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Food & Beverage

Back to Basics: Specialty Food Gets Comfortable

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The specialty food and beverages market is settling in and getting comfortable, with sales slowing down to 4.3% growth in 2018 to reach $148.7 billion in the U.S., according to the Specialty Food Association’s annual Specialty Food Industry report prepared by Mintel and SPINS/IRI.

This last week, we attended the Summer Fancy Food Show in New York City organized by the SFA. First, it is clear that the market is maturing, with growth slowing down from 5.4% in 2017, per the SFA.

In comparison, TLL estimates that retail sales of licensed food and beverages (which overlaps slightly with speciality foods) grew 2.3% in 2018 to reach $12.39 billion; in 2017, growth was faster at an even 6.0%.

According to TLL estimates, over 80% of licensed food and beverage products are branded by corporate trademark/brand properties, largely in the form of extensions from existing food/beverage brands. Just under 5% are entertainment/character-based licenses, primarily in confectionery and kid-oriented foods, snacks, and beverages.

This breakdown is largely reflected in the smaller sub-set of licensed specialty foods. Licensed brand categories expanding their presence in the space include alcohol (spirits and beer), preschool, and retro food/beverage brands.

Product category trends are coming back to basics. Among flavors, the big winner this year was peanut butter—including allergy-friendly varieties that brought the all-American staple to life on everything from energy bars to chips, chocolates to jelly beans. Peanut butter checks a couple of boxes, serving as a rich comfort food as well as a fitness fuel.

A close second for the up-and-coming flavor profile was citrus, specifically, lemon. Popular foods to use the ingredient were cookies, sauces, jams, and glazes, while beverages were less concerned with the basic lemonade profile in favors like lavender, cucumber, and ginger.

Plant-based “cheeses,” “meats,” “grains,” “milks,” and other solutions had their day on the floor and are expected to grow over the next couple of years. Popular substitutes we tasted included peas, corn, cauliflower, and root vegetables—all were delicious and nutritious. Mintel estimates that plant-based specialty items account for nearly 5% of the total market.

As part and parcel of the alternative-ingredient trend (and surprisingly contrary to the peanut butter trend), there was a greater awareness of allergies, with many products checking off more than one box off the gluten-free, dairy/lactose-free, egg-free, and nut-free list. For example, one kid-geared cookie brand claimed to be free of the “top eight major allergies.”

Clean labeling has firmly risen to the level of industry best-practices and consumers continue to demand simple, easy-to-understand, and short ingredients lists without added chemicals. Larger concerns about reducing packaging and food waste translated into smarter portion sizes and less ornate, less complicated plastic wrappings.

Breakfast was the breakout lifestyle trend this year, with a renewed focus by many exhibitors on alternatives to cold cereal and milk with easy-to-prepare, prepackaged hot foods like waffles, pancakes, and muffins. Paleo diet-friendly offerings cut out the bread (or, more likely than not, used a substitute) to deliver high-fat, high-protein meats and cheeses.

Sobriety came a close second among emerging lifestyle trends, with a host of non-alcoholic beers, wines, and champagnes promoting sober living. While some doubled as low- or no-calorie, “better-for-you” alternatives, others kept the full-bodied flavors without the worst consequences.

Per the SFA, over three-quarters of specialty sales are made in brick-and-mortar stores ($113.4 billion), 22% come from food service sales, and just 2.5% originate from online sales.

The top categories by retail sales are:

  1. Cheese and plant-based cheese;
  2. Frozen, refrigerated meat, poultry, seafood;
  3. Chips, pretzels, snacks;
  4. Non-ready-to-drink coffee and hot cocoa;
  5. Bread and backed goods;
  6. Chocolate and other confectionery;
  7. Refrigerated entrées;
  8. Frozen desserts;
  9. Frozen entrées (lunch, dinner); and
  10. Yogurt and kefir.

The top 10 categories by dollar growth are:

  1. Refrigerated plant-based meat alternatives;
  2. Rice cakes;
  3. Frozen plant-based meat alternatives;
  4. Water;
  5. Refrigerated ready-to-drink tea and coffee;
  6. Shelf-stable creams and creamers;
  7. Refrigerated creams and creamers;
  8. Frozen desserts;
  9. Jerky and meat snacks; and
  10. Refrigerated pasta.

The top 10 categories by market share:

  1. Refrigerated plant-based meat alternatives;
  2. Refrigerated plant-based milk;
  3. Self-stable plant-based milk;
  4. Tofu;
  5. Non-ready-to-drink tea;
  6. Refrigerated pasta, pizza sauces;
  7. Refrigerated salsas and dips;
  8. Refrigerated condiments;
  9. Refrigerated pasta; and
  10. Wellness bars and gels.

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