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  1. Each year as part of the State of the Specialty Food Industry research, we track and forecast sales performance of key categories over 10 years. As part of this work, our research team, David Lockwood and David Browne, analyzes what’s happening innovation-wise at the shelf-, brand-, and item-level through a combination of trend research online, as well as in-person experiences at Winter and Summer Fancy Food Shows, and store visits at specialty retailers. Several of the most prominent innovation trends in 2022 include: Diverse-owned brands in the spotlight. Much as specialty consumers have gained affinity for local/regional brands where they shop for food and beverages, many now have an ethical/moral interest in another subset of products; women-, BIPOC-, and/or LGBTQ+- owned brands. Some retailers identify relevant brands in featured sets or with shelf signage and build promotions around key months in the year that celebrate these groups. Brands can obtain certifications, which may help to entice label-reading shoppers. It’s too early to tell if there are certain food and beverage categories where these brands compete more commonly. Instead, it’s apparent that an attentive shopper will often have a choice at the shelf. It’s also unclear if a consumer will prioritize brand ownership over other characteristics such as organic, non-GMO, etc, if given limited options. Convenience after COVID. As we come out of COVID, or at least have migrated into later phases of the virus, it’s apparent that consumers are tired of all the at-home meal preparation. While they honed their cooking and baking skills in 2020, and branched out and experimented in 2021, they entered 2022 fatigued and craving convenience. This takes many forms: Ready-to-eat (RTE), heat-and-eat, ready-to-drink (RTD) innovations have helped grow categories including Beans, grains, rice, dry (Shelf stable); Entrées (Refrigerated); Entrées, lunch, dinner (Frozen); and Tea and coffee, RTD (Refrigerated). Even as boxed mac-and-cheese slowed in 2021, Pasta (Shel stable) and Sauces, pasta, pizza (Shelf stable) both continued to perform well into early 2022, not only due to rising food prices that make these categories stay appealing, but also simple convenience. Kitchen shortcuts in the Baking mixes, ingredients, flours category that only require water or oil, readily available with any diet or allergy in mind. At the same time, growth in mature specialty categories like Cheese and plant-based cheese came from shredded/sliced subcategories. Deli meat correspondingly did well, too. Improved home-brewed tea and coffee via Creams and creamers (Refrigerated). An ever-increasing array of flavors, functional additives (e.g., mushrooms, healthy fats, vitamins), and bases (dairy or plant-based) give consumers many options to enhance their tea/coffee. The return of indulgence. It never really went away, except perhaps when it took a back seat during the earliest phases of COVID panic buying, but consumers are increasingly enjoying sweet and savory snack categories, even as inflation drives food prices higher. A quick look at some of the best performing categories in early 2022 includes Chips, pretzels, snacks; Chocolate and other confectionery; Cookies and snack bars; and Desserts (Frozen), and we’re seeing indulgence run through many categories both in ingredient profile and marketing messaging. Upcycling and food waste solutions. Brands like Renewal Mill, Fabalish, and The Spare Co. are just the tip of the iceberg. They’re partnering in some cases with widely-known brands, too, which should help more consumers get exposed to this segment. Retailers including Misfits Market focus their entire business model on food waste solutions, too, and “upcycled” shopping is fairly easy on a site such as HiveBrands.com. You can view innovation and flavor trends in each of the 37 categories forecasted by purchasing the full State of the Specialty Food Industry report, 2022-2023 Edition. SFA members receive discounted pricing.
  2. The SFA’s newly released State of the Specialty Food Industry + 10-Year Category Tracking & Forecasts, 2022-2023 edition, digs into the current business environment. Following are four insights and takeaways from this year’s research. The Supply Chain’s Impact on Growth The parts of the industry that will grow in the next few years in part hinge on supply chain bandwidth. Makers continue to report they are unable to properly forecast their sales because they often don’t know what their supplier shipments will look like. Lead times for shipments fluctuate, too, causing production schedule delays. All of this influences how makers formulate their products, as they evaluate which SKUs they can confidently produce, made with ingredients they can reliably source and price properly to achieve profit despite increased raw material costs. And once they have products ready for retail, they’re further challenged by shipping logistics, as the trucking industry faces its own issues with short-staffing and rapidly rising fuel costs. BIPOC- and Women-Owned Brands in Demand Consumers want more BIPOC-, Black, and women-owned brands and retailer buyers and foodservice operators are seeking out incubators, brokers, b2b wholesalers and distributors, and even sales consultancies that specialize in supporting and growing these brands. Showcasing these brands has moved far beyond seasonal features to align with observed months like Black History or Women’s History, and will continue to expand. The Next Retail Formats The pandemic gave retailers insight into store formats shoppers want next and smaller footprints with minimal human contact are in demand. Expect fast growth of these formats among traditional grocers, who are also reintroducing areas since the COVID scale back with new ideas. For example, redesigned sets like salad bars that are smaller and less labor-intensive and more grab-and-go opportunities. Ghost kitchens and mini fulfillment centers will be prevalent as well. And convenience stores are well-placed to do more ready-meals and foodservice. On the flipside, businesses that were built around high-touch, personal experiences to build loyalty and trust are struggling with the rising demand for convenience, pickup and delivery. They are fulfilling their customers' needs but wonder if it weakens their original position. Specialty eCommerce Targets In 2019, specialty ecommerce sales amounted to about 4.5 percent of all specialty retail sales. In just two years that share doubled to 9.4 percent, and it will expand further over the next several years, though not so rapidly. By 2023, specialty ecommerce will account for 11.6 percent of all specialty retail sales. For many makers or retailers that sell specialty products, these numbers can be a benchmark for their own goals with specialty ecommerce. Brick-and-mortar retailers ideally should be reporting online sales at roughly the same share percentages as noted above. Likewise, makers that sell their products in ecommerce, whether it’s