'Specialty' category an undercurrent of strength in food and beverage

by Keith Nunes
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Keith Nunes

The term specialty is vague, including when it is used to define food and beverage products, but there is no denying that strength in the industry is emanating from those companies aligned with this descriptor. While large food and beverage companies are struggling to generate growth, many specialty companies, those that tend to be smaller and more nimble, are expanding at a rapid pace.

Sales of specialty food and beverages hit $127 billion last year, 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 growth of the category is driven by product innovation and wider availability of specialty food products in mass-market outlets, a trend that further underscores the strength of the category.

By comparison, Information Resources, Inc. pegs sales of U.S. consumer packaged goods in 2016 at $800 billion across measured retail channels. Dollar sales growth during that period was 1.4%, the lowest it has been since 2011, according to the market research company. A part of the tepid growth rate is attributable to deflationary pressures many companies experienced during the year, but it also highlights how many consumers are shifting their purchasing patterns toward products better geared toward their lifestyle and perceptions of health and wellness.

Specialty frozen entrees
Refrigerated lunch and dinner entrees in the specialty category increased 33%.

Specialty food represents nearly 15% of all food sales at retail. Of the 61 specialty food categories examined in the Specialty Food Association’s report, 57 grew, while declines were recorded in frozen juices, shelf-stable plant-based milk and creamer, beans, grains and rice, and cold cereal. Many of these product categories may be considered staples, categories where price may play a more important role in the consumer’s purchasing decision.

Specialty beverage sales, which account for 18% of the total specialty retail market, increased 24% from 2014 to 2016 to reach $10.5 billion. Snack sales, which account for about 28% of the specialty food market, grew 16% to $16.3 billion.

Among the 10 fastest growing specialty 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.

Among product attributes trending in the specialty food industry is a commitment to sustainability, with nearly 40% of specialty food manufacturers making products perceived as sustainable, up 22% from last year. Specialty manufacturers also plan to innovate around gluten-free, non-G.M.O. and convenient or easy-to-prepare concepts in the coming year, according to the Specialty Food Association. Plant-based, vegetarian and vegan food also are areas of focus for more than a third of manufacturers.

That interest in the specialty food and beverage category is growing among purchasers, investors and larger food and beverage companies is undeniable. And one may expect the category to continue to grow as retail and food service buyers continue to stock products that will differentiate their offerings in the marketplace, and consumers continue to seek products that complement their perceptions of health and wellness and their personal values.

 

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