This Is Why Campbell Soup Bought the Rao’s Company for $2.7 Billion – Robb Report

Rao’s marinara sauce is considered one of the best—if not the best—store-bought tomato sauces in the country. And a recent $2.7 billion takeover of the company behind the sauce seems to support that theory.

Earlier this month, Campbell Soup paid that eye-popping sum to acquire Sovos Brands, Rao’s parent company. While Sovos owns other brands like Noosa yogurt and Michael Angelo’s frozen meals, Rao’s makes up 73 percent of its revenue, according to a Wall Street Journal report from Thursday detailing what makes the $8-a-jar sauce so special. It’s become a pantry staple for home cooks across the United States, and a lot of that comes down to just two factors: 1) the taste and 2) how Sovos has sold the product since it took over Rao’s Specialty Foods in 2017.

“It’s really how delicious it is,” Sovos CEO Todd Lachman told the WSJ. “You can’t trick the consumer with delicious. It’s delicious, or it’s not.”

The Rao’s sauce comes from the East Harlem restaurant of the same name, which opened in 1896 and become a hot spot for celebs such as Robert De Niro and Al Pacino in the 1970s. In the ’90s, the eatery acquiesced to selling its delectable sauces in jars, and Rao’s Specialty Foods was born. The company, however, did not have as many fawning fans as the restaurant—at least not yet.

Sovos bought Rao’s for $415 million in 2017, when the brand had $65 million in net sales and a household penetration of just about 1 percent (industry leaders had closer to 30 percent). But Sovos saw what Rao’s could become: It bumped up the marketing budget from a few hundred thousand dollars a year to $20 million, and expanded the products’ reach beyond the Northeast and West Coast markets where Rao’s had previously been sold. As of last year, Rao’s sales reached $580 million, and the company expects to hit $1 billion in the near future.

The pandemic was a big boost for Rao’s, as people were confined to their homes and had to cook their own meals rather than eating out. But even as the world has slowly returned to some sense of normalcy, people continue to splurge on the pricey pasta sauce, thanks to its lauded flavor and the fact that it’s still more economical than spending $20 on a single bowl of spaghetti.

Loyalists may worry about how Campbell Soup will handle Rao’s, now that the specialty sauce brand is in the hands of a major corporation. But Campbell CEO Mark Clouse tried to assuage those fears: “We will not touch the sauce,” he told The Wall Street Journal. “We have not fundamentally touched the chicken-noodle soup in 125 years.”

The company knows that the secret—and the profits—is in the sauce.

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