CASE STUDIES

New Covent Garden Food Company

case study
Creating and maintaining a premium product that stands out from "me-too"
competitors
Reference Code: CSCM0175
Publication Date: June 2008

DATAMONITOR VIEW

CATALYST
The New Covent Garden Food Company (NCG) set about changing soup consumption when it was first introduced to the
UK, with its range of fresh, natural products designed to remind consumers of authentic homemade soups. However, in
order to stave off the influx of inevitable me-too rivals, the company has embarked on a process of brand expansion,
product repositioning and premiumization.

SUMMARY
New Covent Garden was conceived back in 1987 initially as a soup company with the goal of creating ready-to-
eat soups that tasted as though they had been prepared freshly at home. The bigger the company has become,
the more its portfolio has diversified. The product range has now been expanded to include not only soups, but
porridge, risotto and a number of different pasta sauces too.

The fresh, natural range of soups became an instant hit with consumers who disliked the mass-produced nature
of soup from a tin. New Covent Garden dominated this market for fresh soups in the UK until me-too companies
entered and undercut it on price, successfully taking a significant proportion of the market. By 2001, NCG had
only a 32% share of the UK fresh soup market.

New product releases and a concerted effort to emphasize the premium nature of its goods allowed NCG to re-
establish itself as the market leader. By 2007, market share was back up to 49%. High prices remained as an
indicator of its premium positioning, while it targeted its products at the premium snacks market in order to
capitalize on the convenience trend.

Current advertising and branding still pays tribute to the natural ingredients contained within NCG goods.
Consumers are made to feel comfortable with this homely image, and to feel satisfied that the products are
wholesome and healthy. This gives the products a significant advantage over many of its rivals which use
additives, flavorings and preservatives.

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ANALYSIS

Authenticity is the key driver of sales

Initially, New Covent Garden only served soup

The concept for New Covent Garden is said to have originated when creator Andrew Palmer returned home from a lengthy
sailing trip in 1987. Longing for the comfort of his mothers homemade soup, he was disappointed when he discovered that
the only thing available to him was a salad. His reasoning that he would not be the only one who experienced this longing
proved to be correct, as the company he subsequently set up became successful in its own niche of the marketnamely
that of fresh soup available in a packaged format.

Embracing authenticity has proven successful for the company

A recent Datamonitor report, Authenticity in Food and Drink (DMCM4582), focuses on the concept of authenticity driving
consumer spending habits. Report author Matt Adams states that The underlying attraction of authentic products is that
they are perceived to be made the right way often with artisanal or traditional methods often both. New Covent Garden
utilizes authenticity heavily in its marketing strategy in an effort to create a homely and personal range of products. The
strategy is working for the company: According to an article in Talking Retail (April 2008), sales currently average 1m
(US$2m) per week, and annual sales are up 11.3%twice that of the category as a whole and three times that of the next
leading brand (private label).

New Covent Garden emphasizes the authenticity of its products and creates a homemade aura

The company uses all-natural ingredients in the formulation of its products

New Convent Garden's key point of differentiation is its use of all-natural ingredients. As well as being designed to create
fresh and tasty products, these natural ingredients are also a key marketing tool for the company as consumers are
increasingly concerned with the amount of fresh and natural components in their diet. Furthermore, consumers are
becoming more wary of foods that contain additives and preservatives due to food health scares such as links to
hyperactivity. In 2006, the company changed its strapline from Eat fresh soup for goodness sake to Food as it should
becreating a particular focus on the use of natural ingredients.

One section of the company's website is dedicated to details about the ingredients used in NCG products. It states: We
use all natural ingredients, theres nothing artificial about any of our products. We choose the same natural ingredients
youd have in your own kitchen. A connection is therefore made between the products and how a consumer would make
their own foods and sauces, further highlighting the similarities between New Covent Gardens goods and homemade
items. The website goes on to re-enforce the premise of freshness by declaring We carefully select our farmers and
growers, they have to care about the food they produce, in the same way as we do. This declaration of stringent quality-
checking is important in emphasizing the message that NCG products are premium products.

