How Sargento Created a Product with $50M in First Year Revenue

By Judy Quinn |  September 2, 2014

However you slice it, Sargento Foods has a pretty impressive track record in innovation. Founded in 1953, the privately-held Plymouth, Wisconsin-based company is responsible for the first vacuum packaged cheeses, the first packaged shredded cheeses, the first zippered closure for cheese, and many other product and packaging innovations. This market leader, which currently reports net sales of over $1 billion, even pioneered peg bar merchandising in the dairy case, putting cheese at eye level and within easy reach for shoppers.

Earlier this year, Sargento scored once again, winning a 2014 U.S. Breakthrough Innovation Award for its Ultra Thin Slices, one of only 14 products that Nielsen selected from a starting field of 3,463 launches. Ultra Thin, which serves up “full flavor” cheese in fewer than 45 calories a slice, cleared $50 million in sales in its launch year, and doubled in year two.

So how does Sargento keep its product line so fresh after more than 60 years in business?

According to Rod Hogan, Vice President of New Platform development, it’s a matter of committed, almost obsessive focus. “From the outside looking in, we look like a mature company with a mature product. How can you innovate with cheese?” he says. “But there are two ways we stay focused on being fresh: we focus on the consumer, and we have a singular focus on cheese. We constantly see great opportunities for reinvention.”

It also helps to have a family at the helm with a passion for cheese and a willingness to take risks. Founder Leonard Gentine was a funeral director who began the business as a mail-order operation out of his funeral home; grandson Louie Gentine now serves as CEO. “The Gentine family is passionate about innovation, sets high goals, and we are a well-staffed and resourced division,” Hogan says.

In its innovation practices, Sargento largely follows the Stage-Gate Idea-to-Launch Model, a standard widely used in the consumer packaged goods (CPG) industry. Hogan says that new product innovations at Sargento go through a due diligence cycle that typically takes 18-24 months to move from insights to idea to concept to commercialization to launch.

Insights are the kickstarter and key driver of innovation at Sargento, with Hogan’s team and the company’s consumer insight group, led by insights director Katharine Richards, engaged in ongoing outreach with consumers about cheese preferences, using such tools as in-person focus groups, social media quizzes, and other qualitative research. “It all starts with the consumer,” says Hogan. “We watch how they use cheese, how they make sandwiches. Is it a sandwich for work or dinner? Is it a hot or cold sandwich? Through this we get insights,” he says.

The Ultra Thin product, for example, arose “not as a lightning bolt, but from dialogue,” says Hogan. The insights work at Sargento revealed what Hogan calls “a concern and a point of tension” — that consumers wanted “full flavor” cheese in a sandwich, but were worried about the calorie consequences of eating too much of it. Sargento already has a successful line of reduced fat cheeses for calorie-conscious consumers, but as Hogan acknowledges, “low fat traditionally hasn’t delivered the flavor.” An insights exercise asking consumers to describe their sandwich ingredients as cast members in a movie underscored for Sargento that opportunities for new “full flavor” products existed. “Cheese was becoming more of a star — up from its traditional supporting role,” Hogan recalls in Nielsen’s U.S. Breakthrough Innovation Report. “Some consumers were cutting back on meat and others found that their ham and turkey staples weren’t terribly exciting. Cheese was providing the flavor signature for the sandwich.”

Such insights prompt Sargento to move on to the next stage of its innovation process, which is to bring together a formal cross-functional project team, drawing from the company’s R&D, packaging, engineering, culinary and other teams, to tackle new product ideation, concept and development. These departmental groups, which also attend the company’s insights activities, continue to bring its work back to consumers to “refine” and “optimize” the developing new product, says Hogan.

In regards to Ultra Thin, for example, that project team ended up testing a variety of concepts with consumers to find the desired sweet spot of texture, flavor, and calorie count in the thinner cheese slice. This testing and other qualitative research “helped focus our creative brief: we heavily weighted the terrific taste experience, and went much lighter on the low-calorie benefit,” Richards notes in Nielsen’s report. “This was the balance that resonated with consumers and cued the successful purchase interest.”

With a validated version of Ultra Thin in hand, Sargento then moved to its commercialization stage. “It took a lot of work from a lot of people to slice cheese that thin consistently,” says Hogan. Manufacturing and packaging challenges included having to “interleave” slips of paper between the slender slices. Sargento production and manufacturing teams ended up figuring out ways to modify existing equipment to address these issues, instead of purchasing new equipment.

Since introducing Ultra Thin, Sargento has continued to bring out new products, including Tastings, a series of specialty snack-sized block cheeses. The line’s launch promotion includes “Find Your Tastings Moment,” an interactive quiz deployed throughout the company’s various social media channels. It takes consumers through a series of lifestyle questions to find their “perfect pairing” of specific Tasting cheese, along with recommendations on fruit, wine and other complements.

While cynics might think Tastings is simply another chop-up of its core product, the passionate cheese-heads at Sargento beg to differ. According to Hogan, the new line fits into the company’s continuum of product innovation informed by its research on consumer desires. “People may think, ‘It’s just a chunk of cheese,'” he says. “But we’ve found that consumers want to explore, experience, and taste cheese; it’s something to share with others.”