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Specialty food going 'up and up and up,' says Mintel

January 30, 2018

Food Business News

Expect continued strong growth of specialty food and beverage sales in the years ahead, said David Lockwood, director of Mintel Consulting. “The market is going up and up and up and has a lot more potential to go up going forward,” Mr. Lockwood said during a presentation at the Specialty Food Association’s Winter Fancy Food Show, held Jan. 21-23 in San Francisco.

Total U.S. specialty food sales reached $127 billion in 2016. Growth of the specialty food market dipped sharply in 2015-2016, driven by food price deflation and retail consolidation, but rates are projected to rebound over the next five years, Mr. Lockwood said.

“What you’ve seen is, in 2012-2016, averaged compound annual growth rate of 9%, and going forward for 2017-2021, we have it at 7.9%, only dropping off one percentage point,” he said. “For a market this big, above $100 billion, that’s a really high growth rate.”

Mintel measures and tracks 61 specialty food segments, including baby food, olive oil and water. The forecast does not include food service, private label or price look-up items, or sales through Whole Foods Market or Trader Joe’s. Specialty food is growing at three times the rate of conventional food and beverage, Mr. Lockwood said.

“The way we have measured specialty foods, it will go from 14.8% of the total market to 18%” in 2021, Mr. Lockwood said. “That’s impressive, but it still leaves room for growth.”

Most specialty food consumers only shop in a handful of categories. These light buyers are expected to increase their purchasing in the coming years, supporting continued growth, Mr. Lockwood said.

“The light buyers on average will buy 3.1 categories, while the heavy buyers buy 13.6 categories,” Mr. Lockwood said. “People who test out the specialty foods market always over the years become bigger and bigger users. It’s still the case that most of the people who are specialty food buyers are just light buyers and will become heavier buyers over the years.”

Among the fastest growing specialty food categories are water, refrigerated lunch and dinner entrees, frozen desserts and wellness bars and gels, Mr. Lockwood said.

“Conventional grocers talk about the death of dry goods and the death of the middle aisles and things like that, where shelf-stable products are in many cases outright declining or not growing,” he said. “That’s not the case in specialty foods, however. Of all the 61 segments we track within specialty foods, none of them are declining. All of them are growing to some degree, even if just small single digits.”

The largest specialty food categories are cheese and plant-based cheese, frozen and refrigerated meat, poultry and seafood, and chips, pretzels and snacks.

“Salty snacks never stops growing,” Mr. Lockwood said. “There is still lots more to be explored in terms of flavors and textures. We’ve learned in the last several years there’s no end to the number of flavors and ingredients that can go into salty snacks. Much more to come there and will continue to grow far faster than conventional.”

Specialty cheese
Cheese and cheese alternatives have 7.5% share of the specialty foods market.
Another hot category is specialty frozen desserts, with growth driven by new plant-based and reduced-sugar offerings, as well as smaller portions and novelties. Water, which in recent years has grown at a strong double-digit rate, is led by premium sparkling brands, functional varieties and eco-friendly packaging options.

Mr. Lockwood said there is also plenty of room for growth in specialty refrigerated and frozen meat, poultry and seafood, which presently accounts for 11% of the total meat, poultry and seafood market. Products positioned around heritage, animal welfare and transparency, as well as convenience-oriented innovation, will drive category growth, he added.

“Consumers put all-natural as the first, most important thing on their list,” Mr. Lockwood said. “Even though it doesn’t have a precise definition, they really like that term. That’s why we continue to see lots and lots of talk, even if it’s not a front-of-label claim that it’s all-natural, the positioning products make speaks to the idea of all-natural, and that makes sense because that’s what consumers like to see.”

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