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Homeliness is implied through packaging, cookbooks and the company's website

The concept of homeliness is very important in the marketing of NCG brands. The differentiation between tinned goods and
its own fresh ranges is based around the concept of experiencing a homemade taste. In order to retain this feeling, several
elements of the company's advertising focus on the home and disassociate from the impersonal nature of the mass-
produced corporate product.

Its packaging resembles tubs with homemade labels haphazardly stuck on at various angles, with the name of the product
marked on in a hand-written style. The impression given is not one of a bulk-produced container, which is exactly what
NCG strives to stay away from.

New Covent Garden produces a series of cookbooks that display recipes on a graphic of notepad paper. Instead of
appearing in a clear computer font, the writing is scrawled as if by hand and the uneven color represents a ballpoint pen.
Recipes are also available for free on the official website. This transparency adds to the personal feeling of the company,
with the consumer being able to replicate their favorite flavors at homemaking NCG even more synonymous with
homemade food.

The company encourages the traffic light system as it provides an opportunity to display its healthfulness

With the concept of the Food Standard Agency's (FSAs) food traffic lights becoming more prevalent in the UK, there has
been much debate regarding their endorsement. The system involves detailing the content of fat, saturated fat, sugar and
salt in the product using the controversial nutrient-profiling model. These values are then displayed per hundred grams.
Each nutrient is subsequently assigned a color based on how healthy or unhealthy its presence is. Green indicates a low
content relative to a consumers recommended daily allowance. Red indicates the oppositethat there is an unhealthy
amount of a certain property. Amber indicates a value between these two extremes which indicates neither great
healthiness nor excessive unhealthiness. The presence of the traffic light colors allows consumers to form instant opinions
of whether the product is good for them or bad for them. Manufacturers not in favor of the traffic light system tend to have
goods particularly high in one or more of the rated categories. Conversely, companies who are in favor tend to have
relatively healthy products and see green traffic lights as an endorsement of their products. Therefore, a good set of traffic
lights can act as advertising for a manufacturer. However, doubts remain over the accuracy of the traffic light system when
applied to a multitude of different products. Ben Clarke, vice president and area director of Kraft Foods UK and Ireland,
stated that "In fairness to the FSA, it initially said it only intended traffic lights for ready meals, pizzas and so on. 100g
wasn't a bad choice but when you're looking at a variety of products, it becomes irrelevant and potentially misleading" (The
Grocer, 2007).

As New Covent Garden produces mainly healthy foods, it is clearly a proponent of the traffic light scheme; NCG feels that it
has nothing to hide from consumers in terms of unhealthy properties in its products. The soups, in particular, are made with
natural ingredients and therefore are low in undesirables such as saturated fats. However, some of its ready meal series do
contain red lights. For example, the Chicken & Pancetta ready meal contains 31.1g of fat (the RDA being 70g), and 18.5g
of saturated fat (RDA of 20g). This saturated fat content, in particular, is extremely high at 92.5% of a consumers RDA.

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Nonetheless, its soups are perceived to be one of the healthiest in terms of salt content. In 2004, the FSA specifically cited
soup manufacturers as a group which had a responsibility of removing salt content in their products in order to improve the
healthfulness of consumers. We welcome the commitment that some manufacturers and retailers have made to reduce
salt content in soups but the fact that such a popular and convenient food can provide more than a third of the daily salt
limit shows that continued effort in this area is still needed, Gill Fine, FSA director of consumer choice and dietary health
(Food and Drink Europe, 2004). However, New Covent Garden's fresh chicken soup was recognized as having the lowest
salt content in the fresh/chilled category of a nationwide survey of major brands in 2004. At 1.0g per serving, it counted as
just a sixth of the 6.0g RDA (Food and Drink Europe, 2004).

