Henry Ford once said that: “If I’d have asked my customers what they wanted, they would have told me ‘A faster horse.’ ”
The same (sort of) is true for spaghetti sauce.
Campbell’s Spaghetti Sauce Recipes
First, we need to rewind to the 1980s when pasta eaters’ could only choose from Ragu’s plain, marinara or meat sauce. Because other tastes and textures were not mass marketed, the selection was limited.
But then, Prego hired Howard Moskowitz, a psychophysicist, to build its market share. Varying sauces by sweetness, saltiness, tomatoeyness, and more, Moskowitz analyzed countless taste tests. His results indicated that people prefer their sauce plain, spicey, or chunky. Surely delighted that no one was selling a chunky sauce, Prego reformulated its recipe and marketed a chunky sauce. The result? Campbell’s Soup (owner of the Prego brand) wound up with a winner.
And now, we have another leap in pasta progress.
Around since the 1890s, Rao’s was a NYC eating establishment. A century later, they were selling their sauces, that were then acquired by a Wall Street firm, and massively marketed. By 2023, Rao’s had grown from a little-known niche sauce to a national brand worth double the price of a jar of Ragu or Prego. Like Prego became chunky, Rao’s also was different. This time, though, their unusually high quality ingredients distinguished them from everyone else. For Campbell’s, it made Rao’s worth $2.7 billion for an acquisition that should close during December.
Our Bottom Line: Product Differentiation
Defined as a market in which very few firms dominate, oligopolies use product differentiation to compete.
Below, moving to the right, firms gain power as they move closer to oligopoly and monopoly. Still, they need to differentiate their products:
Through a chunky sauce for Prego and then Rao’s, Campbell’s is following a traditional competition recipe.
My sources and more: It is always nice when two disparate articles form a synergy for one of our posts. Today, it all began with a Slate Money podcast. Then, this recent article reminded me of one from more than six years ago and also Malcolm Gladwell’s TED talk.
