What’s Trending in Specialty Foods

Beverages are big, the plant-based market is evolving and consumers are flocking to smaller format stores. Those are some conclusions from the annual State of the Specialty Food Industry Report published by the New York City-based Specialty Food Association (SFA).

According to the SFA, the specialty food market topped $175 billion in 2021, up a healthy 7.4% from the previous year. The overall market is led by the top 10 categories of meat/poultry/seafood, cheese/plant-based cheese, chips/pretzels/snacks, bread/baked goods, coffee/hot-cocoa, refrigerated entrees, chocolate/other confectionery, water, frozen desserts and frozen lunch and dinner entrees.

Some of those stalwarts popped up in SFA’s list of fastest-growing categories. In order, those rapidly-expanding sectors include RTD coffee and tea, refrigerated creamers, refrigerated entrees, frozen breakfast foods, frozen appetizers and snacks, seasonings, refrigerated pasta, frozen fruits and vegetables and shelf-stable sauces, pasta and pizza.

In addition to keeping an eye on popular and up-and-coming specialty foods, grocers can get other relevant takeaways from this year’s State of the Specialty Food Industry report. For example, ongoing supply chain challenges faced by food companies and retailers is affecting growth, with manufacturers unable to accurately forecast sales and feeling a trickle-down effect in product development.

The report also highlighted recent changes in physical food stores as purveyors of specialty foods. The SFA projected that smaller footprint stores with minimal human contact have become popular in the pandemic era, and will continue to provide solutions to consumers. “Expect fast growth of these formats among traditional grocers, who are also reintroducing areas since the COVID scale-back with new ideas,” the report declared.

The SFA’s annual report called out other market trends as well, including the growing demand for Black, Indigenous, and people of color (BIPOC)- and women-owned brands, a slower growth pace in the specialty plant-based food sector compared to the traditional food market and a continued surge in specialty beverages. Indeed, specialty beverages grew twice as fast as specialty foods in 2021, the report notes, with ready-to-drink alcoholic beverages like hard seltzer, hard kombucha, and fermented functional cocktails performing particularly well.

According to Denise Purcell, SFA’s VP of content and education, the specialty food market has prospered over the past two years  that have been fraught with issues including the lingering pandemic, supply chain backlogs, high food costs and geopolitical conflict. “Growth will continue, but at a slower pace than the industry experienced during the 2020 pandemic-influenced whirlwind of grocery shopping and at-home meal preparation — and will depend on supply chain bandwidth and shifts in challenges like inflation, shipping issues, cost increases, and materials shortages,” she predicted.