How the specialty food industry is faring in the era of COVID-19

Every June more than 30,000 food makers, grocery buyers, wholesalers, suppliers and members of the media from around the world descend on the Javits Center in New York City for the Specialty Food Association’s Summer Fancy Food Show, a three-day event dedicated to the newest innovations in specialty food.

Except in June 2020, of course, when the convention center’s cavernous halls were filled with hospital beds instead of food and beverage booths.

Like so many other businesses and trade groups this year, the Specialty Food Association had to cancel its signature event and find a way to replace business as usual with something virtual that could be carried out safely.

Thus the launch of this week’s Specialty Food Live! 2020, which recreates the part of the Fancy Food Show that’s most vital for the brands hoping to have their stories told and their wares tasted. For four days this week, specialty food company representatives will hang out in virtual showcases, ready to meet with retail and foodservice buyers seeking new products.

Unlike the in-person version of the show, the virtual rooms are open to qualified buyers only, and those who registered early enough had the option of having food and beverage samples sent to them so they’ll be able to participate in virtual tastings of the products they’re learning about.

In recent years, the show has also included the release of a State of the Specialty Food Industry report done by Mintel for the SFA. While the show didn’t go on this year, the report did — it was released in June as part of the association’s summer 2020 publication.

Taking stock of specialty food trends

The report covers the two-year period between 2017 and 2019 and reports on big-picture trends in the specialty food industry, and it also covers the events of 2020 and how the pandemic has played a role in more recent trends.

Retail sales of specialty foods grew 8.9% in the two-year period, compared to a 3% increase for overall food sales, the report found.

It’s no secret that consumers started stocking up on essentials at the start of the COVID-19 outbreak, but as time wore on they also spent more on indulgent items and comfort foods, the report says. Food shopping became a balancing act between budget and specialty items to feed the cravings of anxious consumers who weren’t sure how long they’d be stuck at home.

Before the pandemic hit, consumers were spending a growing percentage of their food budgets on dining out, and specialty food sales in foodservice channels grew 12.8% in the two-year period covered by the report, compared to a 7.5% rise in sales at brick-and-mortar stores.

That trend shifted dramatically when the pandemic forced eateries around the country to close to dine-in business and consumers stuck at home rediscovered the art of cooking. The report predicts that people will be slow to return to dining out, buoying retail food sales for the foreseeable future.

The report also revealed that sales growth at traditional grocers, specialty stores and natural markets softened as mass market retailers like Target and Walmart upped their offerings of specialty items. Mass merchants and mainstream stores accounted for 60% of specialty food retail sales last year.

In retail channels, sales by dollar amount rose faster than sales by units, indicating price increases in some segments, the report says. Plant-based meat was one key area where rising prices played a role in growth. Retail sales of refrigerated plant-based meat alternatives grew 112% during the study period, while unit sales increased 70%, reflecting consumers’ willingness to pay more for premium new products in the category.

Additionally, online sales of specialty foods hit $5.4 billion by last year, up 50% from 2018, and grocery e-commerce has been rising faster amid the pandemic as consumers shifted more shopping online. The report quotes an industry insider who predicts the trend will continue but also posits that online is just one option grocers will offer.

Specialty food consumers spent about 30% more on food per week on average, including both restaurant and grocery spending, the report found. It also predicts that the economic downturn stemming from the pandemic could take a bite out of spending on specialty food and beverage items in the coming months.

In the early months of the pandemic, retailers also saw a surge in center-store sales of specialty foods as shoppers stocked up on nonperishable items like pasta, rice, soup and bottled water.

Sales of plant-based milks, meats and other products, which had already been on the rise, also surged as consumers facing shortages of their traditional animal products opted to try plant-based alternatives.

The report also highlights several other trends specifically related to the pandemic, starting with the realization of the essential role grocery retailers play in their communities. Other trends related to COVID-19 include a rise in cooking and baking at home, a surge in snacking and the continued interest in plant-based products and better-for-you foods and beverages.

Finally, as the outbreak disrupted supply chains and consumers flocked to stock up on basics in the early weeks of the pandemic, innovation took a back seat to ramping up production of the most in-demand items, the report says. Food makers put less popular items on the back burner in order to crank out more of the goods consumers were snapping up.