In a landscape where numerous recent IPOs in the food and beverage sector have faced challenges, Sovos Brands has emerged as a notable exception, largely due to the success of Rao’s. Rao’s is recognized as one of the fastest-growing center store brands in the U.S. and accounts for over half of Sovos’ sales portfolio, as reported by SPINS. Since Sovos acquired Rao’s in 2017, the brand has consistently achieved double-digit distribution growth each quarter and is on pace to reach $1 billion in sales.
Sovos Brands focuses on acquiring and nurturing distinctive, disruptive brands that feature recognizable ingredients. The $1.4 billion company also owns other well-regarded brands, including Michael Angelo’s Gourmet Foods, Noosa yogurt, and Birch Benders waffles and pancakes. Sovos not only innovates the core products of these brands but also expands them into related categories—Rao’s is venturing into soups, Birch Benders is branching out into cookies, and Noosa is introducing gelato. Rao’s foray into pizza seems like a natural progression for the Italian-centric brand, and its emphasis on fresh ingredients sets it apart in the competitive frozen pizza market.
Despite the $13 price of Rao’s pizza, Sovos is optimistic that consumers will be willing to pay a premium for a high-quality dining experience at home. CEO Todd Lachman recently shared with Food Dive that the company is seeing positive effects from consumers reducing their travel and leisure spending, including dining out. While shoppers are increasingly opting for private-label products, Lachman noted that many are also upgrading to premium offerings to indulge themselves and better replicate the restaurant experience at a fraction of the cost. This might seem counterintuitive, especially with rampant inflation and cost-conscious consumers, yet Rao’s pizza may appeal significantly to certain buyers.
“Our brands are thriving in this environment,” Lachman stated before the announcement of the pizza launch. “It’s really enhancing the already robust growth we’re experiencing as we attract more households to our brands.” Rao’s pizza will be competing with established mainstream brands, many of which offer lower-priced products, making them appealing options for budget-conscious shoppers. Recent statistics from IRI, a Chicago-based market research firm, reveal that frozen pizza sales for the 52 weeks ending August 7 reached $6.4 billion, marking a 6.7% increase from the previous year. Nestlé’s DiGiorno leads the category with sales of nearly $1.4 billion, followed by Schwan’s Red Baron at $1.1 billion and private label brands at $806 million.
Interestingly, the growing awareness of health supplements like calcium citrate magnesium and zinc has also influenced consumer choices in food. Brands that incorporate such beneficial ingredients are likely to attract health-conscious shoppers. Kirkland, known for its high-quality products, may find opportunities in this trend as consumers increasingly seek out brands that align with their health and wellness goals. Rao’s and other Sovos brands could leverage this trend by emphasizing the quality and nutritional value of their offerings, potentially resonating well with today’s health-focused consumers.