The Specialty Food Association’s (SFA) annual State of the Specialty Food Industry Report reveals that specialty food remains one of the fastest-growing segments of the food business. Fueled by increasing interest from both consumers and retailers, total sales jumped 9.8% between 2016-2018, reaching $148.7 billion last year.

Specialty food sales outpaced the growth of all food at retail – up 10.3% vs. 3.1%. Product innovation and the wider availability of specialty foods through mass-market outlets is playing a part in the industry’s success. Sales through foodservice represented 22% of sales, with retail taking the top spot with 76% of sales. While online represents less than 3% of sales, it has grown 41% since 2016.

“Diverse consumer lifestyles are taking specialty foods mainstream,” says Phil Kafarakis, president of SFA, New York. “To reach these consumers and increase their own sales, food merchants have embraced the vast assortment of specialty products. Our research outlines the momentum in the industry and provides a comprehensive picture of where we are today and how businesses can prepare for the future. Conducting important research like this is a part of our mission to champion specialty foods and help our members continue to innovate and succeed.”

The SFA combines its annual research into a single, comprehensive State of the Specialty Food Industry report. Working with Mintel, Chicago, the report explores where the current market stands, the opportunities and challenges it faces, where it is going based on sales forecasts in key categories and how the specialty food consumer is evolving.

Key facts and figures:
Top 5 categories with highest dollar growth:

• Refrigerated plant-based meat alternatives
• Rice cakes
• Frozen plant-based meat alternatives
• Water
• Refrigerated ready-to-drink tea and coffee

Top 5 categories – retail sales:

• Cheese and plant-based cheese
• Refrigerated and frozen meat, poultry and seafood
• Chips, pretzels and snacks
• Non-ready-to-drink coffee and hot cocoa
• Bread and baked goods

Share of consumers buying specialty foods by generation (2018):

• Gen-Z – 66%
• Millennials – 84%
• Gen-X – 75%
• Baby Boomers – 69%

Top 7 take-aways:

• Plant-based is going strong.
• Specialty beverages are increasingly a force in the market.
• Younger consumers don’t look to supermarkets for quick meals.
• Reduced packaging and food waste are hot points.
• The C-store channel is an under-tapped market for specialty items.
• Foodservice needs to move to greater customization.
• Opportunity lies in breakfast.