Figure 1: New Covent Garden is an advocate of the FSAs food traffic lights, and prominently displays them
on goods

Source: www.newcoventgardenfood.com DATAMONITOR

New Covent Garden has looked for greater brand recognition through new product
launches, advertising and sponsorships
In order to compete better against the emergence of 'me-too' products, NCG has expanded since its inception and now
offers a myriad of ready meals, risottos and pasta sauces in addition to an ever-growing range of ready-to-eat soups. New
flavors of soups are debuted as Soup of the month offerings, and the company makes its products accessible to new
consumers through large-scale sampling sessions. In addition to this, advertisements and event sponsorships have served
to enhance the image of the company and reach potential new consumer bases.

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New soups spark interest even in off-seasons

Product ranges are tailored to the season in order to remain relevant and appealing

Though it can be consumed all year round, consumers are less likely to eat soups in the summer when the weather is
hotter. On the contrary, it is the cold-weather seasons when demand increases as consumers seek the comforting
sensation of a warm and nourishing foodstuff. A winter season soup called White Christmas was released in December
2007, described by the company as "Full bodied, creamy Stilton cheese melted into white onions and festive white Port.
Smooth and velvety, with flecks of parsley and thyme providing a touch of Christmas green." The senior brand manager at
New Covent Garden, Nick Munby, confirmed this seasonal targeting strategy in stating The festive seasonal variant is an
innovative way for retailers to drive sales during the Christmas period.

In order to increase interest at times of low consumption, NCG announced the launch of their new summer range of soups
for the summer of 2008. The range contains five soups, two of which have already proven to be favorites in previous years
(Summer Vegetable and English Asparagus). The three new varieties are: Pea & Mint; Red Pepper; and Gazpacho. New
Covent Garden marketing director Nigel Parrott claims that the soups can be enjoyed either hot or cold, and that they can
prove to be a beacon brand in the chiller cabinet for retailers (Talking Retail, 2008).

The Soup of the month offer is an opportunity to introduce new ideas and flavors into the marketplace

New Covent Garden uses flavor innovation as a key differentiator and has identified the release of new and interesting
tastes as a way of creating unique sensory experiences for consumers and retaining appeal in the brand. In the Soup of
the month deal, the company has created a vehicle to test new limited-edition recipes in the market under normal retail
conditions in a way that enables New Covent Garden to collate substantial feedback from consumers. This process allows
the company to reformulate the soups to create the maximum possible appeal to their target audience. Decisions can then
be made on whether the product is ready for a launch, and whether the public would be receptive to it. The feature also
allows NCG to bring pre-existing products back into consumers consciousnesses at times when a sales boost is
necessary.

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Figure 2: Soup of the month is a feature used by New Covent Garden to debut new varieties or re-ignite
interest in old ones

Source: www.newcoventgardenfood.com DATAMONITOR

New Covent Garden uses associations and product sampling sessions to target first-time consumers

Sponsorship deals allow the company to target a specific new audience

New Covent Garden has used associations and opportunities to sponsor events as a fundamental way of increasing
awareness of the brand. In 2007, NCG celebrated an ongoing association with the Royal Horticultural Society by launching
a new soup called Kitchen Garden, which comprised of in-season vegetables including peas, radishes and spinach. The
association included the sponsorship of the Growing and Showing Marquee at Hampton Court Palace Flower Show in the
July that of year. The relationship has continued into 2008 with the sponsorship of the inaugural Growing Tastes Marquee.
Another new soup was introduced to celebrate this particular associationthe Broccoli, Watercress and Fennel soup
becoming the May 2008 Soup of the month.

New Covent Garden also sponsored the Britains Best Disha cookery program aired on the channel ITV in September
and October 2007. It documented the search to find the best home-cooked food in Britain. The program, which aired as 30
episodes, averaged more than one million viewers per day. The audience of such a program would be likely to appreciate
good food and, in particular, food which had a home-cooked vibe. Therefore, NCG targeted them with its product range
designed entirely to represent this particular form of cuisine. As with the Royal Horticultural Society, the association with
quality is paramount to New Covent Gardens brand image, hence the decision to sponsor a program about great food.