DTC, or through Amazon or other online avenues in brick-and-mortar retail, should ideally be seeing an online sales share approximate 9-12 percent of their total retail sales in 2021-2023. Plant-Based Challenges The overall plant-based specialty retail market grew 6 percent, exceeding $7.7 billion in 2021, after stellar 26 percent growth in 2020. Plant-based growth has outpaced the entire specialty retail market, which grew 4 percent in 2021 and 20 percent in 2020. However, some plant-based categories were among 12 total that grew specialty sales slower than the entire market in 2021. These include Yogurt and plant-based yogurt; Tofu; Creams and creamers (Shelf stable); Plant-based milk (Refrigerated); and Plant-based milk (Shelf stable). A given category’s degree of maturity, innovation opportunities and in some cases, vulnerability to other emerging category adjacencies may cannibalize sales in specialty. The largest growth gap is with Plant-based meat alternatives (Refrigerated). It grew 34 percent in specialty but 66 percent in the total market. Historically, this category has been composed of 97 percent specialty items, but it changed in the last three years and now non-specialty items are contributing to much of the growth. Specialty Beverages Grow Faster than Food During 2020’s initial height of COVID, specialty food grew faster (21 percent) than beverages (16 percent), but that shifted in 2021 as specialty beverages grew twice as fast as food. It comes down to consumers seeing certain products as critical, and others as discretionary. In this instance, food was more a consumer priority during the initial phases of COVID but over time, consumers expanded their shopping lists to include more specialty beverage purchases. RTD alcoholic beverages like hard seltzer, hard kombucha, and fermented functional cocktails, in particular, are growing rapidly. Opportunities in Perishables New this year, we took a closer look at specialty perishables sales, which are expected to reach nearly $33.5 billion in 2022. Perishables (random weight, non-UPC’d specialty items sold in bakery, cheese, deli, meat, and seafood sections) are critical to specialty, both in scale and as a good source of growth. For specialty retailers, perishables departments represent enticing, creative merchandising and execution. Plus, they are important centers for emerging food and beverage innovation that may eventually migrate to packaged goods categories. After being challenged by shutdowns during COVID, perishables can expand to better meet consumers’ needs for hot, ready-to-eat or take-home, heat-and-eat fresh meals; meal kits; sandwiches, side dishes, and salads; breakfast foods; confections and desserts; and hot and cold beverages. But retailers must adapt post-pandemic as many consumer prefer to buy sealed, pre-packaged products (even those prepared in-store), which they perceive as fresher and/or safer. The new State of the Specialty Food Industry research is available for purchase here. SFA members receive discounted pricing.
  3. 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.
  4. Optimism is high among the specialty food supply chain, who weighed in in the recently released State of the Specialty Food Industry report, on what the future holds for specialty post-pandemic. Here is some of what they had to say about growth, values-based shopping, diversity and inclusion, and retail innovations. “That crystal ball after last year got even murkier. We’re excited because we’re leaning into the mission to grow, we’re adding another fulfillment center and actively expanding the network to serve our members. We see it as a huge year of growth. We view it as getting back on track to the incremental steady growth that we were had prior to the tailwind that we had in 2020. What a great year to be in food and what a great year to introduce people to new products and tell your stories and do great work with food.” -chief merchandising officer of a specialty ecommerce retailer “There was an underlying sort of tension in our society that led to this moment where people wanted to have an opportunity to express themselves and basically vote with their dollars. We’ve heard from customers ‘supporting brands that are doing good makes me feel good.’ There’s a massive opportunity here to transform the shopping experience itself—it’s not just buying the stuff that you need, but inducing an emotional experience that makes you feel good about what you’re doing—supporting great brands that are making a positive difference in this world.” -CEO, cofounder of a specialty ecommerce retailer “We should all be optimistic because specialty products and health and wellness products are what people need. Consumers are going to come out of the fog in the last year and realize that what they eat is important to their long-term health and the health of their families.” -CEO of a specialty chocolate brand “Pre-pandemic, we launched a financial assistance and visibility program for suppliers that are women-, minority-, LGBTQ-, veteran-, and disabled-owned. We’ve had so many more requests from retailers to show them more examples of suppliers like this. With the increase in interest, there will be more callouts on shelves and in campaigns around those companies.” -SVP, category management and growth solutions for a specialty distributor “I’m hearing from the manufacturer and vendor side that they are not fully ready with the pack sizes to support the foodservice business, which is very concerning. It’s not going to be an option for very long for foodservice to take retail packaging. On the flip side, are restaurants going to continue to have these slimmed down menus that drive down margins? That could very much change the shape of the industry for a long time. We expect retail food to remain strong in terms of being better than pre-COVID numbers. Within that, we expect specialty to continue growing at a much stronger rate than conventional food. I think the foodie culture has been exasperated, but its grown [differently] with everybody cooking at home and watching TV food shows.” -national sales director at a specialty importer and distributor “We predict innovation stations will pop up within retail to try to bring excitement back into stores, creating an area for new products to drive trial and awareness.” -SVP, category management and growth solutions for a specialty distributor “It will be interesting to see the evolution of how brick-and-mortar operations shift, whether curbside and deliveries become an even bigger focus. With ghost kitchens, it’s pretty phenomenal to think about what you can accomplish if you don’t have massive numbers of customers in your building every day.” -chief merchandising officer of a specialty ecommerce retailer You can learn more about market growth, fluctuations, and drivers, as well 10-year category tracking and forecasts by purchasing the State of the Specialty Food Industry, 2021-2022 Edition. And weigh in on what you think the new post-pandemic industry norms will be in our discussion in the Community Hub.
