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The future of soup: Online purchases and non-can packaging
While many of the classic soup brands retain the quality and taste of their signature flavors, the same cannot be said when it comes to the “look” or packaging of their products. In addition to changes in the product’s graphics, many soup products now come in plastic or microwaveable cups and bowls.
Indeed, much has happened in the last century when it comes to retail and changes applied in the last several years are even more surprising.
With the advent of the computer and the Internet, everything seems to be within reach with just a click of the mouse.
In the last several years, online shopping has been booming, continuing to expand and increase in value. In February, the US Department of Commerce (https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf) reported $69.2 billion in e-commerce sales for the fourth quarter of 2013, an increase of 3.4 percent from the third quarter and 16 percent from the same period in 2012. The share of e-commerce in retail sales have also been steadily increasing.
Research groups point out that online grocery sales have also been pushing up despite a revenue drop during the recession. IBISWorld’s latest industry report said the years leading to 2018 show promising growth for online grocery because of declining unemployment and increased internet usage. With people more busy and with less leisure time, internet food shopping will become appealing and convenient.
Datamonitor also looks to grocery shopping as the “next star performer of online retailing” with the industry pushing hard to capture the interest of consumers.
Amazon’s Chief Executive Officer Jeffrey Bezos announced in their latest letter to shareholders the expansion of Amazon Fresh in more cities. The company promises to deliver fresh groceries in a matter of hours, using the service.
Prime Fresh members will only need to pay $299 a year to receive same-day and early morning delivery of fresh grocery items and other consumer goods.
Bezos said Amazon would also partner with local merchants to make the service more convenient and to help increase the selection of prepared foods and specialty items. The service was expanded to Los Angeles and San Francisco after a five-year trial run in Seattle.
Euromonitor’s Top 5 packaged food trends included the possible take off of online grocery with the new offering of Amazon. “Online grocery shopping has been available for many years in the US. However, due to the low margins in the grocery business and the expenses involved in delivering door to door, online grocery services have not taken off and remain a niche offering that is only available in a few densely populated urban and suburban areas such as Boston, Chicago, New York City and San Francisco,” it said.
The report said the new delivery service “created considerable excitement,” especially with the option for customization with perishable goods.
This is good news for many perishable goods merchants, as well as packaged soup companies, courting younger generations of consumers, many of which may not like to spend time going to the store to buy their needs.
Under Amazon’s grocery and gourmet department, Campbell, Dr. McDougall’s, Progresso, Amy’s and other brands dominate the soup section. There are also gourmet products in the form of Soupman, among others.
Campbell and Progresso are undeniably the market leaders in the soup industry. With $8.1 billion worth of sales in 2013 and a market cap of $13.07 billion, The Campbell Soup Company (CPB) is able to retain its number one spot. Its soup business alone is worth $1.1 billion.
While Progresso remains at second place, it is backed by Forbes’ 48th most powerful brand in the world. Progresso is just one of the products under General Mills (GIS), which has a market cap of $29.9 billion and sales of $17.43 billion.
Both products are among Amazon’s featured brands and have hundreds of items on sale at the popular merchant website.
No more cans
It is interesting to note that Amazon’s soup shelf, which more or less represents what is being sold in ordinary groceries, features a collection of products in different containers. Gone are the days when ready-to-eat soup is only packaged in bulky and heavy cans.
Campbell, of course, keeps its classic flavors like chicken noodle soup in cans, perhaps to ensure customer familiarity with the product and to bank on brand loyalty and reputation. But many of its new product lines are in microwavable cups and bowls.
Among the soup brands, some of the gourmet products are embracing the Tetra Pak because they cater to a more sophisticated consumer group that is more discerning when it comes to health and the environment. Progresso’s “artisan” soups and Soupman’s signature flavors are now in Tetra Recart packaging, which is meant to replace tin cans.
Truth be told, Euromonitor data shows that soup sales continue to remain stagnant and at some point are declining because of consumer sentiment against processed and canned goods.
Many analysts believe that the can packaging of soups are turning off consumers.
Not only are cans heavy, they also have large carbon footprints. Younger generation of consumers associate cans with old-fashioned foods as compared to soup in other containers, which seem fresh and appealing.
Now the trend is to go with stand-up pouches, which grab attention for all the right reasons. Pouches are easier to open and can serve as a “billboard” because of the easy to read surfaces of products that come in boxes or pouches.
This trend pushed the envelope further with new packaging designs. While Campbell released last year a range of limited edition tomato soup cans as a tribute to painter and pop icon Andy Warhol, Soupman has been dishing out packaged soup in colorful and bold Tetra Pak pouches.
Soupman Inc. (OTC: SOUP), which started out as a in-demand restaurant in New York City, has been offering a couple of its famous soup varieties – chicken noodle, lobster bisque, lentil, tomato bisque, crab corn chowder, chicken gumbo and jambalaya – in over 4,000 supermarkets and in Amazon.
The company believes that the eye-catching package graphics, featuring its founder Al Yeganeh – who was more or less immortalized through the sitcom Seinfeld and the character “Soup Nazi” – will help increase sales. The same goes for its use of the Tetra Recart, a packaging technology that keeps the gourmet-quality soups fresh without the need for refrigeration. According to Tetra Pak, the Tetra Recart is the first retortable carton package for shelf-stable products. The food is sterilized inside the pack and will stay fresh for up to 24 months. Tetra Pak is marketing it as “modern, innovative and renewable.”
As one of the more forward looking soup companies, Soupman is banking on its packaging for future retail success. And it just might work.
While soup sales is expected to decline, value may still rise as more people buy higher quality goods in the coming years. New packaging is a game changer in the industry that draws flak from the use of cans. Packages such as the Tetra Recart allow the sale of high-quality products in larger but lighter containers.
Analysts project that one day the canned food aisle will be replaced by stacks of pouches, with not only soup but other packaged food categories embracing the change.