Sampling sessions encourage speculative consumers to become new buyers of the brand

Nigel Parrott declared in an interview in 2005 that "I think two-thirds of the consumers that could buy fresh soup have yet to
try it and that's the challenge. I think the penetration should be significantly higher" (Talking Retail, 2005). The company

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has discovered that the relatively high price of its ready-to-eat soup in comparison to canned and chilled private-label
varieties is an inhibitor of first-time consumption. At UK ASDA stores, New Covent Gardens 600g Summer Vegetable soup
is priced at 1.69 (US$3.32) compared to 0.96 (US$1.88) for its 600g private-label fresh equivalent. A 400g private-label
tinned vegetable soup is even cheaper, retailing at 0.39 (US$0.77). In an attempt to circumvent this barrier, the company
has organized sampling sessions to encourage potential consumers to try different varieties of the soups, with the intention
of creating more long-term customers and establishing brand loyalty. In the same interview, Parrott claimed that The
quality of our product means that the conversion rate from sample to purchase is extremely high and this will drive many
more people to the fresh soup fixture in search of New Covent Garden. The sessions are advertised in the company
newsletter, and generally take place at shopping centers, and flower and gardening shows. In a session that took place at
The Centre MK in Milton Keynes from the 28th-30th March 2008, NCG claimed to meet nearly 30,000 consumers. The
entire 2008 national campaign is expected to reach an estimated 600,000 consumersproviding the company with a
significant opportunity to increase brand awareness (Grocery Trader, 2008).

A premium product range has allowed New Covent Garden to re-establish its dominance
over competitors
From 1995 onwards, New Covent Garden competitors began to appear with increasing regularity as taking a share of the
ready-to-eat soup market became an increasingly lucrative prospect. The vast majority chose to use the NCG model for
their own business, offering little in the way of innovation and progression. However, lower prices resulted in these rivals
taking part of the market away from the company. In order to re-establish a dominant foothold, NCG began a long-running
strategy of repositioning its products, changing its target consumer and enhancing the image of having premium product
lines.

Identifying a new target audience resulted in a change of direction for New Covent Garden

The initial target market for NCG was the younger adult up to the age of 35. In fact, research began to show that older
consumers and couples without children were more responsive to the products. As a response to this discovery, the
company changed the writing on the packaging to make it easier to read for older consumers. Clear, bright colors and basic
imagery of the ingredients made the packaging very visual and created a greater emphasis on homeliness. In addition to
this, advertising campaigns started to focus more on mid-lifers and seniors, with the sponsorship of gardening events being
a particular example. According to the company itself, this resulted in an immediate upturn in sales. The market share
which had been gradually declining up until the 21st centurystarted to increase again, and has always increased year on
year since this point (Talking Retail, 2007).

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Changing product positioning to that of a convenient snack has increased the versatility of the product
range

Indulgent ready meals are an attempt to take a share of consumers who demand healthy convenience

New Covent Garden does not consider its products purely as an alternative to tinned soups. Indeed, the chilled nature of its
soups means that the company is better positioned in the overall chilled product market. In order to capitalize on the
demand for healthy convenience products, NCG launched a range of natural ready meals in May 2007. The meals, in an
attempt to retain the high-quality image of the brand, are advertised as indulgent, premium products. They come in six
varieties: Chicken, Tomato & Olive; Salmon and Crayfish; Chicken Mozzarella and Pancetta; Meatballs and Mediterranean
Vegetables; Moroccan Lamb with Chickpeas; and Chicken in Madeira. New Covent Garden's group marketing manager,
Andrew Ovens, predicted This is one of our most significant brand stretch developments, which will stimulate fresh
consumer interest in the ready meals fixture. (Talking Retail, 2007) The release was accompanied by a 250,000
(US$493,152) marketing program which specifically targeted women, and included adverts and posters in the UKs national
press.