  5. COVID has impacted the specialty food industry for a full year. In the SFA’s newly released State of the Specialty Food Industry report, 2021-2022 edition, members of the supply chain were candid on the ways the pandemic has positively and negatively affected their businesses. Here is some of what they had to say about in person versus virtual meetings, the challenges of staying connected, and keeping on top of what’s moving as well as new product discovery: “In some ways things have gotten busier because, rather than getting to talk to everyone at a one-day show, I have to talk to all of those people individually. I don’t have to travel to see them anymore, but I still have to connect with them.” -regional sales manager at a specialty dairy brand “We’ve kept on a pretty good track [with promotions and retailer meetings], but we have a lot of retailer buyers that are still not seeing people face to face. We have some that I don’t believe are ever going to go back to face to face. I think they’re going to remain either in a virtual environment or they’re going to do some sort of controlled category management presentations with dedicated periods of time. Because it’s easier in the virtual environment to stay on schedule and on time. There’s been a lot of outsourcing, roles that used to be done at retailer X are now done by the main distributor for that retailer such as the actual physical entering of promotions, printing of tags, and making sure that the pricing is right.” -SVP, business development at a specialty food and beverage broker “Something that retail buyers have missed during COVID relates to the trends, and they’re asking, ‘What’s the next CBD, or the next plant-based category that’s going to explode?’ They’ve been able to survive with talking to their trusted brokers, advisors, distributors, and brands, but they still miss that experience of talking to new brands, especially those that need education. It’s hard to do that via Zoom.” -head of sales at a specialty dessert brand “Supply chain sourcing stabilized pretty quickly. We did not have the same experiences that a lot of box stores did, because of the diversity of who we buy from. We began leveraging our foodservice supply chain, which plummeted as restaurants and hotels closed. We had no problem taking 50-pound bags of flour and putting them in to 5–10-pound bags and selling them. Our guests appreciated the fact that they could get most of what they wanted. They might not have been the same brands or same sizes that they normally were used to, but they still had access to what they needed. We’ve got a long history of being restaurant-type operators and so we were able to be a little bit more nimble than the typical supermarket that’s super reliant on a particular SKU that fits in a particular slot that’s already entered in a system.” -founder, owner of a multi-store specialty food retailer and foodservice operator “For these younger brands, virtual meetings level the playing field, since you don’t have to fly somewhere, pay for hotel and dining expenses, etc. All of that makes it so much more affordable to pitch to retail accounts for these emerging brands, and I think that that is a welcome change. I don’t think the virtual pitch is going to go away, simply because it’s easier for the buyers and it’s more equitable for the brands.” -owner, founder of a specialty brand consultancy “For us it’s a matter of staying on top of what’s moving. We’re constantly rotating and moving things and that’s why our customers like coming in. We’re never going to have a store that’s more than 1,000 square feet, because it’s too big. [At big stores], it’s almost information overload. How do you discover new things if you’re overloaded by different products and brands? It’s a nice conversation that you have with your customers in this small format because you’re listening to them, but you’re also educating them more than ever.” -founder of a specialty c-store concept “It’s hard to get the same level of dialog with our retailers when we’re doing things on Zoom. It’s less personal and hard to make a connection. The food business is so much about the passion and enthusiasm of tasting it, and you either couldn’t send product to people or the companies had different rules on what they could receive. It would have been much harder if we were still a young company that needed to make new personal connections.” -CEO of a specialty chocolate brand “We launched a new and emerging brand program just before the pandemic hit, which turned out to be lucky because the demand bounced back so fast that we ended up onboarding more new suppliers in 2020 than ever before. We’ll do fewer in-person meetings going forward, which is causing us to think about how our offices are laid out, and our retailers are doing the same thing. We previously traveled to do category reviews with our retail partners, those are now done virtually. We’ll still go back to in-person meetings, just not as frequently.” -SVP, category management and growth solutions for a specialty distributor “I don’t plan to go back to my office much at all, and a lot of my staff is the same way. Retailers want the samples of food and to see the product, but they have also gotten accustomed to the succinctness of an online meeting. They have found they can be a lot more productive when there is less time taken up by the in-person discussions that go in many directions. We send a lot more samples, which tends to give us smaller opportunities with each client but ones that are more likely to succeed.” -national sales director at a specialty importer and distributor “All relationships are being maintained with buyers via Zoom, and the same with our vendor meetings. I’ll bet that is going to stick – not 100 percent because you still need that human interaction. But for a supplier especially, it’s a lot easier to do it virtually rather than get on a plane to visit our offices. For our partners, there aren’t any relationships that we’re walking away from. Our relationships strengthened because of the need to do these repeated meetings and discuss service levels. As far as large CPG vendors go, we had to work with them more than usual and it helped us work through those relationships that have been a challenge in the past.” -VP vendor relations at a specialty distributor You can learn more about market growth, fluctuations, and drivers, as well 10-year category tracking and forecasts by purchasing the State of the Specialty Food Industry, 2021-2022 Edition. And weigh in on what you think the new post-pandemic industry norms will be in our discussion in the Community Hub.
