) accounted for no more than 2%.
Soup marketers have nearly infinite possibilities in combinations, spices and styles to create new soups, and, while specialty marketers and retailers have long offered distinctive gourmet and ethnic soup varieties, the idea has plenty of untapped potential in the broader market. With its World Recipes line, introduced in the fall of 2010, Progresso is making an effort to expand the taste horizons of mainstream soup consumers. If the first four new soups in the line are successful, the expectation is that more will follow.
Ingredient Trends and Health
Ingredients need to be considered separately to principal flavor, and the dominant trend in ingredients has been the upward march of vegetables and vegetable products. In line with consumer needs for “better-for-you” products, there has also been a noticeable uptick in use of added nutrients and related products; the growth in salt and salt substitutes is, in part, based on manufacturers’ needs to maintain taste profiles, while reducing sodium levels. (See chart “Soup Ingredient Trends.”)
Soup always runs the danger of becoming the staple in the pantry, and consumers need to be reminded of other reasons to eat. Mintel’s latest soup report offers three opportunity concepts for manufacturers to mull over:
• Weight management. While both Campbell’s and Progresso touch on this in advertising and marketing communications, more could be made of this important health benefit. Campbell’s provides 30-day menu plans on its website to help consumers incorporate regular soup consumption into their diets to help in weight loss. Campbell’s, or another brand or retailer, could develop the idea a step or two further into a promotional event—with specific weight-loss goals, not unlike the Special K Challenge.
• Functional soup. Different soups deliver a variety of functional health benefits. Miso soup, made from a fermented soy paste, delivers a variety of beneficial nutrients, including omega-3 fatty acid, fiber, protein, vitamin K and various minerals. It is said to support immune function, energy production and strengthen bones. High-fiber lentil soups may help manage cholesterol levels. Marketers or retailers looking to take advantage of these benefits could create health-focused lines with different soups promising different specific benefits.
• The common cold. A study published in 2000 by a researcher from the University of Nebraska Medical Center found chicken soup contains anti-inflammatory agents that may actually help to reduce the symptoms of the common cold. In other words, grandmother was onto something. While more recent analysis of the research has called the results into question, one thing is for sure: It probably could not hurt. pf