Trends Driving Growth in Specialty Food Industry

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Source:Food Business News

Specialty beverage sales increased 24% from 2014 to 2016 to reach $10.5 billion.

Sales of specialty food and beverages hit $127 billion, climbing 15% between 2014 and 2016, while all food sales at retail grew 2.3%, according to the Specialty Food Association’s annual State of the Industry report, produced with market research firm Mintel. The continued strong growth is driven by product innovation and wider availability of specialty food products in mass-market outlets.

“Consumer preferences for specialty food products are growing at double digits, outpacing mainstream food staples,” said Phil Kafarakis, president of the Specialty Food Association. “The products our members create appeal to consumers looking for authentic tastes and foods with fewer and cleaner ingredients.”

Specialty food represents nearly 15% of all food sales at retail. Of the 61 specialty food categories examined in the report, 57 grew, while declines were recorded in frozen juices and beverages (down 68%), shelf-stable plant-based milk and creamer (down 5.3%), beans, grains and rice (down 1.5%), and cold cereal (down 1.6%).

Specialty beverage sales, which account for 18% of the total specialty retail market, increased 24% from 2014 to 2016 to reach $10.5 billion, led by growth in water, refrigerated juices and functional beverages and shelf-stable and refrigerated ready-to-drink tea and coffee. Snack sales, which account for about 28% of the specialty food market, grew 16% to $16.3 billion.

Refrigerated lunch and dinner entrees increased 33%.

Among the 10 fastest growing categories, 7 are refrigerated or frozen. Refrigerated juices and functional beverages grew 31%, while refrigerated lunch and dinner entrees increased 33% and yogurt and kefir rose 27%. Shelf-stable grocery products accounted for 61% of the total specialty food market in 2016 with $36.2 billion in sales, fueled by strong growth in water, wellness bars and gels, and nut and seed butters, all of which increased 20% or more.

The specialty food categories with the highest dollar sales growth included eggs (up 184%), refrigerated ready-to-drink tea and coffee (up 114%) and jerky and meat snacks (up 86%).

“Consumers are also making purchases wherever they happen to be, changing the retail food environment,” Mr. Kafarakis said. “The eagerness of all retailers including mass market, e-commerce, and food service to capitalize on these consumer trends is transforming the marketplace.”

Specialty eggs raked in the highest dollar sales growth, up 184%.

On-line sales are heating up, with third party e-commerce and direct-to-consumer web sites accounting for nearly 36% of specialty food sales, while growth at retail and food service has slowed, up 5.5% compared to 9.1% in 2015. For the first time, specialty food sales in multi-unit grocery and mass merchants outpaced growth of sales in natural and specialty chains.

Among product trends in the specialty food industry is a shift to sustainability, with nearly 40% of specialty food manufacturers producing sustainable products, up 22% from last year. Manufacturers also plan to innovate around gluten-free, non-G.M.O. and convenient or easy-to-prepare in the coming year. Plant-based, vegetarian and vegan food also are areas of focus for more than a third of manufacturers.

Specialty food retailers predict local and regional foods will be a growing trend. Additionally, a third of specialty food retailers plan to develop more private label products in 2017.