  6. The SFA’s newly released State of the Specialty Food Industry report, 2021-2022 edition, digs into a business environment still adjusting from COVID’s impact over the past year. A burgeoning ecommerce channel has been one of the shifts the industry has experienced and here, members of the supply chain share their opinions on its growth, challenges in discoverability for small or emerging brands, and the future. “For specialty brands, a lot of the ecommerce platforms for retailers are very not friendly to browsing, not nearly as much as old-school shopping trips where you’re walking through a store, and you say ‘I’ll try that.’ Retailers need to level the playing field a little bit for specialty because you need that browsing ability for specialty for somebody to stumble onto your [brand]. That’s my biggest concern right now for long-term growth for specialty.” -SVP, business development at a specialty food and beverage broker “When we added the online ordering platform that came along with DoorDash, it was like having an additional outlet to give people food. We just had the discussion this week where a store manager asked when we’re getting rid of curbside and our response was ‘probably never.’ It’s probably going to be an element of our service model going forward. This will allow us to curate those relationships with frequent customers and do special rewards for them.” -CEO of a specialty retail and foodservice group “Brands are discovered in a variety of ways and you have to be relevant in every way that your consumer would discover and buy your brand. And maybe online is a very saturated platform, it’s hard to compete as a small brand. I know for us online was pretty small [pre-COVID], and now it’s a huge chunk of our business. And [by] online I mean our own DTC, but also online retailers like Imperfect Foods, Fresh Direct, Good Eggs, and Amazon Fresh.” -head of sales at a specialty dessert brand “We saw a lot of emerging brands do more paid advertising themselves to location-specific audiences, driving traffic back to particular retail stores rather than driving traffic to their own websites. Especially brands in cold distribution since they simply don’t ship direct to consumer. They do paid ad spending, which you have to dial in, but once you get it, it’s relatively affordable, and there should be a positive return on investment. It’s win-win. The brand wins and the stores love it.” -owner, founder of a specialty brand consultancy “One of our biggest challenges has always been that people love sweets and they believe that something with low sugar can’t taste good. Demos and getting people to try the product for their first time has gone away, so we’ve been focusing more on how to engage with people digitally. The challenge is how to get taste cues across, so we’ve been using recipes a lot to help them understand what it will taste like. And we’re also starting to use coupons more than before.” -CEO of a specialty chocolate brand “Jet, Walmart, Amazon—basically all of the major retail platforms out there … bias the large incumbent players, which makes sense. That’s where the mass demand is, that’s where the dollars are. So, what does that mean for small and emerging brands out there? It’s really interesting to see great things that small brands are doing, truly innovating, and offering a lot more value to stand out versus the big incumbent players in the space.” -CEO, co-founder of a specialty e-commerce retailer “We launched in October 2020 and think the timing was ideal in many ways. Of course, with COVID forcing people to change their patterns, it unlocked some behaviors that were previously closed off. We’re pretty big believers that [ecommerce] is only going in one direction. This is not a trend. This is a permanent shift in consumer behavior that’s here to stay.” -CEO, co-founder of a specialty ecommerce retailer You can learn more about market growth, fluctuations, and drivers, as well 10-year category tracking and forecasts by purchasing the State of the Specialty Food Industry, 2021-2022 Edition. And weigh in on what you think the new post-pandemic industry norms will be in our discussion in the Community Hub.
