Food stocks banking on new, bold flavors

Windsor Genova – Fourth Estate Cooperative Contributor

New York, NY, United States (4E) – In the $4 trillion global food industry, taste dominates and “flavor” drives stocks of bigger and traditional food companies. Supermarkets get the largest share of food retail sales, according to the United States Department of Agriculture. Supermarkets are followed by independent food stores, convenience stores and other outlets. A majority of the leading global retailers are firms from the U.S. and Europe. In the U.S., food sales are estimated at around $100 billion per month, more half of which is food eaten at home.

With the overwhelming possibilities in the food industry, taste tends to change and shift based on trends and a number of other factors. For instance, in the packaged food industry, more specifically in the soup market, research shows that sales are more and more driven and influenced by innovations in taste and flavor. It’s one thing to get a can of chicken soup from the supermarket and to choose from at least a dozen premium flavors. Younger consumers are said to be seeking newer and bolder flavors to keep their taste buds excited. So now you have packaged soup in squash and red pepper flavors.

With established brands such as Campbell Soup Co. (NYSE: CPB) and Progresso by General Mills (NYSE: GIS) dominating the market, smaller and younger companies are working harder to separate themselves from the crowd and strengthen their following of loyal customers. And it might be working. According to Euromonitor, for the past couple of years, Campbell has been losing market share to two kinds of competitors – lower-priced brands and premium soup brands offering themselves as healthy and high-quality alternatives.

Campbell is undoubtedly the industry leader when it comes to soup. With $8.1 billion worth of sales, a market cap of $13.07 billion (2013) and 17,700 employees, according to Forbes, it is also among the largest of its kind. Its condensed soup business alone is worth at least $1.1 billion. Its 12 percent sales growth last year has been attributed to higher sales in U.S. soup, as well as other products. Company shares were trading for $44.31 on Friday, down 0.56 percent or 35 cents from the previous day.

Established in 1869 by Joseph Campbell, a fruit merchant, and Abraham Anderson, an icebox manufacturer, the company first sold canned tomatoes, vegetables, soups, jellies, condiments and minced meats. It later adopted the technology of condensing soup, with the tomato variant still being sold today as among the top 10 shelf-stable food items in the U.S. With a mix of innovation and effective marketing, Campbell has become a household name. It sells a variety of soup products, from microwavable items to instant “gourmet bisques.”

Most likely feeling the pressure from its smaller competitors, Campbell, in its 2013 annual report, claimed to have “enhanced the taste” of their soups and given it a distinct positioning in the marketplace. It also launched 38 new variants. This year, Campbell will launch 29 new ready-to-serve soups as part of its “homestyle” series which boast of “wholesome ingredients and no added preservatives.” It is also further expanding its range of “healthy” soups.

But while Campbell is the only soup company included in Forbes’ 100 Innovative Companies, General Mills remains a power to reckon with when it comes to company size. With a market cap of $29.9 billion and sales of $17.43 billion in 2013, the 35,000-strong company beats Campbell by landing at 47th place in Forbes’ World’s Most Powerful Brands.

Nevertheless, General Mills’ soup brand Progresso continues to trail behind Campbell. Euromonitor said Campbell has a substantial lead in terms of U.S. value share at 47 percent. But that number has decreased since 2008 when it was had a market share of 49 percent compared to Progresso’s 16 percent.

Progresso, which was founded by an Italian named Giuseppe Uddo, boasts of its use of quality large-cut vegetables, beans and spices in its soups. Among its products are soups that claim to be “heart healthy,” light, and 99 percent fat free.

General Mills claims Progresso, in recent years, has posted steady sales, as well as share gains. It traded at $51.25 on Friday, a 1.88 percent or 98-cent drop from Thursday.

Analysts said Progresso and other Campbell rivals have slowly been eating up a larger market share, not to mention the continuing decline in the growth of the soup market. Data from Euromonitor shows stagnant soup sales in the past few years with sales growth still lower than pre-recession years. Analysts think it may be caused by growing consumer sentiment against processed and canned goods. It is no surprise that analysts expect the soup market to rebound in the next several years by banking on new products – meaning healthier and premium soups in environment-friendly packages – with higher unit prices.

Among the most reliable contenders in the soup market is Soupman Inc. (OTCQB: SOUP), a small cap hinged on a nationally recognizable name best known for its high quality soup varieties. Immortalized in popular culture through the defunct sitcom Seinfeld, the company has expanded its iconic soup kitchen in New York to a chain of restaurants and nationwide retail of its packaged soup. Soup flavors such as Lobster Bisque, Jambalaya and Chicken Gumbo are being sold in over 3,000 supermarkets, as well as online.

Boasting of an all-natural recipe, the company claims that its “proprietary cooking process maintains the integrity of [the] ingredients and the hand-made quality that made Al Yeganeh, who made the soup recipes, famous.” All of the products are said to be slow-cooked in small batches. This contrasts with packaged food products mass produced by larger companies. It also embraced a Tetra Pak packaging, allowing its “gourmet soups” to compete with Campbell and Progresso at the soup aisle at the grocery store instead of being stored in the gourmet section with other niche-market products.

Although it only has six packaged soup varieties, at least 47 are offered in Soupman’s restaurants in New York City, Connecticut and Texas. This does not take into account the company’s new food truck franchise program.

It has just started expanding its distribution and shelf space and continues to push for ways to keep the company name in the public’s mind, from getting basketball icon Shaquille O’Neal as brand champion to banking on its Seinfeld connection.

With a market cap of $16 million, Soupman (originalsoupman.com) comes nowhere near the giant food companies. However, the company thrives on opportunity and a business model that is expected to spur future valuation. And with Euromonitor estimating soup sales to decline while value increases due to marketing and an emphasis on quality in the next five years, it may be a wise choice to consider small players with a lot of potential.

Article © AHN – All Rights Reserved
About the Author

Leave a Reply