Jam is Not Just Jam: The Changing Face of the Specialty Food Market

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The specialty food market is changing drastically driven by cultural factors that are shifting the way people consume and increasing the range of choices that consumers have. Population demographic shifts, income and spending habit changes and growing demand for products within the wellness and indulgence spaces are key drivers affecting this change. While these shifts are serving to create tremendous areas of opportunity, they are also raising the barriers to entry.

Even as this market grows every day, all of the products within it fall more or less into one of 4 categories that consumers define as specialty areas. The first is wellness. Wellness products have a perceived impact on the health and well-being of the consumer either by avoiding harm (products that are “free of” something), being thought of as better (possibly all natural), that avoid allergens or chemicals (gluten free, organic etc), or those that enhance the consumer’s health (fortified foods, nutritional benefits etc). The second category is indulgence. These products speak to consumers’ deeply felt desires through either luxury (gourmet products), hobbies (cooking as a past time), values (like heritage varieties or ethical processes), comfort foods, or those that are exotic (either imported, special varieties etc). The third category is ethnicity. These are the products that appeal to specific subsets more than others and that are divided along cultural lines. The last category is convenience. These products are specifically designed to make life easier. These might include products focused on on-the-go usage occasion or innovative packaging that simplifies some aspect of life. But as these 4 categories grow, differentiation in any of them becomes more important.

When budgets do not allow for national campaigns or the time that it takes to build a reputation organically over many years, much of the burden of differentiation falls on the packaging of that product. Rachel Corey, the Sr. buyer for City Feed Specialty Foods in Boston highlights the importance that many specialty retailers place on packaging as a key differentiator. Specialty retailers don’t want to have too much of any one thing so if you want to even get in, you will need to replace something that is already there and living within one of those four categories by being better in either value, quality, taste, story or relevance—and being better looking.

“We’ve definitely rejected products that tasted good but didn’t have good packaging”, says Corey.

Despite how crowded the specialty foods market is becoming and the challenges that this creates for brands within it or those that aspire to be, there are huge opportunities created by this growth. Foods in the indulgent category, specifically beverages, dairy, cheeses, condiments and nuts & seed mixes continue to be top sellers in the US Grocery market overall (NASFT 2005, State of the Food Industry Report). This shows that even as food spending as a percentage of income has fallen steadily since the 1930’s to right around 9.5% (USDA Economic Research Service report), people are still more willing than ever to make “trades” both up and down, to buy the products that they will find great joy or personal satisfaction in consuming. The wellness category has also seen tremendous growth as aging boomers and empty-nesters are re-discovering meal assembly and seeking out better ingredients to use. This is mirrored in the broader trend toward cooking as an interest, with 57% of people polled (Mintel Group Ltd. “Cookware US, August 2011) identifying themselves as “cooking enthusiasts”, and the foodie fervor captivating the US in the past decade. Within the ethnic foods category, sales are up more than 5% year over year as the population continues to diversify (Data Monitor, “Insights into Tomorrows Ethnic Food and Drink Consumers”) leading even mass brands look to more ethnic offerings as a way to specialize—like Kettle Brand offering a Spicy Thai flavored chip and finding success in those areas.

While strong demand exists for specialty products—specifically for those that are allergen free or minimally processed within affluent market, artisan and heirloom products that are viewed as indulgences, and ethnic foods being leveraged to address the “global palette” of the new specialty food consumer—carving out a space in this market is without a doubt a daunting task even with a great product. There are some things that can be done to make market entry easier.

  1. Identify communities with highest per capita incomes to target. These groups will spend more on specialty foods and engage more frequently with indulgent products.
  2. Find ways to fill gaps in the offerings in these areas either through product innovation or brand strategy and design that will shift perceived importance of your offering.
  3. Follow food trends. Subscribe to newsletters, read restaurant reviews to see what people are interested in or reacting positively to. Also, start to make note of what products are frequently shopped-down within the retailers you wish to target and try to learn what those brands are doing different than their competitors. Incorporate that knowledge into your strategy.
  4. Become a specialist within your specialty category. Figure out what you do better or differently than your competitors that consumers care about and make it your focus.Use that to dominate within your niche.

Whether you are bringing a new specialty product to market or need to reassess one that is already there to address added competition from other new entries these few steps are a great place to start and by really incorporating some of that learning into your corporate ethos, you can unlock the tremendous potential of this growing and shifting market.

 

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