LOUISVILLE, COLO. — With Rao’s sauces expected to bring in $580 million in fiscal 2022 sales, Sovos Brands, Inc. sees the line on track for $1 billion in annual sales and branching out further into various grocery departments.
“Rao’s had another impressive year, surpassing half a billion in net sales, organically growing 35% for the full year and accelerating to 45% in the fourth quarter,” said Todd R. Lachman, President and Chief Executive Officer. conference on March 8 to discuss the annual results. “While we have quintupled household penetration for Rao’s since we acquired the brand in 2017, household penetration is still only 15% today and awareness is only 58%. With plans to increase our marketing and R&D spending by double digits in 2023, we are confident that we can continue to drive years of steady volume growth into the future.”
While sauces are at the core of the line, Sovos Brands has expanded Rao into frozen entrees, frozen pizza, pasta and soups.
“Our new Rao’s Beach categories – soups, pasta and frozen – all continued to grow well ahead of their categories in the quarter, driving combined dollar and unit consumption growth of 45.5% and 41.1%, respectively, with our business in each category growing is in dollars and points at least 30%,” said Mr. Lachman. “Household penetration and dollar shares in each of these categories are at or below 2% for the Rao brand, reflecting the material runway ahead. In the second half of 2022, we are piloting Rao’s frozen pizza at select retailers. Due to the successful results of the test market, we will expand nationally in 2023.”
Sauces currently account for about 85% of Rao’s sales, but Mr. Lachman sees frozen pizza as a springboard for further growth for the brand. Noting that frozen pizza sales in the United States are approximately $6.5 billion, he said. “I mean, two slices of frozen pizza, you can figure out the math, is a significant business for us, and that’s what we have our sights set on.”
Sovos Brands has cleared the way for Rao’s to continue its trajectory toward $1 billion in sales by divesting the Birch Benders baking mix brand to Hometown Food Co., Chicago. According to the company, the resources used to support Birch Benders will go towards supporting Rao.
“… We are building a long-term business and taking Rao’s to $1 billion and beyond,” Mr. Lachman said. “And there’s no doubt in our minds that Rao’s is going to hit the $1 billion net sales mark.”
For the year ended Dec. 31, 2022, Sovos Brands posted a loss of $53.5 million, down from fiscal 2021 when the company earned $1.9 million, or 2¢ per common share. :
Sales rose to $878.4 million from $719.2 million a year earlier.
The loss is largely related to the disposal of Birch Benders, according to the company.
In fiscal 2023, the company is guiding sales in the range of $900 million to $925 million and adjusted EBITDA in the range of $130 million to $135 million.