  7. The specialty food supply chain shared opinions and observations on pandemic-influenced pricing strategies, consumer behavior around trading up and down, and private label. More insights can be found in the recently released State of the Specialty Food Industry report. “I was looking at [a big retailer account] today, and the condiment set. Based on the trends you’d think with condiments, cooking sauces, etc., that the retailers would go into specialty because of the cooking at home thing. And instead, they went really commodity, really warehouse, away from the distributor business, and put in a lot of restaurant brand name stuff. But then the same buyer, for pasta and pasta sauce, went more specialty. I can’t really understand why. Consumer behavior in general varied wildly by category. With pasta, it almost didn’t matter what brand. If it was on the shelf, people bought it. Pasta sauce in the $7.99 to $10.99 range did better than it ever does. People also traded up on coffee.” -SVP, business development at a specialty food and beverage broker “As far as private label, we’ve made the decision to stay committed to our makers and not compete directly against them. To support them and help amplify the greatness of their products, and their stories, and their voices, so in contrast to a lot of other players out there we don’t have a need or interest to get into private label.” -CEO, co-founder of a specialty ecommerce retailer “We have seen competition from private labels, especially in baking chocolate. But a good thing about a good private-label brand is that it can help by getting more exposure to a category. We had the opportunity to expand into a club store, but in the rest of retail we didn’t need to upsize any of our packaging. We got feedback from customers at the onset of COVID that they would like to stock up, but we knew it would take a while to develop that packaging, so we took a wait and see attitude and didn’t jump into it.” -CEO of a specialty chocolate brand “In the beginning of the pandemic, retailers didn’t put promotional tags on the shelf because they had to simply keep up with the increased volume. Then we saw a huge bounce back in promotions. While a lot of consumers lost their jobs, I haven’t seen an overall change in pricing strategy. It was more around the promotional piece of it – EDLP (everyday low price) versus a hi-lo strategy, a shift in when they promote, or the depth of the deal.” -SVP, category management and growth solutions for a specialty distributor You can learn more about market growth, fluctuations, and drivers, as well 10-year category tracking and forecasts by purchasing the State of the Specialty Food Industry, 2021-2022 Edition. And weigh in on what you think the new post-pandemic industry norms will be in our discussion in the Community Hub.
  8. Plant-based, brain health, stress support, and foods from BIPOC (Black, Indigenous, People of Color) makers are among the trends seen by the supply chain in this year’s State of the Specialty Food Industry report. Here is some of what they had to say: “Some of the macro trends that we’ve seen with COVID are going to last. Indulgence, taste exploration, restaurant quality, and having our type of item for retailers is a way to [show consumers that they] have the option for [them] to stay here. For a meeting I had with Target [recently], indulgence was something that they focused on. In August it was SKU rationalization, now it’s ‘we need to play on indulgence. Better-for-you is important but we do want to cater more to like something that’s delicious and indulgent.’” -head of sales at a specialty dessert brand “Probably six months to a year ago it was all about why categories, brands, and products are relevant during COVID, and now it’s [buyers saying] ‘show that its relevant with COVID, but show that it’s relevant beyond COVID, and if you need to adjust the product, be ready to address it.’ It’s kind of the horizon of the next 12-18 months, what those big categories and trends are, and how they’re going to surface, and how are customers going to adjust back to eating more away from home. Are they going to change their eating habits? How sensitive or not will they be to promotions, because obviously you didn’t have to promote a lot [during the height of COVID] and products would sell.” -head of sales for a specialty food maker “I’m hyper-focused on trying to figure out how the workplace, the office space, is going to function. We had a large B2B business selling to local firms, feeding their staff and that evaporated overnight. All of our events business evaporated overnight also, and I firmly believe that the quality of our food is going to get us back into the door when people step back in. I’m just trying to think of ways to improve upon the experience and improve upon the flexibility that they have with the experience, and the safety around it, so that we’re top of mind for them when they do return.” -founder, owner of a multi-store specialty food retailer and foodservice operator “What I’m seeing through sales is a lot of interest in exploring flavors, and in plant-based. We do a lot of cheese in the northwest U.S., and our marketing person in that area recently held up a plant-based cheese and said, ‘I can’t believe I’m saying this, but it tastes great.’ Also, the impact of cooking at home is evident in our numbers. The traditional categories of baking and grains and all related scratch cooking areas.” -VP vendor relations at a specialty distributor “When people are excited about doing the actual cooking, then they get excited about the quality of the ingredient that they’re using, and that’s the defining factor. That’s what is differentiating the products that we sell. Why go to [our stores] and not go to [big supermarket chains]? These are the reasons. We tell people how to actually make a Roman pizza dough and talk them through it. And those people can take those experiences home and share them with their children, the rest of their family, and that’s what people want.” -owner of a multi-store specialty food retailer “The majority of [my clients] who are BIPOC (Black, Indigenous, People of Color) founders are so proud and really leaning into it, rightfully so, and seeing good responses from retailers. We’re seeing more of a call for diversity from all across the supply chain. They’re essentially sending BIPOC and female founders to the front. And then the other side is that I have founders who are hesitant to do that. They’re in more conservative areas of the country … and they question if the retailers and consumers would respond to [BIPOC founders announcing themselves.]” -owner, founder of a specialty brand consultancy “Natural and specialty products will continue to gain share because of trends related to active lifestyle, stress support, brain health, gut health, and how to use food as medicine. Conventional retailers will continue to offer up space for those products. Brain health and stress support will emerge as strong categories, including things that feed into those like mood, sleep, and immunity. Other strong drivers are healthy fats, alternative sweeteners, and the Keto lifestyle—if not Keto specifically then the three factors behind it: low carb, low sugar, and healthy fat. While family meals will continue, I do think people are getting worn out from scratch cooking, so baking sales have subsided slightly. Frozen or simmer sauces that can make at-home cooking easier will also continue to do well.” -SVP, category management and growth solutions for a specialty distributor “Private labels are continually being added by the retailers whom we work with and that volume continues to grow. I’m a big believer in private labels, both conventional and specialty food.” -VP vendor relations at a specialty distributor “Meat, produce, and baking items all continue to trend year-over-year at a higher rate than we would have normally expected. We’ve also seen an increase in our prepared foods. Not in our full-service deli prepared foods, but all the packaged foods, probably for the convenience of being grab-and-go versus having to wait, and maybe just the allure of it being packaged and being safer than something that’s on a platter and open.” -founder, owner of a multi-store specialty food retailer and foodservice operator You can learn more about market growth, fluctuations, and drivers, as well 10-year category tracking and forecasts by purchasing the State of the Specialty Food Industry, 2021-2022 Edition. And weigh in on what you think are the pandemic-influenced consumer and food trends in our discussion in the Community Hub.
