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What’s So Special About Food?

By Karina Masolova

The Summer Fancy Food Show at New York City’s Jacob Javits welcomed 2,600 exhibitors from around the world last month. While Turkey was the partner country this year, the floor welcomed exhibitors ranging from classic importers like Italy, France, and Greece to Asian countries like Japan, Korea, and India to smaller countries like Costa Rica and Latvia (sprats, mineral water, and their excuse for chocolate).

The Numbers Behind Specialty Foods

American retail sales of specialty foods reached $99 billion in 2016, and make up 15% of all retail food sales, according to the Specialty Food Industry. Coupled with the $28 billion in sales through foodservice, the industry was worth approximately $127 billion in 2016 in the U.S. Growth was fueled by small businesses, product innovations, and wider availability through mass-market and ecommerce outlets.

Interestingly, growth in third party e-commerce and direct-to-consumer websites accounted for almost 36% of sales—giant corporations aren’t necessarily leading the charge behind specialty foods. For those interested in licensing out their brands, it’s becoming increasingly important to go beyond the usual suspects in finding a partner. But the trade off for all the effort will (theoretically) be a partner with strong social capital, something money can’t buy.

The bulk of specialty foods is sold in mainstream stores (82%; including drugstores and mass retailers like Target or Walmart who sell more than food), followed by specialty food stores (11%; think Whole Foods, Trader Joe’s, and ethnic food retailers) and natural food stores (7%). The most affluent consumers prefer specialty foods over the regular stuff—85% of those who make over $150,000 a year buy, along with 74% of those who make $100–149,000 a year, and 67% of those who make $75–99,000 a year.

All-natural, organic, sustainable (these products are made by 40% of manufacturers) non-GMO, and overall socially conscious foods are the bedrock of the specialty food industry. One key to the rapid growth of the industry is its mission-driven message. Specialty food consumers don’t necessarily pay a premium price simply out of a self-interest in healthy living, but also to get the “good feel glow” that comes with the knowledge they’re being environmentally conscious, supporting local small businesses, and otherwise saving the planet.

The fastest-growing categories, according to the Specialty Food Industry? Eggs at 184% growth in U.S. retail sales from 2014–2016, followed by refrigerated ready-to-drink tea and coffee (114%), jerky and meat snacks (86%), water (75%), shelf-stable ready-to-drink tea and coffee (37%), and frozen meat alternatives (37%).

Retail Sales of Specialty Foods, Top 10 Categories, U.S., 2014–2016
Data Source: Specialty Food Industry
Source Retail Sales, 2016 Share Change, 2014–2016
Cheese and plant-based cheese $4,422 7.5% 12.4%
Frozen and refrigerated meat, poultry, and seafood $3,738 6.3% 11.4%
Chips, pretzels, and snacks $3,570 6.0% 13.6%
Coffee and bocoa (non ready-to-drink) $3,223 5.4% 12.1%
Bread and baked goods $2,798 4.7% 15.8%
Chocolate and other confectionery $2,195 3.7% 10.0%
Yogurt and kefir $2,042 3.4% 27.2%
Frozen lunch and dinner entrees $2,017 3.4% 18.1%
Refrigerated lunch and dinner entrees $1,963 3.3% 33.0%
Condiments, dressings, and marinades $1,928 3.3% 8.1%

Licensed Trends

While exhibitors featuring licensed options were few and in between, it was lovely to meet with licensees including Brooklyn Beans (showing off their new Bailey’s-branded coffee and Welches-branded fruit cider K-cups), The Fremont Co. (Budweiser sauces and marinades), and Jelly Belly.

Food and beverage manufacturers’ experience with licensing is very different from licensees in other product categories—royalty rates are lower, agreements are longer, and other payments like contributions to central marketing funds and minimum guarantees are less common. One licensee on the floor stated that the company never signs a deal with a minimum guarantee. They’re not alone—low profit margins in the grocery aisle, coupled with the high turnover and resolute staying power of consumables, means that taking the long view makes sense.

Retail sales of licensed food and beverage products reached $11.43 billion in 2016 in the U.S./Canada, up from $10.78 billion in 2015, according to TLL. One notable trend is the rise in sales of frozen or refrigerated lunch and dinner entrees—respondents to TLL’s Licensing Business Survey indicated that this is a strong growth area not only for food and beverage brands making extension deals, but also for corporate/trademark brands that have strong ties to wellness and sustainability. Also applicable with this broader trend are condiments and snacks, which are becoming increasingly upscale as consumers seek convenience and quality in one package.

Food Trends

The top food trends of the year were spices like chili pepper and ginger; toppings like pink pepper and hemp seeds (sorry, croutons); and ready-to-drink teas and coffees (including cold brew). While low-fat foods are thankfully on the way out (it turns out, peanuts have the good kind of fat!), gluten-free foods are still strong.

Unpacking the Experience

Packaging is growing increasingly more informative, and ingredients lists are shrinking. So what goes on labels? A quirky, morally upright mission statement—including a description of the main ingredients, their sourcing, and the place the product was packaged. Some apparel and accessories manufacturers operate on a similar concept, and we expect other categories to follow over the years.

Everything’s Green (But the Vegetables)

The show featured green and raw cold-brewed coffee, tea, and olives. But the most popular veggies on the floor were tomatoes, signaling that snacking foods like dried peas and kale chips might be on the way out. Keep in mind that these insights don’t extend to fresh foods—the closest thing on the floor was Vegy Vida, a cucumber dip for kids that softens the acidic taste of vegetables. The adults soothe their taste buds, on the other hand, with gluten-free, all natural, chili-flavored ketchup.

Where’s My Water?

Specialty water includes mineral, carbonated, flavored, and oxygen-/ginger-/chili-infused varieties. And there were plenty of options on the floor. At the Cannabis World Expo, I even saw CBD-infused water. Long story short, you can add anything to a bottle and people will drink it—at least it’s not soda, or even worse, tap.

The More Obscure, the Better (But Keep it Basic)

The novelty trend also applies to the food and beverages category. For some exhibitors, their bestsellers were the most obscure offerings of classic favorites. For example, jerky manufacturers who also sell classic beef and chicken varieties noted that their most popular offerings are bison and venison meat. Cheese puff companies use fancy blue and two-year aged cheddar cheeses. Consumers (outside of the big cities) are interested in trying out new flavors, textures, and experiences that are actually good for you—a reaction against years of margarine and deep-fried cookie dough?

But in the sense that creative, dynamic packaging and ingredients is key to differentiation and success—we’re just following the oldest sales adage in the book.


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