Beverages, Snacks, Plant-Based Drive Specialty Sales

Beverages, snacks, and plant-based foods are standouts in the specialty segment which despite approaching maturity continues to outpace the growth of conventional, according to Mintel research presented during the session 5 Key Drivers in Specialty Food at the Winter Fancy Food Show.

“Specialty food and beverage sales account for 16 percent of all food and beverages so the fact that it’s approaching 20 percent is a major milestone,” said David Browne, senior analyst, Mintel.

Helping spur sales is the rise in popularity of specialty beverages, which hold 18 percent share of all specialty products and account for $12 billion in sales. The fastest growers are ready-to-drink tea and coffee (19 percent), water (15 percent), and refrigerated juices and functional beverages (7 percent).

“Rising trends include functional drinks that boost energy, mental focus, relaxation, and microbiome health,” said Browne.

Boding well for specialty is the fact that consumers are making snacking part of their daily routine with everyday snacking appealing to close to half of specialty food consumers. High protein and low sugar options are helping lead the way in the category that accounts for $18 billion in sales and holds 27 percent of specialty food and beverage share. Jerky and meat snacks were the fastest sellers in the segment, experiencing 10 percent growth, followed by chocolate and other confectionery (9 percent), and juices and functional beverages (7 percent).

Plant-based foods are not only becoming mainstream, but innovations in the segment are driving growth in several of the top 10 specialty food categories, which are led by shelf stable creams and creamers (37 percent), plant-based meat alternatives (36 percent), and refrigerated creams and creamers (20 percent).

According to Browne, one-third of specialty food consumers have purchased plant-based products, and preliminary findings from Mintel research show the vast majority of committed plant-based consumers (90 percent), are specialty food consumers.

E-commerce is a key channel for purchasing these products with 41 percent of shoppers buying at least some of their groceries via the channel. “We feel confident that online specialty sales will double to $6 billion in sales within the next few years,” said Browne.

The top 10 online specialty categories achieved purchases from 10 percent to 15 percent of specialty food consumers in 2018, with some emerging for the first time. They include water and sparkling water, with 15 percent of specialty food consumers purchasing; nuts, seeds, trail mix, and dried fruit, with 11 percent purchasing; soda and carbonated beverages, 11 percent; bars, 10 percent; and juice, 10 percent.

Another channel holding promise for specialty food makers is foodservice, said Browne. While specialty foods only account for 4 percent of all food in the $32 billion channel, it holds great potential, he said, but warned that it can be “a tough nut to crack,” for those looking to break into the space. 

Positioning claims in the specialty food space draw dedicated consumers, led by all natural with 68 percent of specialty food consumers buying these foods, organic (55 percent), and non-GMO (45 percent), locally-sourced (41 percent) and eco-friendly (40 percent), ethical (37 percent), fair trade (36 percent), plant-based (34 perent), gluten-free (27 percent), and sustainable (25 percent).

“One-quarter to one-third of all purchases are coming from each of those,” said David Lockwood, director of Mintel Consulting.

Also driving specialty food growth are generational preferences with trial peeking between ages 25 and 34, number of categories purchased, within the 45 to 54 age range, and spending on food at home, between ages 35 and 44.

“Gen Z is most likely to spend the largest percentage of their food budget on specialty,” Lockwood said. “Millennials spend the most per week on food prepared at home, and Gen X purchases the most categories since they may have young children and older children at home.” 

Specialty food consumers are also seeking specialty foods to fit into diets that they are following, with many taking an a la carte approach to these lifestyles, Lockwood said. Specialty food consumers currently follow 4.5 diets vs. 3 diets for non-specialty food consumers. The most popular are low-sugar, high protein, and low carb.

“Dieting has changed since younger adults are following more than one diet at the same time,” said Lockwood. “There is an enormous amount of opportunity here.”

Altruism also continues to influence the specialty food space. While consumer support for transparency and traceability is significant, it hasn’t changed much in the past five years, according to Lockwood. What has, are companies’ willingness to make these things part of their long-term goals.

“Specialty companies are changing from looking strictly at innovation to considering what they can do to change the world,” Lockwood said.

Related: Holiday Food Sales Healthy Despite Tariffs; Affluent Consumers Prefer Organic, Authentic Brands.