Flourishing Specialty Food Industry Hits $109B with 22% Growth [Infographic]

• Author: Emily Crowe
• Categories: Trends and Statistics; Food Trends; Market Trends; Industry Stats
 
• Source: Specialty Food News
• Tags: broker; distributor; importer; research; retailer; Specialty Food Association; supplier

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Total retail and foodservice sales of specialty foods swelled to nearly $109 billion in 2014, a growth of 22 percent since 2012, marking a banner year for the industry.

The Specialty Food Association and Mintel International presented the findings of the 2015 State of the Specialty Food Industry in a live webinar Wednesday, painting a promising picture of the growth and sustainability of specialty foods.

Additionally, 15 segments within the industry saw sales exceeding $1 billion. Presenters noted the report does not include sales information from notoriously private Whole Foods Market and Trader Joe’s; were those companies’ data included in the study, it is estimated that sales numbers would be markedly higher.

Top Performers

Among the best-selling categories within the industry, cheese and cheese alternatives continued to represent the largest segment with $3.7 billion in sales. Coffee, coffee substitutes, and cocoa jumped to the No. 2 spot with 21.5 percent growth since 2012.

Frozen/refrigerated meat, poultry, and seafood had the third-largest share of sales, thanks in part to the growing popularity of deli and charcuterie.

Refrigerated pasta was the fastest-growing segment in 2014, with 78 percent growth since 2012. Other refrigerated items like pizza sauce are growing rapidly, which Ron Tanner, vice president of philanthropy, government, and industry relations for the Specialty Food Association, attributed to a consumer desire to buy more fresh products.

Shelf-stable, functional beverages are also gaining sales as consumers are looking for soda alternatives that carry a health benefit.

Specialty foods are beginning to make significant strides against traditional products, Tanner noted. In the case of refrigerated salsas and dips, 62 percent of all refrigerated salsas and dips sold in the United States at retail are specialty products.

Additionally, specialty products make up 57 percent of all energy bars and gels and more than half of all teas sold in the U.S.

All in all, specialty food products represent nearly 15 percent of the total market share of all foods sold domestically at retail. When the Specialty Food Association began its annual research about 12 years ago, Tanner said, that market share was only 4 percent. The association anticipates reaching 20 percent market share within the next five years.

“Over the years, specialty food has certainly taken a lot of market share away from the mass-market products, and they’re beginning to make substantial inroads,” Tanner said. “As consumers are buying more specialty foods, retailers will be stocking more of them and this should continue to increase.”

Industry Perspective

Across the specialty food supply chain, all segments reported a relatively strong year in 2014. Denise Purcell, head of content for the association and editor of Specialty Food Magazine, noted a majority of industry members reported about 10 percent growth year-over-year in 2014.

Many also reported a stable or slightly declining number of SKUs since 2007. “That suggests that the supply chain is really focused on getting the right number of SKUs that they need to grow sales without going overboard and risking carrying a surplus of inventory,” Purcell said.

For manufacturers, average annual sales in 2014 were $2.9 billion, with 48 percent showing growth of 20 percent or more for that year. Nearly two-thirds of those manufacturers are co-packing private-label items for retailers.

Among importers, a majority of sales gains were in the 1 percent to 19 percent range. For distributors, mean annual sales were $7.2 million, and 46 percent said they grew sales 20 percent or more last year. Brokers reported higher average sales and SKU counts in 2014 than in previous years.

Specialty food retailers also had a good year in 2014, with the average square footage of specialty stores growing to 6,072 square feet. “I think that’s because they’re getting more business and they’re putting in more departments than they have been in the past,” Tanner said.

Asked about their thoughts on emerging food and market trends, retailers called out smoked flavors, pickled foods, gluten-free items, seaweed, more good-for-you ingredients, sustainability, whole grains, humane food production, ethical sourcing, smaller stores, and greater delivery options.

Manufacturers, brokers, distributors, and retailers all agreed that locally made or sourced products is most important to consumers today. Offering predictions for the next big claim three years from now, manufacturers, importers, and brokers all predicted the non-GMO claim would top the list.

The Future of Specialty Food

David Browne, market research and retail analyst for Mintel, said one of the most important aspects of the specialty food market is that it will continue to become more mainstream. About 82 percent of specialty food sales are in conventional outlets such as big-box retailers and convenience stores, meaning consumer exposure is greater than ever.

Online sales across all segments are expected to boom in coming years, with millennials representing the biggest buyers. “It’s something the industry as a whole should be paying great attention to and building out services to support that,” Browne noted.

The free-from movement, particularly non-GMO and gluten-free items, is expected to continue to surge. Convenience food and beverages will be a hot sector in the next few years, with consumers setting their sights on easy, good quality, portable food and drink.

The specialty foodservice segment is building up steam, Browne said, growing 50 percent faster than retail. That growth signals a continuing rise in the availability of specialty foods in restaurants, food trucks, and national food chains.

“Today’s specialty consumer is a very committed consumer,” Browne said. “Specialty food is very much like the natural and organic food industry, which is overlaying this industry very closely. These consumers tend to see it as a lifestyle and not an occasional indulgence. That’s very good news for the industry as a whole."

View the full webinar.