COMPETITION'S GETTING THICK

BOB BAUER

Mama mia, they're laying it on thick! New product introductions have made a cramped spaghetti sauce category even more crowded, forcing retailers contacted by SN to pick and choose among flavors. New, thicker, vegetable-based flavors are edging their way onto shelves, in some cases reducing space for the traditional thinner sauces, even though the latter still generally outsell the former.

The number of facings of all flavors are varying as retailers try to find the right mix without increasing the space allotted to the category.

The new products apparently have helped the category. Nielsen Marketing Research, Northbrook, Ill., reported that unit sales of

spaghetti sauces were up 4.9% for the year ended Dec. 11, 1993. Sale prices for consumers were common, however, as the unit volume gain was nearly double the 2.6% gain in dollar volume.

As new spaghetti sauces squeeze their way onto supermarket shelves, grocers are putting the squeeze on the slow-moving products, rather than adding shelf space for the category.

"There are too many items in the category now, more items than needed to generate the maximum sales," said Rod Boni, a buyer at Pay Less Supermarkets, Anderson, Ind. "So we're in the process of cutting back -- not the size of the department; we're cutting the number of items. It looks like we're cutting back maybe 10% to 15% of the items.

"There's a lot of duplication. There are so many different styles; classic style, garden style, traditional, old-world recipe. All the flavors in this category are not selling. We're going to look at sales figures and also look for duplication," Boni said.

Richard Copeland, a buyer at Rainbow Foods, Hopkins, Minn., said his company also is taking a look at the makeup of its spaghetti sauce section. He expects stores to begin cutting back, carrying only five or six brands of the most popular flavors. "But when you get into the more esoteric items, maybe you're only going to carry one red pepper and mushroom and maybe someone else's different flavor. Somewhere along the line it has to stop. It just takes up too much space."

Emil Oles, a buyer at Genuardi Super Markets, Norristown, Pa., said his company is following the lead set by manufacturers. "The new product introductions have required us to be more attentive to the section, look for space and go with the new products the manufacturers are putting their emphasis behind. Where they've let things slide, we're letting it go also." He said Genuardi doesn't plan to increase the category's space. "Supermarkets are running out of room."

With space at a premium, retailers aren't prepared to simply take on a new item and add it to their existing offerings.

"Usually before we put in a new item we take a look at it and determine whether there's really a need for it," said Steve Jensen, a buyer at Hy-Vee Food Stores, Chariton, Iowa. If they decide to take on the item, he said, a slow-moving item is deleted.

Joni Carson, a buyer at Laurel Grocery Co., East Bernstadt, Ky., also has taken steps to free up space in the spaghetti sauce section.

"We had a situation, particularly with Ragu, that we had to look at," she said. "About nine months ago we did a volume that was so minimal on Ragu spaghetti sauce that we were really concerned about the items we carried; there was no movement. We sat down with our broker, who in turn got together with the Ragu rep, and we had a discussion about how we could realign that whole category and get the movement back in there.

"What we found," she reported, "was there were so many stockkeeping units that the movement was so dispersed among all the items. So there were no real strong items. Nothing had any particular loyalty to it other than a base item or two. "So we sat down and realigned the actual items we carry. We reduced the SKUs and then we changed brackets and started buying in a better bracket. Of course, we got retail back down."

The results have Carson smiling. "We've tripled the movement on that particular line of spaghetti sauce in nine months. It's been astronomical. It all boiled down to being realistic: putting fewer flavors out there, having less confusion, having it be a cleaner section and having a better retail price."

She said space was taken from all manufacturers, particularly Ragu.

"The Ragu line itself was just unbelievable. They had so many items. To have as many items as they do, they didn't have the strength. We couldn't afford that many items. I couldn't believe by making those few changes -- reducing SKUs and putting the emphasis on the items they have that are better -- that we were able to increase movement by that much. "Plus, it changed the buying bracket, and therefore the retails went down, too. Now it's nothing to write a truck of Ragu spaghetti sauce, whereas before, we couldn't write a 5,000-pound order," Carson said.

As tight as things are in most areas, Gregory Carr, vice president of sales and merchandise at Carr Gottstein Foods, Anchorage, Alaska, said it's even tighter up north.

