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  • Key Trends Driving the Specialty Food Market

    Denise Purcell

    The specialty food market has prospered amid two difficult years. According to SFA’s newly released State of the Specialty Food Industry research, the market hit $175 billion in retail, foodservice, and ecommerce sales is 2021 and continues to grow at a faster rate than all food.

    Growth will continue but at a much slower pace than the industry experienced in the 2020 stay-at-home whirlwind of grocery shopping and at-home meal preparation. The market faces well-known challenges due to inflation’s role in pushing food prices, supply chain difficulties, fuel cost increases, packaging shortages, and shipping issues. Growth over the next few years depends heavily on shifts in these challenges and supply chain bandwidth.

    In the Summer issue of Specialty Food magazine, you can discover the highlights from this year’s research, such as sales and forecasts in key segments, fastest-growing categories and subcategories, and COVID’s impact on category sales. In addition to a deeper dive into all this data, the full 112-page research— available for purchase in the specialtyfood.com Learning Center—also details key trends driving opportunities and decision-making in the market. Here is a preview of some:

    Home cooking and baking slows as COVID subsides. As COVID took hold in 2020, consumers returned to kitchens in full force. Up until then, consumer food spending had been pretty evenly split between groceries versus at restaurants, but tilted heavily back on groceries almost overnight, with specialty benefitting from the shift. Fast-forward through 2021 and dollar sales growth in various cooking/baking categories has taken a turn, giving back much of the 2020 COVID gains. But unit sales through April 2022 are strengthening, suggesting that home cooking/ baking will remain a long-term trend but not nearly as strong as the pandemic-influenced phenomenon.

    Collaboration carries the industry forward. Supply chain challenges necessitated long overdue SKU rationalization, not only among makers who have pared down production to essential products, but also retailers who are more cautious than ever about bringing in new products. The impetus is on makers to innovate with far more thought, R&D, and investment. Innovation centers, incubators, and culinary kitchens are ramping up efforts to help producers design, package, and create products that will make their way into specialty retail.

    BIPOC- and women-owned brands in the spotlight. Consumer desire for brands from Black, indigenous, and people of color (BIPOC)- and women-owned companies is skyrocketing. According to the State of the Industry’s companion research, Today’s Specialty Food Consumer, published in September 2021, 17 percent of specialty food consumers say they buy specialty food “to support diverse suppliers (e.g., women-, Black-, BIPOC-, LGBTQ+-, veteran-, disabled- owned companies).” Meanwhile, 22 percent of SFCs said they prefer to shop in stores that feature these types of brands/products.  

    Increasingly incubators,  distributors, and brokers are specializing in supporting diverse-owned brands. Retailer and foodservice operators are also seeking out a broader diversity of brands. Target launched its Racial Equity and Change program with plans to spend $2 billion+ with Black-owned businesses by 2025. Pop Up Grocer featured a Washington, DC spot to highlight brands that are women-owned, BIPOC- and queer-owned, and/or local. Many specialty retailers, such as PCC Natural Markets, are retooling their mission to address Justice, Equity, Diversity and Inclusion, which is translating to product assortment in stores.

    To learn more about The State of the Specialty Food Industry + 10-Year Category Tracking and Forecasts, 2022-2023 Edition,  look for upcoming information about our webinar on July 21.  

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