• by Karlene Lukovitz  @KLmarketdaily, May 8, 2007

Why are big brands like Prego suddenly stirring the pot with fresh ad campaigns?

Pasta sauces have survived the low-carb craze, only to face a longer-term threat in the form of more convenient meal alternatives.

Pasta sauce sales in FDM channels (excluding Wal-Mart) declined from $1.47 billion in 2001 to $1.39 billion in 2004, the peak of the low-carb trend, but by last year had rebounded to nearly $1.47 (up 2.2% in '05 and 2.5% in '06), according to a new report on the category from Mintel International. Including Wal-Mart sales, the category totaled $1.63 billion in 2001 and $1.67 billion in 2006, Mintel estimates.

In current dollars (minus Wal-Mart), sales of shelf-stable sauces, which account for 96% of total sales, rose by 4% during the past two years--although they were down almost 3% when adjusted for inflation.

Refrigerated sauces, while currently a minor force in the market, grew by 16% in current dollars and 1% in adjusted dollars during the five-year period.

Makers were able to boost prices once the low-carb mania began to cool (price per 16-ounces jumped 8.6% over the period), but unit volumes were down throughout, which does not bode well for relying on price hikes going forward.

Mintel projects that refrigerated sauces will grow by 53%, from $59 billion last year to $90 million, by 2011, while shelf-stable sauces will grow just 1.8%, from $1.4 to $1.54 billion. The total category is projected to grow at 2.2%, to $1.63 billion.

In short, the category's outlook is lukewarm. Although tomato sauce offers antioxidants lycopene and Vitamin A, new organic versions of big brands like Ragú and Prego are growing quickly, and pasta with sauce is an economical meal that's popular with both children and adults.

Shifting demographics are one factor: About 74% of Hispanic households and 68% of Asian households consume pasta and sauce, compared to 80% of the population as a whole.

But the biggest threat is competition from Italian pasta alternatives (boxed kits and frozen meals), non-Italian frozen entrees ranging from Mexican to Thai, and the variety of prepared dinners now available in stores.

"It's a matter of how convenience is defined at any given time--it may be easy, but is it as easy as other options?" says Harry Balzer, EVP of NPD Group. "Today, convenience is assessed not just on the basis of the cooking, but the whole process. These frozen and ready-to-eat options also have broad appeal to the whole family, and they involve using and cleaning up fewer pots and pans than pasta and sauce."

While Campbell's new campaign for Prego in a sense touches on convenience--Spice Girl Emma Bunton and other spokespeople confirm that there's no need to add anything to the sauce, because it's perfect as it is--Balzer believes that sauce and pasta makers need to analyze everything from distribution to packaging to storage and clean-up. "The minute you stop focusing on making a product more convenient, you've essentially stopped looking at that product's future," he says.

One sign of progressive thinking: Corelli, a brand made by Italian company Columbus S.r.l. and sold in Kroger, is using aseptic boxes by Tetra Pak. The boxes are said to protect the sauce's taste and freshness, allowing for use of completely fresh ingredients, including spices. They are easier to open and close, as well as non-breakable and lighter than cans or jars, and come in a 13.8-ounce size suitable for single or two-person households.