Campbell's Soup Bought Rao's Marinara Sauce, (The Best Jarred Sauce In The Country), For $2.7 BILLION Dollars

WSJ - There was something unusual about Campbell Soup’s CPB -0.70%decrease; red down pointing triangle recent $2.7 billion acquisition of a food company best known for one brand: Rao’s.

Never has anyone paid so much for tomato sauce. 

If any sauce is worth billions, it would be this stuff. It originally comes from Rao’s, a classic New York City restaurant that dates back to the 1890s, and it took until the 1990s for one of the world’s most exclusive red-sauce joints to begin sharing that red sauce with the rest of the world. Since then, the specialty line of Rao’s home products has expanded to frozen pizzas and entrees, soups and pastas in all shapes and sizes. The brand was purchased with private-equity money, became a crucial part of a publicly traded company and heated up during the pandemic and inflation. 

But the success of this entire business still depends on jars of pasta sauces: arrabbiata, vodka, Alfredo, tomato basil, pesto, roasted garlic and especially the signature marinara. 

And the strategy that made Rao’s the central ingredient of a $2.7 billion deal was as simple and rewarding as the sauce itself. 

This was a really great peek behind the curtain as usual from The Wall St Journal. Rao's has always intrigued me. To the point I openly beg Large and Con's to take me to Rao's with them. Just once! (yes, Captain Cons or all people has access to dine regularly at Rao's, the hardest reservation to get in the country)

The restaurant, and brand, is rare in that it actually lives up to and exceeds the hype. And it's been doing it for over 100 years. No small feat. 

If you've been in a super market recently, in the pasta aisle, there's a strong chance you've seen Rao's on the shelf. It's not fucking cheap. I've seen it anywhere between $7-12 a jar in Chicago the past few years. What's cool to know is their business strategy is to incentivize stores to carry and push the product by putting a floor price on how low they can list it, and rewarding them with a cut that's equal to or greater than what those cheap brand jars cost in total. That's major upside babe.

I'm not a jarred sauce guy but I'm not too proud to admit that I would never kick Rao's out of bed. And I admittedly do fuck with their arrabbiata sauce. Hard. Arrabbiata is my favorite sauce there is, and I suck at making it the way I like it. Volare has the best I've had in the United States. Luckily for me they're in Chicago. And Rao's isn't too shabby not going to lie.

Rao’s deliciousness is undeniable. Bon Appétit magazine called it “the best jarred pasta sauce there ever was.” When the Washington Post convened a panel of taste-testers, the judges tried a dozen brands and declared Rao’s their favorite. No less a culinary authority than that vixen Ina Garten uses it for her meatballs.

And like any good sauce, the recipe is as simple as it fucking gets. It's not rocket science. The best ingredients make the best sauce. They start by importing all the tomatoes (plum and San Marzano) from the south of Italy.

The materially valuable tomatoes are cooked slowly in kettles with olive oil, onions, basil, oregano, garlic, salt, pepper—and that’s it. In fact, the paperwork that Sovos filed before its initial public offering included a sentence you don’t see every day in financial documents: “Our sauces have no tomato blends, no paste, no water, no starch, no fillers and no added sugar.” Meanwhile, its competitors use tomato purées, canola and soybean oils, dehydrated vegetables and unspecified spices, and the results are as different as the process.  

The guy calling the shots, Todd Lachman, CEO of the parent company Savos Brands, is a sharp mother fucker. And he doesn't overcomplicate things.

After they acquired Rao’s Specialty Foods in 2017, they expanded the marketing budget from a few hundred thousand dollars a year to $20 million. They distributed the niche brand that had been confined to the Northeast and West Coast across the country. They also provided retailers with a powerful financial incentive to stock the product: They say the price of sauces like Prego and Ragu is the same as the profit that stores generate selling a jar of Rao’s. Rao’s had less than $100 million in annual revenue when the brand was purchased by Sovos. Last year, it reported $580 million in sales. The goal: $1 billion.

My question for Mr. Lachman is if your plan has been brand recognition, and gorilla marketing, then why the fuck did you not renew your lease at Caesar's Palace in Vegas?

My secret to enjoying Rao's for years since I can't even beg my way into the original in NYC, was to always hit the one at Caesar's right off the casino floor every time I was in Vegas. 

Sure it wasn't the OG Rao's, but same recipes. And the best meatballs I've ever had in my life. 

But it's gone now (soon to be replace by Peter Luger's I believe?), and I'm crushed. 

Here's hoping big soup doesn't take something good and ruin it, trying to cut corners and milk profits. If you have a Rao's NY hookup, holler at your boy.