  9. From online shopping, to the reinvigoration of stalled categories, to in-store changes that may be here to stay, the specialty food supply chain offered insights into the pandemic’s influence on consumer behavior. Here is some of what they had to say, excerpted from the recently released State of the Specialty Food Industry report, 2021-2022 edition. “Home cooking trends that will stick include baking, pastas, grains, beans, and snacks. Online grocery shopping will continue growing because of the convenience factor of not having to spend an hour or three hours getting to and from the grocery store. And even if you are going to the store to get produce and dairy, you’ll supplement with online.” -chief merchandising officer of a specialty ecommerce retailer “All that difficulty that we saw during the initial impact had less to do with a trade-down mentality, or a size-up mentality and more to do with just ‘what can I get?’ So, we saw a lot of consumers just buying whatever they could find on the shelf, and thankfully our supply team did a lot of amazing work quickly changing procedures to be able to keep up largely with demand, which allowed us to be that sort of regular option on shelf for people to choose.” -regional sales manager at a specialty dairy brand “The one thing that changed drastically from the start of COVID was that people didn’t want any prepared foods. They didn’t want to eat anything that we touched. In the beginning, that was our one weak link. But they bought fruits and vegetables like crazy, which of course we had to put on the shelf. The prepared foods business has already come back very strongly. That business is now much bigger than it was originally because of the new customers that we’ve picked up.” -CEO of a specialty retail and foodservice outlet “Once you’re in the store there’s a relationship there, and that relationship is one where people have enough confidence and trust that they are willing to spend the time and energy in continuing to nurture it. That was the beautiful part of what happened this year.” -founder, owner of a multi-store specialty food retailer and foodservice operator “[Early on], people wanted more guidance on how to cook [meat] cuts that they weren’t familiar with that they might have experienced in a restaurant. We saw items like scallops increase in sales. We saw finer cuts of meat increasing in sales. Items that need a little bit more finesse. Caviar sales increased. People still wanted to experience those little pleasures that they would get when they would go out and then found ways to find that pleasure at home. It was cool to see how people adapted. They were still trying to find joy in the day-to-day.” -founder, owner of a multi-store specialty food retailer and foodservice operator “A lot of people are acting under the assumption that the world has changed permanently, but I’m more of the view that most people are going to be anxious to get back to life as it was. Yet, some of our businesses, like coffee shops, might not come back.” -CEO of a specialty retail and foodservice group “There were a couple of changes that we made back in September to some of the flow in the retail store. We took on an extra space to allow for curbside pickup and the addition of outside seating. Our whole mentality is ‘eat, shop, learn,’ so we have a bar in there where you can eat great foods. Our cheese and charcuterie selection, and the wines and beers are from small artisanal producers around the world, and we have to tell their stories. We’re highlighting special producers like that. People weren’t spending in the beginning to discover new products, but by September or October I think they were feeling like ‘we’re stuck in the house too long, and we should treat ourselves,’ and so the economy started to change a little bit in our retail.” -owner of a multi-store specialty food retailer “We made small changes to the retail flow of the new store because it’s about playing to the customers’ new behaviors; making it easier for them, making their experience still great, because shopping [at our stores] is an experience and that’s what we need to and want to deliver on. People don’t just come in and say, ‘Oh, I know that olive oil, let me buy it.’” -owner of a multi-store specialty food retailer “[Because of] the pandemic, we have such a mix of consumers now. We were the only store open during the [height of the] pandemic within our block radius for hot coffee. So now we’re getting the MTA bus drivers, were getting the incredible blue-collar workers, and the construction workers that were still working that didn’t have hot coffee. But [guests] are also discovering new things, and since we make sure we’re properly pricing things, they’re able to try different things. So, we’re curating based on this, too, thinking that average person wants to spend $5-7 or less.” -founder of a specialty c-store concept “The things you read about in the trend charts: its maximizing value, its comfort foods. Shockingly, though, it’s not hitting the high end [adversely] the way we thought it would. [Shoppers are] willing to spend on quality goods but they’re budgeting more, so when they do it, it might be an in-between treat or it’s really something special.” -national sales director at a specialty importer and distributor “We brought in essentials for guests. We wound up selling a whole lot more eggs, milk, butter, beans, and things like that. They’re back to cooking and they’re buying canned tomatoes, yeast, and flour. We used to sell a lot of it, and then we didn’t, and now everybody’s making pizza and bread at home, so we had to buy flour by the pallets, and we used to buy it by the cases. So, that’s the switch. We’re still selling a whole lot of those ingredients. Fresh meat and seafood is blowing up like crazy. Deli went wild. Sandwiches, bread, outrageous. So, we took on more local bread bakers.” -owner of a multi-store specialty food retailer You can learn more about market growth, fluctuations, and drivers, as well 10-year category tracking and forecasts by purchasing the State of the Specialty Food Industry, 2021-2022 Edition. And weigh in on what you think are the pandemic-influenced consumer trends in our discussion in the Community Hub.
