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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S2 STATE OF THE SPECIALTY FOOD INDUSTRY 2018 THE SPECIALTY FOOD MARKET The Specialty Food Association, working with Mintel, has revamped its annual research into one new, comprehensive State of the Specialty Food Industry report that explores where the market is today, the opportunities and challenges it faces, where it is going based on sales forecasts in key categories, and how the specialty food consumer is evolving. Read some highlights on the following pages. The Specialty Food Association's State of the Specialty Food Industry report is a joint research project prepared by Mintel and SPINS/IRI. The research encompasses the three most recent calendar years of sales data and includes figures for 63 specialty food categories, pulled from the SPINS database of mainstream and natural food stores. For the first time the report estimates online specialty food sales. For a more in-depth look, go to specialtyfood.com/stateindustry2018 to download a longer Summary Report of this year's research, or find the full 175-page research report compiled by Mintel. Mintel has forecasted 34 specialty food categories through 2022. The report also includes data and insights from a consumer survey conducted in January among 1,629 adults. Also for the first time, Mintel conducted targeted interviews with members of the supply chain, including retailers, foodser- vice operators, specialty food manufacturers, brokers, and distributors. ABOUT THE RESEARCH "We see the future growth of the [specialty] category being driven more by foodservice, convenience, and vending," says a senior manager in food distribution. "We've seen a lot of growth in drug (CVS, Walgreens, etc.) as well. You've got all these different players now that want to carry some of these products." Changing consumer expectations and food-choice aware- ness is stimulating sales growth and expanded distribution. Specialty foods' characteristics—quality ingredients and production, interesting flavors—are requirements rather than luxuries with consumers, younger ones particularly. The good news is this mindset will continue to be the norm. Based on Mintel's research, the youngest specialty food consumers, coined the iGeneration (ages 18 to 23) embrace specialty foods' attributes somewhat more strongly than generations before them. A continuing engaged consumer base means ongoing opportunity, but these consumers' prefer- ences will mean shifts for the industry as to where specialty foods are purchased, how they are consumed, and on which areas to focus product development. "The meta word for me in this business right now is 'disruption,'" says an executive vice president of a specialty/ natural foods brand. "It's happening on multiple levels … retail channels, consumer channels, distribution." Design by Funnel Inc. Today, 65 percent of consumers purchase specialty foods, leading the industry to $140.3 billion in retail and foodservice- sales in 2017—an 11 percent increase over 2015. Growth is slowing year upon year as the specialty food market matures. But at retail, specialty foods still increased nine times as much as all food. Specialty food and beverage sales as a share of the total market reached 15.8 percent. Foodservice and online are burgeoning bright spots for specialty food sales, each growing more than brick-and-mortar retail sales from 2015 to 2017. Both are channels that buyers, distributors, brokers, and producers who were interviewed as part of the research mark for growth opportunities in the maturing specialty food market. They also cite emerging chan- nels like convenience stores and drug stores. SALES GROWTH OF SPECIALTY FOOD VS. ALL FOOD AT RETAIL 0 2 4 6 8 10 "The meta word for me in this business right now is 'disruption.' It's happen- ing on multiple levels … retail channels, consumer channels, distribution." DELIVERY FOOD MART TO GO DRUG STORE SPECIALTY FOOD ALL FOOD 1.4% 12.9% TO Source: Mintel/SPINS/IRI

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