Want to make money in the food industry?

Specialty foods and beverages could provide a path to profit. In the US, specialty food industry sales hit $127 billion in 2016 with strong growth recorded by traditional and non-traditional specialty food retailers, foodservice operators and distributors.

The Specialty Food Association’s (SFA) annual State of the Industry report examined the industry in detail. Largely fuelled by small business growth, total sales jumped 15% between 2014 and 2016. Growth was also driven by product innovations and wider availability of specialty foods through mass-market outlets. Sales through foodservice increased 13.7% to $27.7 billion as US consumers made specialty food a regular part of their away-from-home meal purchases.

“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.

“Consumers are also making purchases wherever they happen to be, changing the retail food environment. The eagerness of all retailers including mass market, e-commerce and foodservice to capitalise on these consumer trends is transforming the marketplace. Our research indicates that accelerated growth will continue.”

Top trends:

• Sales growth: Online accelerates, traditional slows. While growth at retail and foodservice has slowed — up only 5.5% versus 9.1% in 2015, growth in third party e-commerce and direct-to-consumer websites has gained ground, accounting for almost 36% of sales.
• Retail channels heating up: Millennials, one of the top growing consumer segments, buy specialty food wherever they shop. This trend has helped drive sales in multiunit grocery and mass merchants, where growth outpaced that of natural or specialty chains for the first time.
• Centre store alive and well: Grocery, shelf-stable specialty foods accounted for 61% of the total specialty food market in 2016. Strong growth performance was seen in categories like wellness bars and gels, and nut and seed butters.
• Shift to sustainable: Close to 40% of manufacturers produced sustainable products, up 22% from last year. Among retailers, sustainable products accounted for 16% of product sales. Along with non-GMO, the supply chain predicts sustainable will be the claim most interesting to consumers in the next three years.

Consumers are especially focused on specialty foods in the refrigerated sections. Categories with the biggest sales growth in this area include refrigerated juices and functional beverages up 30.7%, refrigerated lunch and dinner entrees up 33.0% and yoghurt and kefir up 27.2%.

The full State of the Specialty Food Industry report, produced in conjunction with market researcher Mintel, is now available here.