Single-serve portions see the products take on a more convenient role

In order to make the products more deliverable to consumers who are looking for individual, on-the-go experiences, NCG
added a variety of single-serve portions to its product range in 2007 as part of a 2m (US$3.9m) brand development
program. The four most popular 600g (23 serves) brands of soup were chosen, namely Carrot & Coriander, Leek &
Potato, Winter Vegetable and Spicy Butternut Squash & Sweet Potato. The tagline One Bowlful Try Me was added to
each carton to emphasize the singular nature of each serving. In addition to targeting the on-the-go market, this move was
primarily designed to encourage first-time consumers by offering a solution that didnt create wastage if they did not like the
product. The portions were also cheaper, at a RRP of 1.39 (US$2.74) compared to a RRP of up to 2 (US$3.9) for a
regular 600g portion.

The expense of the products is not unnoticed but is accepted by consumers

Consumers have noticed the high prices but appreciate the quality of the products

Food lovers regularly use the internet to share their views and tastes with fellow enthusiasts. The proliferation of shopping
intelligence websites dedicated to food reviews means that word-of-mouth advertising is more prominent, and 'bad'
products can be quickly and easily exposed to large volumes of people.

Website reviews on ciao.co.uk of various soups in the NCG range between 2002 and 2007 were mostly positive, with only
one of 13 helpful reviews stating that the soup was not recommended. Eight of the aforementioned reviews cited the
expensive price as a negative element of the product, but praise for the quality of taste and texture was overwhelming.
Though publicity gained from such an internet source will be minute in comparison to other forms of advertising, NCG
benefits from sustaining a perception of quality in spite of the general cost of its goods.

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A higher price than copycat competitors sets the product range apart and makes it look superior

Despite pressure to lower the price of its products, NCG made a decision to retain high prices in order to re-enforce the
image of premium products. Even at its initial launch, the original New Covent Garden soupCarrot & Corianderwas four
times more expensive than its tinned counterpart, according to Nigel Parrott. However, this did not deter consumers who
were prepared to pay a premium in order to eat a high-quality soup that reminded them of home. Though competitors could
attract consumers on a budget, NCG chose to concentrate on establishing a reputation of the superior quality of its brands.
As the company has grown, brand loyalty has developed and the reputation of New Covent Garden as the producer of
premium ready-to-eat soups has re-opened the gap with competitors in terms of market share. Such is the extent of this
popularity, Parrott declared that the soups enjoyed price inelasticity, and that a recent increase of 0.15 (US$0.30) on the
RRP of Carrot & Coriander soup due to an increase in the cost of ingredients had only a marginal effect on sales figures.

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APPENDIX

Case study series

This report forms part of Datamonitors case study series, which explores business practices across a variety of disciplines
and business sectors. The series covers a range of markets including food and drink, retail, banking and insurance,
pharmaceuticals and software.

Methodology
A variety of secondary research was carried out for this case study. This included researching the soup market on
Datamonitors Interactive Consumer Database and the Productscan Online Database of new products, alongside an
extensive review of secondary literature and other in-house sources of information.

Secondary sources

New Covent Garden Food Co showcasing seasons best fresh produce in association with the Royal Horticultural
Society; Grocery Trader (May 2008)

New Covent Garden unveils national sampling campaign; Talking Retail (April 2008)

Food additives make children behave badly; The Times (September 2007)

New Covent Garden soups launches single serve cartons into independents and symbol groups; Talking Retail
(September 2007)

New ready meals range from New Covent Garden; Talking Retail (May 2007)

Campaign trail; The Grocer (March 2007)

Are there lights at the end of the tunnel; The Grocer (January 2007)

Covent Garden in Freshness Focus; Brand Republic (November 2006)

A chill wind cools premium growth; The Grocer (November 2005)

Close up: New Covent Garden Food Co The new original; Talking Retail (August 2005)

Further reading
Changing Grocery Shopping Patterns (Datamonitor, DMCM4619, March 2008)

New Developments in Global Consumer Trends (Datamonitor, DMCM2468, April 2007)

Authenticity in Food and Drink (Datamonitor, DMCM4582, December 2006)

Capitalizing on Natural & Fresh Food & Drink Trends (Datamonitor, DMCM4149, September 2006)

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Developing Products with a Price Premium (Datamonitor, DMCM2103, May 2005)

Ask the analyst

The Consumer Knowledge Center Writing team

askcm@datamonitor.com

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