Campbell’s plans to scoop up Rao’s sauce as Big Food expands its premium palate
Just noodling around… As Campbell’s US soup sales cool after pandemic soup-mania, the canned icon is slurping up premium brands. Yesterday the chicken-noodle standard-bearer announced plans to acquire Sovos Brands, the maker of Rao’s tomato sauce (and soups) and Noosa yogurt, in a deal valued at $2.7B.
Rapid boil: The deal’s price tag reflects Sovos’ growth since going public in 2021, when it was valued at $1.3B. Rao’s organic sales grew 35% last year, making up more than two-thirds of Sovos’ total sales.
Saucy: Campbell’s says Rao’s won’t compete with its budget sauce brand, Prego, which retails for less than $3/jar (Rao’s costs about $8).
Sea Salt & Vinegar: The deal is reminiscent of Campbell’s 2017 snack-quisition of Snyder’s-Lance, which gave it premium chip brands like Kettle and Cape Cod.
Trying to stay fresh… Campbell’s thrived during the pandemic as millennials used its condensed soups to level up recipes (think: tomato bisque + cauli rice) and they nostalgia-snacked on Goldfish. Now it aims to keep its soup hot by catering to premium palates. Other brands have made similar moves: Oreo maker Mondelez bagged Clif Bar for $2.9B last year, after nabbing fancy-cookie brand Tate’s in 2018. In June, ice-cream giant Unilever said it would buy premium frozen Greek yogurt biz Yasso, while Snickers owner Mars added nutritious-meal maker Kevin’s Natural Foods to its candy-filled cart.
“Premium” products command a premium… Campbell’s agreed to spoon over $23/share for Sovos — 27% more than the company’s closing share price on Friday. Similarly, shoppers are willing to shell out more $$ for foods with health-associated labels (organic, non-GMO, all natural). Recent acquisitions show that companies are putting stock in premium brands as some shoppers splurge for quality.