Industry Voices: Channel Evolution In The Specialty Food And Beverage Market

Denise Purcell
Shifting channel strategy generated many comments from the supply chain during interviews SFA’s research partner Mintel conducted as part of the recently released State of the Specialty Food Industry research, 2020-2021 Edition. The interviews are included in the 125+-page full report to add insight and context into today’s market. 

Among comments about channel evolution, companies noted that specialty brands are scaling faster than ever thanks to e-commerce and are using that channel to test the water before migrating to brick-and-mortar. Conventional retailers continue gaining ground and embracing better-for-you and specialty trends. And alternative channels are increasingly a focus among emerging specialty producers that aren’t winning traditional retail accounts at the pace they’d like or need. 

Here are highlights of the supply chain’s responses:

“We’ve seen huge growth in conventional stores like Kroger, Walmart, and Target. The natural category is exploding. … What we’ve seen over the last year or year and a half is that the natural world is becoming more of the conventional world.”
—marketing coordinator for a 20-year-old, family-owned specialty food brand

“[It used to be] that we have to get our numbers up in natural before tipping our toe into conventional grocery. Now you go everywhere. You pick the right grocery retailers, such as Safeway NorCal or Giant/Martin’s, that are much more forward thinking in the natural and organic space than other banners are. You don’t have to incubate for 3-4 years before you start leaping into grocery. Now, Walmart’s talking to every small brand, and Kroger [is too]. So the speed at which a brand could potentially scale is a lot faster now than what it used to be, if the brand has money.” 
–co-founder of a 2-year-old sales consulting group

“The [specialty/natural] food channel is a difficult place to make a profit in the beverage business. It’s a great place to get proof of concept and build a brand with cachet, but in the long term [focus] has to be more mainstream in most categories. I’m finding that mainstream retailers want specialty products like ours. Category managers want to have that kind of image enhancer for their categories.” 
–owner of a 5-year-old specialty beverage company

“It’s about not saying, “Hey, we’re going to launch in Target in 1,000 stores.” It’s actually being a little bit more restrictive with the buyer, saying “while we want to be in all Target stores, we think our strength is in [our home geographic] market right now. We’re not there yet to be in all of your locations in [another distant geography]”, for example. Our goal is to go from 50 to 100 to 500 to 1,000 stores, but I need to show proof of concept. If [the retailer] puts me in my home market, or the one I want [that’s] in the right [location]…at least if I don’t succeed, my investment is only 50 or 100 stores, not 1,000."  
–director of growth and category management for an 11-year-old specialty dessert brand

“In terms of getting our products launched and established, the first thing we always do is put them on Amazon, for a whole host of reasons. For one thing, it provides us with a test bed, so certain products we’ve had on Amazon long-term while we decide when the appropriate time is to launch them into [brick-and-mortar] retail. We’ve discovered things like, ”Are these pantry staples and are people repurchasing them? Do they need to be tweaked? What are the reviews like? Are these [products] fully functional?” We can use Amazon and direct e-commerce as a test bed with consumers before we go to retail.”
–founder of a multi-brand specialty food and beverage portfolio

“The focus right now is on alternative channels and impact. That’s been a focus for our brands for quite some time, and even more so now. What’s been on our minds a lot is just creating opportunities and connecting the brands to the right distribution channels, which are outside of the typical retailer and distribution systems. I think that’s really positive in a way, because they’re not having to jump through all of these hoops, they are able to act quickly, and form creative partnerships. Agile brands, like those we support, will be able to succeed through these challenging times.”
–partnerships manager for a shared kitchen operator and specialty brand incubator

You can purchase the 125-page State of the Specialty Food Industry Full Report and 10-Year Category Tracking and Forecasts (available at a discounted price for SFA members). And, download a recording of the recent webinar The State of the Specialty Food Industry + COVID-19 Impact here.

What do you see as the channel evolution in the specialty food industry? Weigh in in the Q&A Forum.
Posted by Denise Purcell on Sep 2, 2020 9:30 AM America/New_York