"We've always been a nightmare for them because building a store in Alaska is about double the cost of anywhere else," he said. "We've always been very restrictive. If we have an 8-foot set we can live with, as these new flavors come and go, we let them pick the one they're going to replace. We're a lot tougher than the lower 48 on that. The department is not going to grow.

"We don't have the Hunt's vs. Ragu vs. Prego vs. Classico vs. everyone's private label," he added. "We don't have that depth of field. We carry a couple of main-line -- Prego and Ragu -- and some gourmet high-end.

"A lot of vendors choose not to pay the freight from Seattle to Anchorage. For those that do, the price of goods is lower here. There are some vendors who do pay some freight to get to Alaska, and that freight is related in a lower, everyday price. Campbell Soup is not paying, so that takes Prego out of the loop, and Lever Bros. really isn't paying that well with the others."

All the retailers contacted agreed spaghetti sauce readily lends itself to cross-merchandising.

"Once in a while, we'll promote both spaghetti and sauce in the same ad," said Boni. "In the stores, you can put sauce on display with spices, spaghetti, Parmesan cheese and some produce items. It's a good category to do some tie-in merchandising."

An executive for a New Jersey chain agreed.

"There are times we try to create a display with everything someone might need to make a spaghetti dinner: spaghetti; sauce; a couple of spices and some Parmesan cheese. We've even put signs reminding customers to stop by the bakery for Italian bread and the produce department for salad items. We've had some success with that sort of arrangement, but we're careful not to overdo it. It works well when done once in a while because it's not something shoppers see every day."

The new, thicker sauces have captured shoppers' attention.

"The biggest trend I see is that more and more of the sauces are vegetable-based vs. the meats. That seems to be the big push. Vegetable sauces far outsell the meat sauces," Copeland said.

"Chunkier, thicker and more peppers are more popular than thinner," said Oles of Genuardi.

Others, while pleased with the movement of the new sauces, said they have a long way to go to compete with the traditional flavors.

"Traditional plain, meat and mushroom are the best in all lines," said Laurel's Carson. "Thick and hearty, garden style and all of those have a good, steady movement, but the traditionals by far outsell everything else."

Lynn Herman, a grocery buyer at Quillen's, La Crosse, Wis., agreed. "The standards, Prego and Ragu's basic ones, have been doing the best job for us recently. Larger stores, of course, have a bigger selection than the smaller ones. But even in those, basics do the best."

All the retailers reported being satisfied with the level of manufacturer support for the category.

"They're all promoting fairly heavily," said Boni of Pay Less. "It's a competitive category. You've got Ragu, Prego, Hunt's, and Campbell's. So you've got some big-name players in there. There's no lack of promotional activity. They support their products with promotions and freestanding insert coupons."

"Ragu really pushes their product here," Carson of Laurel Grocery said. "Prego promotes here also, but we seem to get a better price point with the Ragu. We may have created some brand loyalty there because we do it so much." She said she sells three times more Ragu products than any other brand.

The brand loyalty Carson mentioned has also been seen by others.

"To a certain extent, the category is different than others because there is more brand loyalty," Quillen's Herman said.

"There's some brand loyalty. It's not just promotion driven," said Boni.

"People develop favorites," said Copeland of Rainbow Foods. "I think what you find more and more in today's world is most people have a couple pops they like; there's a couple of dish soaps they use; there's a couple of laundry detergents they like; there's a couple of coffees they might drink; and they go back and forth. People won't always buy what has the low price. They may say, 'I like Ragu' or 'I like Prego,' and they'll buy it up when that's on special."

"There's a certain amount of loyalty, but obviously a feature in an ad will sway the consumer," said Jensen of Hy-Vee.

"I think," said Oles, "if you're in a high-low market like we are, you have to have it on sale, although I see a slight trend toward people looking to put their money behind more attractive shelf pricing."

Carr said prices are higher in Alaska. "Remember, when you ship to Alaska, you're adding a freight number. Water, glass and sauce, as heavy as they are, create a pretty good freight number coming upstate. So we don't have the ads I've seen in the lower 48 where they have them as low as 99 cents with a coupon."

The consensus among the retailers was that sauce sales overall continue to increase slightly.

"There was a real big push for a while and I think we've gone through a lot of acceleration in movement, but it's leveling off now," said Copeland at Rainbow.