  10. The SFA’s newly released State of the Specialty Food Industry report, 2021-2022 edition, digs into a business environment still adjusting to and recovering from the pandemic’s impact. Following are four insights and takeaways from this year’s research. 1. Center store rebirth. COVID recalibrated several grocery categories. Some are forecast to grow more than they would have otherwise, and some have new life after being stalled for years. A year of home cooking has led to consumers rediscovering the usefulness and necessity of a home pantry. While cooking-at-home habits will eventually strike a balance with dining out as more foodservice opens, at-home cooks are now more resourceful, willing to experiment, and enjoying (some of) what the pandemic forced them to learn. 2. Improving discovery. Online meetings have been solving an immediate need for retail buyers and makers, and this has proved to be a more efficient way of getting business done that will become a fixture going forward. However, buyers and makers acknowledge that it comes at the cost of hurting new product discovery. Combined with limited in-store sampling, fewer demos, and the decimation of foodservice, 2020 was a rough year for innovation discovery. This will be one of the key issues for the specialty industry in 2021 and beyond. 3. Specialty’s ecommerce visibility issue. Related to diminishing discovery, specialty is facing challenges with the growth of online shopping as it allows fewer opportunities for impulse buys. Industry data shows nearly two-thirds (62 percent) of consumers say they miss finding items not on their list when shopping online. In fact, impulse sales account for 20 percent of in-store purchases, meaning 2020 was likely a year of “safe bets” with essentials and known brands from a consumer purchase standpoint in ecommerce. Rising ecommerce retailers such as Thrive Market, Hive, and Good Eggs are addressing the visibility issue by working harder at showcasing specialty. 4. Channel shifting. Almost every online e-grocery market saw phenomenal growth in 2020, while drug stores gained new customers by adding grab-and-go and refrigerated aisles. Dollar stores continued pulling people from all other channels, and in 2021 are projected to account for 50 percent of all newly opened stores. Consumers shopped in stores for groceries that they may have rarely visited much in prior years. Most pronounced through spring and into summer of 2020 because shoppers were desperate to try to find everything from toilet paper to commodity foods, this channel shifting led them to discover that some of these channels and chains were good enough that they would visit again. Expect a behavioral shift to continue for the foreseeable future. You can learn more about market growth, fluctuations, and drivers, as well 10-year category tracking and forecasts by purchasing the State of the Specialty Food Industry, 2021-2022 Edition. And weigh in on what you think the new post-pandemic industry norms will be in our discussion in the Community Hub.
  11. COVID continues to impact the specialty food trade. Members of the supply chain spoke out in the SFA’s newly released State of the Specialty Food Industry report, 2021-2022 edition, to elaborate on what ways the is affecting their businesses. Here is some of what they had to say about channel evolution, price/value shifts, food and beverage trends, and a return to normalcy for buyer-maker relations: “One of the things that came up repeatedly was ‘how deep are your relationships?’, and those suppliers who had longstanding relationships with their co-packers, their distributors, and their retail partners were in a better situation. With COVID, everything went out the window. From the co-packer level, small brands were being pushed aside as bigger brands were doing larger production runs and needed all that time in the production facility. At distributors, a lot of smaller brands got overlooked, and wouldn’t get picked for the pallet. It was frustrating because [small] brands would find out that they were out-of-stock from either their consumers or from the store level [buyers], who’d say ‘Hey, we’re reordering every Tuesday and Thursday from [the distributor] and we’re not getting [your] product.’ These small brands [knew] the products were in the warehouse but not on the truck. Some brands who had a great relationship with a store and store buyer would pick up the phone or email them and [look into options to] ship direct, self-deliver, or circumvent distribution, but obviously you can only do that where you have the logistics to do it regionally.” -owner, founder of a specialty brand consultancy “In some ways, the execution of the supply chain is more important than the quality of the product right now … In an old environment, a brand manager would probably be expected to know that manufacturer X has a big promotion running at [a specific retailer]. Now, this is less of a priority than knowing whether or not manufacturer X has a long term out-of-stock on an imported item because the container is stuck at the port, or they can't get a container to ship it over [to the US].” -senior vice president, business development at a specialty food and beverage broker “We have strong relationships with our farmers, co-packers, and everyone right up to our website, and those relationships worked well. It was the ripple effect from seemingly random elements of product production, like bottle caps or plastic film being out.” -chief merchandising officer of a specialty e-commerce retailer “We saw a lot fewer retailers bring on new items, and that’s probably a long-term impact of this; retailers looking to do more sales with fewer SKUs.” -regional sales manager at a specialty dairy brand “Some retailers preemptively planned for a recession, and they went really commodity, really private label, high velocity, less margin. Other retailers leaned in [to specialty, knowing consumers] aren’t going to restaurants, and eating at home, which was great for business. It