Salad days for upstarts

May 15, 2003
Ken and Annie move up, while Unilever's Best falls short

Big, established players rule the supermarket and supercenter aisles, especially in established but modestly growing categories. For small regional players trying to break in, the going just gets tougher as both the competition and the retail customers get bigger and bigger.

Or so goes conventional wisdom. But the salad dressing business is defying it.

When Bestfoods launched a new line of salad dressings under its regional Hellman's and Best brands in 1997, it did so with much fanfare and heavy marketing support. The leap from mayonnaise to the adjacent salad dressing section seemed like a natural. And with flavors such as Roasted Tomato Balsamic Vinaigrette, Spring Onion Ranch and Citrus Splash, the new dressings brought variety to a category where old favorites dominated.

Yet Unilever, one of biggest companies in the global food business, recently pulled the plug on the Hellman's and Best salad dressing brands following its purchase of Bestfoods in 2000.  The brands were a $45 million business only a year ago, but with Unilever under heavy promotional pressure from rival Altria Group's Kraft, the company decided its money was better spent behind jazzed-up, new squeezable versions of the mayonnaise and its much larger Wishbone salad dressing brand.

Small companies, big impact

Amid the clash of the salad dressing giants, however, some of the little players have been thriving. Among those gaining market share are mom-and-pop operations such as Ken's Foods' Ken's Steak House brand, which with more than $100 million in retail sales has quietly has become the No. 4 brand in the category, despite large gaps in its coast-to-coast distribution.

It's not that the big players are exactly on the run. Wishbone, which received increased marketing support once Unilever decided to refocus on bigger brands, saw sales rise 9.3 percent to $274.3 million for the 52 weeks ended Feb. 23, according to Information Resources Inc. (IRI).  Kraft saw sales rise a more modest 1.5 percent to $452 million, just behind the category's 2 percent growth rate to $1.45 billion. And Clorox's Hidden Valley Ranch grew 6.9 percent to $190 million.

But outgrowing them all has been Ken's Foods, up 12.9 percent to $109 million -- the latest in several years of double-digit growth for the Marlborough, Mass.-based company. Ken's has grown from salad dressings handmade at the Steak House of the same name in the 1950s to a company of more than 500 employees in three plants, including the Marlborough facility and ones in the Atlanta and Las Vegas areas. The latter two plants were added relatively recently, with the Las Vegas facility opening only last year.

Sales to retailers make up only about 40 percent of Ken's overall wholesale sales of more than $200 million, which also include private-label dressings and co-packing of some of Newman's Own salad dressings. Both those businesses have been robust, too. Overall private-label dressing sales rose 16.6 percent to $116.1 million in the 52 weeks ended Feb. 23, according to IRI. Newman's own saw 6.6 percent growth to $54.7 million.

Variety and creativity

Andy Crowley, president of Ken's Foods, attributes the company's success mainly to the variety and creativity of the line's recipes and hard work. "And we're a little more nimble," he said. "We're willing to do custom formulations [for retailers and foodservice accounts]. We're willing to do regional formulations."

But he's not looking to step on the toes of any giants. He adds: "The big guys are good at this as well."

Despite the national reach of most of his competitors, however, the salad dressing business is still very regional in nature, Crowley says. Vinaigrettes are big in the Northeast, ranch and honey mustard in the South and Southwest, and Ken's does whatever it can to cater to these regional whims. Though its market share is growing, the company still isn't a truly national player. It lacks distribution in the upper Midwest, including Chicago, and in the Pacific Northwest. "There's still a lot of opportunity to expand," Crowley says.

Ken's growth has continued despite the potential distraction of a lawsuit over who owns the trademark , Ken's Foods or Ken's Steak House. Crowley is the son of a couple who were regular restaurant patrons at the restaurant, befriended the Hanna family that ran it, and liked the dressing so much they started the bottled dressing business.

Now, Ken's Food is suing the steak house for trademark infringement, alleging it has misrepresented its role in the success of the dressing on the restaurant Web site, its menus and in trade publications. In a counter-suit, Timothy Hanna, son of the restaurant's founder, the late Ken Hanna, claims Ken's Steak House owns the trademark and only licenses it to Ken's Food.

A far less storied New England foodservice establishment gave a start to another up and coming brand in the category , Annie's Naturals. Annie Christopher, a Brooklyn culinary school graduate, started a barbecue stand in North Calais, Vt., in 1985. Customers liked her flair for sauce recipes enough that Christopher decided to start making salad dressings out of her 1840s farmhouse as a cottage business for a stay-at-home mom. She started making batches big enough to fit in the back of a pickup truck and selling them at craft fairs and food shows.

Disdain for preservatives

Christopher's embrace of organic ingredients and disdain for preservatives ultimately led her to the fast-growing health-food retail channel, where Annie's Naturals command a 50 percent share in some chains. Use of Annie's popular Goddess Sesame Shiitake Vinaigrette and other flavors on salad bars at such chains as Wild Oats has helped give consumers a taste that has them buying the bottled brand, too.

Despite its organic positioning and health store roots, Christopher believes it's flavor and culinary creativity that have built the brand into a $14 million business that saw 30-percent growth in the first quarter on top of 41 percent growth last year.

She pores through hundreds of cookbooks and food magazines for inspiration, but she's proud of the personal touch in each of her formulations. "When I come up with a new flavor, it's somehow personally inspired," Christopher says. "I don't take a recipe from a book and copy it. It's never happened."

Christopher is a long way from operating from her farmhouse, but she's yet to see the need to build a plant. She opted instead to work with co-packers Blanchard and Blanchard in Vermont and J. Lieb in Forest Grove, Oregon.

"I felt the category was lackluster in terms of flavors [when I started]," she says. "If you offered something different and not so full of preservatives, they'll buy it." Annie's was the first brand, she says, to offer a bottled raspberry vinaigrette flavor that's gaining a following in Ken's and other brands now.

Only in the past three years has Annie's moved into supermarket retailers such as Kroger Co. Annie's had a $7.2 million business in supermarkets the 52 weeks ended Feb. 23, up 26 percent from a year ago. But 45 percent of Annie's Naturals' business remains in natural food outlets, she says.

While the mainstream stores sell her most popular flavors, natural food outlets sell the broader range and newer flavors, such as Black Olive & Truffle Vinaigrette. For now, many supermarket chains, including Kroger, confine Annie's to the natural-food section, but Christopher believes the brand ultimately will make the migration to the mainstream salad dressing sections and accelerate sales growth even more.

Salad Dressing sales by brandBrand                        Sales       Change             ShareKraft                         $452.0       +1.5%               31.2%Wishbone                   274.3       +9.3%               18.9%Hidden Valley             190.0       +6.9%               13.1%Ken's Steak House     109.0     +12.9%                7.5%Newman's Own            54.7       +6.6%                 3.8%Annie's Natural              7.2       +26.0%                0.5%Private Label              116.1     +16.6%                 8.0%Overall                  $1,448.7      +2.0%Source: Information Resources Inc., 52 weeks ended Feb. 23

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