Why Do Consumers Crave Specialty Foods? They Connect With the Customer
The year-end holidays are a big time for specialty foods. Beyond their obvious uses in celebratory meals, specialty foods make great gifts. They are personal and thoughtful in a way that mass-produced, processed foods simply can’t match. Gifting that new coffee toffee brittle, or the latest non-nut nut butter, or a jar of organic volcano honey, shows thoughtfulness. Why? I think it’s because these small, startup food companies have managed to connect to customers in a way that big food companies never have, and the relative exclusivity of their brands confers a sense of hand-picked or homemade.
Small Brands, Big Disruption
Between the creativity of the products and their seemingly hand-crafted packaging, smaller food companies are in the midst of a large-scale disruption of the food industry: many manufacturers themselves started out as customers looking for a deeper connection to the foods they were buying When they couldn’t find those products, they started making and selling them themselves. Guess what has happened since then? Specialty foods hold nearly 15 percent of the entire retail food market, about $140 billion worth, and they look to reach over 20 percent in the next few years.
This is a moment of transition when the personal connection to customers has become critical. Brands and retailers across industries have to plan how to best deepen those connections, rather than merely stocking shelves and sitting back to count the footprints of customers coming in the door.
During big food's 100-year history, food companies succeeded by offering the same items to more and more customers — building ubiquity in every American pantry. Times have changed, and today those pantries are often a collection of highly curated products. And don’t take your eyes off the refrigerator, either. Seven of the 10 fastest growing categories of specialty foods are refrigerated or frozen. People want fresh foods, they want prepared foods, they want unusual foods that will expand their families’ horizons and impress their friends.
Enter Specialty Food Startups
So how have these scrappy new companies connected with the customer? Simple: they are built on those customers' specific and expressed needs and demands — without which they wouldn’t exist.
The gluten free movement is a great example. What started as a health fad, a new awareness of wheat intolerance most often associated with Celiac’s disease, swelled into a tidal wave of response. “Gluten-free” accounted for a volume of 465 kilotons in 2017 and is projected to become a $7 billion market by 2021. Now, all those people buying these products may not have Celiac’s — a report by the University of Chicago’s Celiac Disease Center puts that figure at 1 percent of Americans, or 3 million people – but they’re interested enough in the potential health benefits of limiting gluten to seek out the products anyway.
Many small food companies responded and now there’s a marketplace ranking system for gluten-free companies now (Udi’s is #1 as of this writing). And along with non-GMO and convenient/easy categories, gluten-free offerings led product innovation plans for manufacturers last year.
Another example of smaller food companies truly reaching the consumer is the unlikely category of jerky and meat snacks. Once the province of country general stores, where you could get a stick of house-cured beef jerky, unpackaged, for a dime, this segment now commands $235 million in sales annually. Between 2014 and 2016, the category grew by 86 percent, and it led the 20 percent growth spurt in specialty snack foods overall. Why? The bodybuilding and extreme gym workout fad may have ended, but it’s left a lot of former devotees with the feeling that they need a lot of protein, and they need it now. Small manufacturers picked up on this need, and have been cashing in on protein-rich snack foods — including yogurt, kefir and specialty wellness bars — which for years have topped the sales charts for specialty snacks.
Big food companies have had no choice but to take notice of these disruptors, and many of them have taken the step to acquire smaller companies outright. Others have been trying to mimic specialty brands’ offerings. But the one thing they need to do above all else is to consider and connect with the customer. Because — and this isn’t really news — the customer is king.
Phil Kafarakis is the president of the Specialty Food Association (SFA), a non-profit trade association representing more than 3,800 food artisans, importers, buyers, distributors, and other entrepreneurs in the U.S. and abroad spearheading innovation in the food industry.