was just interesting to see the retailers’ reactions over time. But it's too early to tell, because consumption's been so high, who made the right decision.” -specialty food broker “One of the worst things that’s happened is [the loss of] those discovery moments when you walk into a store and those opportunities to meet a vendor or a producer or maker to hear their stories directly. Some companies are experimenting with pre-packaged samples, but COVID is going to have massive long-term effects on how new products launch, how people discover new products, how they take chances with new products.” -founder, owner of a multi-store specialty food retailer and foodservice operator “In some cases, we had to turn away new business, which is heartbreaking, but [we did so] to do right by the customers that we already have. We were able to work proactively … and had direct forward-looking conversations with distributors and retailers where we could say ‘we can’t ship you this, but we have this instead.’” -regional sales manager at a specialty dairy brand “As an e-commerce business, we were trying to balance out a surge in new consumers with making sure that the people who have been loyal customers for several years were getting served. We had to have site hours that we allowed people to shop during the early months, as well as maximum order quantities to help manage that impact. In the end, the pandemic accelerated our business pretty dramatically.” -chief merchandising officer of a specialty e-commerce retailer “Because we manufacture everything in house, we do have a little bit more flexibility. We’re not [challenged] because of a co-packer who is at their limits. That would have been a nightmare.” -head of sales at a specialty dessert brand You can learn more about market growth, fluctuations, and drivers, as well 10-year category tracking and forecasts by purchasing the State of the Specialty Food Industry, 2021-2022 Edition. And weigh in on what you think the new post-pandemic industry norms will be in our discussion in the Community Hub.
  12. Denise Purcell

    5 New Norms

    Where do we go from here is the question on everyone’s mind as we start to approach the post-pandemic new normal. That same question is integrated into this year’s newly released SFA State of the Specialty Food Industry research. As you can see in report highlights we published in the summer issue of Specialty Food magazine, food sales fared well in a year of stay-at-home mandates. Brick-and-mortar and online grocery sales boomed across the board, more than offsetting foodservice’s unfortunate plummet as restaurants limited seated dining or closed for good. How these new norms will shake out is still unknown but based on the research and supply chain interviews, here are five shifts we expect to stay in place. Cooking-at-home habits. The research indicates that most people who gave extra home food preparation a serious try in the past year have created some lasting habits, at least for a few specific tasks. Whether it’s baking bread, making from-scratch soup, or using the slow cooker, home cooking will remain prevalent to a higher degree than it would have without the pandemic. New foodservice business models. Supply chain interviews show foodservice operators are planning new business models that include commissaries or partnerships, outdoor dining, new recipes/menus, and delivery as part of the segment’s comeback. Increased takeout and delivery, especially, will remain elevated, in part because older adults and those with young children may be slower to return to on-premise dining and partly because many consumers now more regularly incorporate some takeout dishes into their at-home meals. Better ecommerce opportunities for small brands. Several industry conversations centered around improved ways to discover new products online. Retailers and makers are both looking for ways to showcase on-trend and new products in a way that is enjoyable for shoppers to browse, including reliable ways to surface local and regional products, and increase visibility for brands that support social, economic, and environmental justice causes, areas of high consumer interest. Virtual sales meetings between retail buyers and makers. From what we have learned, both parties believe that the new style of meeting will be the norm going forward, though some in-person meetings will resume. Makers tell us that meetings are more efficient, and while there is less time to talk about multiple SKUs, there is a higher success with a maker’s leading SKU. Tighter SKU management. The one thing that major retailers want from specialty manufacturers is “your very best product.” Total SKUs have been reduced as the pandemic uncovered supply chain weakness, and 2020 results suggest that scaling back on SKUs did not harm sales. Most of the reductions have come from “me too” brands and under-performing line extensions. The new challenge for makers is how to successfully get to market all their SKUs that aren’t number-one. If a brand’s best product does well, a targeted new product that attracts many of the same users might get strong consideration. You can learn more about market growth, fluctuations, and drivers, as well 10-year category tracking and forecasts by purchasing the State of the Specialty Food Industry, 2021-2022 Edition. And weigh in on what you think the new post-pandemic industry norms will be in our discussion in the Community Hub.
  13. In the recently released State of the Specialty Food Industry research, we interviewed members of the supply chain about COVID’s ongoing impact. Among shifts they are seeing in consumer behavior and food trends are things like home cooking continuing, prepared foods growth, plant-based, and values-based shopping especially for products made by Black, female, or other diverse founders. What pandemic-influenced trends are you seeing in your business?
  14. 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.
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