So, what's the secret behind the sauce?
THE SECRET SAUCE BEHIND A MULTI-BILLION DOLLAR ACQUISITION
As a former New Yorker and an Italian food junkie, dining at Rao’s in NYC is a bucket list experience. There are rumors that if you call the restaurant in the beginning of the year (212-722-6709), they save a few reservations for a lucky soul. I was never able to get anyone on the line. It became a game to me, trying to find a connection amongst friends, clients and acquaintances. I got close a few times, but never sealed the deal. Rao's remains the elusive meal that I may never experience, and their permanent voicemail recording (“...sorry our reservations are booked for the entire year. Click.”) still plays in my head.
Yes, they opened an outpost in LA, and did a 15-year run in Vegas, expanding the opportunity for epicurean escapism to people like me. But dining in Vegas amongst the other tourists is vastly different than cozying up to one of the 10 tables at the quaint Upper East Side mainstay. Not to mention the opportunity to spot a celeb or eat at a table “owned" by Robert De Niro, Martin Scorsese or even Mariah Carey.
In the '90s, the restaurant began selling its sauces to the public, a genius move when you have a product so highly coveted and unavailable to most. At this time, the Rao’s brand name was still largely unknown. Supermarket distribution introduced them to the broader public, sparking steady growth. Eventually Rao's sold to an upstart food and bev company, Sovos, in 2017. From there, the trajectory has been colossal. Rao's dropped their first-ever brand campaign in 2018, hosted a pop-up experience in Soho, and expanded the offering across dry pasta, soup, and products in the frozen aisle.
The pandemic also boosted the business with reports of a 22% increase in net sales year-over-year. With so many people cooking at home and craving quality food, consumers did not shy away from Rao's premium price tag. In just six years, Sovos catapulted Rao's revenue from $65M to $580M in sales. More recently, Campbell’s acquired Sovos for $2.7 billion dollars, with a hefty emphasis on Rao's brand as the crown jewel of the portfolio.
So, what's the secret behind the sauce?
What can other brands learn from the growth of a one-off restaurant into a supermarket powerhouse?
1) Authenticity
Italian food is about passion and authenticity. Since the family business opened in 1896, Rao's has celebrated the flavors and culinary traditions of southern Italy. It took 80 years for the New York Times to drop in and give them a review, and a few things they observed: Christmas lights are up year round. Sauces are slow-simmered in small batches in open kettles. Uncle Vincent's charcoal fired lemon chicken is cooked over, yes, charcoal. Brands that harness the intrinsic power of authenticity in their story and products tend to be highly differentiated from their peers.
2) Scarcity
Scarcity creates desire, and desire creates demand. Look at any other brand that has built scarcity into their model; Supreme, PlayStation, even McDonald’s most recent Grimace Birthday Meal. All have generated demand and buzz by limiting access to the product.
What makes Rao’s unique amongst this set is that the scarcity didn't start with a physical product, it was built with an experience. After years of fanning the fires of FOMO with their restaurant (no soup for you), they made the product widely accessible. The fact that you can have as much of it as you want is only adding to the bottom line.
3) Power of Celebrity & Influence
Walking the streets of NY, you're bound to spot a famous face. But knowing they are all gathered uptown enjoying a meal that is not meant for the common man adds an additional layer of mystique. With the restaurant featured in The Wolf of Wall Street and Jay Z’s video for “D.O.A”, the public gets a glimpse inside the experience while still keeping the doors firmly shut to the masses. Rao’s also uses Busy Phillips, a well-liked and known foodie as a paid spokesperson for the brand.
4) Premium Product
When charging $10 per jar amongst a sea of sauces that are $5 or less, your product better be great. And Rao’s is great. Not only does scarcity allow for a premium price point, but Rao's avoids that crowded space where brand affinity is one coupon, BOGO and discount away from losing customers. As with grocery brands like Tillamook, Ben & Jerry’s, and Kerrygold, Rao’s is proof that people are willing to pay more for higher quality.
5) Marketing Spend
If I had a dollar for the number of times I’ve heard, “we want our brand to move the needle, but our budgets are tight..." I could have bought Rao’s for $2.7B. When Sovos took over the Rao’s brand, the marketing budget jumped from a few hundred thousand dollars a year to $20M. The 9X growth results in six short years speak for themselves. Not every brand has $20M to invest in marketing, but the strategy scales down too: if you put the money into awareness, and create content that connects and resonates, you will get the money back…and then some.
The big question now: will Campbell’s honor the product that has brought Rao’s so much success, or will big CPG water down the sauce into oblivion? Only time will tell.
And it goes without saying, if you have a hookup at Rao’s in NYC, email me.
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Written by Jenny Lackey, Client Services Director at Nemo Design
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