Specialty Food Magazine

Summer 2018

Specialty Food Magazine is the leading publication for retailers, manufacturers and foodservice professionals in the specialty food trade. It provides news, trends and business-building insights that help readers keep their businesses competitive.

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STATE OF THE SPECIALTY FOOD INDUSTRY 2018 S13 WHERE WILL SPECIALTY FOODS SELL IN THE FUTURE? However, warnings that physical stores will fall by the wayside are overblown. "The supermarket is as important as a doctor or hospital or library. They respond to the needs of the community," says a specialty food broker and industry consultant. "When you start removing the human touch, it all kind of falls apart." "Nothing will ever replace human-to-human great service. There's a theater that you've got to begin to embrace as a retailer, otherwise the [customer should just] click on an item and have it sent to their door," says the business manager and buyer for a specialty supermarket chain. Members of the supply chain see the relationship between online and brick-and-mortar as complementary rather than adversarial. More startups like Instacart and Shipt are securing partnerships with brick-and-mortar retail chains, which yield added growth for all in the specialty supply chain. "There will still be people who like to shop in the store, but for when they can't, [retailers] need to make sure there's an offering," says a director of analyt- ics for a leading on-demand shopping platform. "Online ordering is a need that customers have so if the retailers aren't in the space, they're probably going to miss out on a lot of growth." The competition from online can be good for the specialty supply chain overall. One senior manager in food distribution notes that online and expanded distribu- tion of specialty food gave his firm incen- tive to seek out specialty. "Up until this point we hadn't embraced it as a seismic shift in the business." Specialty food stores accounted for about 11 percent of total retail sales, with their market share dipping to 10.7 percent in 2017. Contrib- uting factors include expanded distribution of specialty foods in other channels, and compet- itive pricing that can be difficult for specialty stores to compete in. "The specialty store model in a classic sense, is just no longer sustainable," asserts a founder of an independent natural and specialty supermarket. Yet, independent specialty merchants encompass several values and characteristics that core younger specialty food consumers seek—those that position them as a founda- tional component of the community. Empha- sizing these areas provides a strong competi- tive edge and a direction that retailers should focus on over the next decade. As these young- er shoppers mature, they carry these values forward. • Education. iGens especially prefer to shop where the staff is knowledgeable. Although this age group is more aware of the term 'specialty food' than the generations before them, they encounter difficulty deciding what to choose. An engaged, informative staff is a valuable point of differentiation. • Local/regional emphasis. Consumers across the board expressed an interest in local and regional foods. "We focus on little-guy suppliers, what's cool in our city. While it adds complexity on the supply chain side … it puts us in a better competitive situation," says a West Coast specialty retailer. • Connection. Core SFCs have a desire to know the owner where they shop, something an independent grocer can fulfill far more than a large chain or mass merchant. • Fresh foods focus. Brick-and-mortar retailers could leverage demand for produce, perishables, and frozen food into a position of strength versus online grocers. These categories are not always as readily accessible online as others, except by consumers using local delivery services or Peapod. SPECIALTY STORES' ROLE ONLINE VERSUS BRICK-AND-MORTAR E-commerce is thriving. As e-tailers have improved their specialty foods selections, consumers have flocked. Fully two thirds of SFCs have made online purchases of specialty food—up from 53 percent in 2015. E-commerce growth for specialty foods is all but sure to grow as younger consumers are more likely than their older counterparts to shop this way. Made East Side Locally BBQ SAUCE

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