Make it special
Specialty foods, which the New York-based Specialty Food Association defines as smaller-production-type items with high-quality ingredients (gourmet foods are a subset of specialty foods), are in a growth mode within the United States. According to the "2013 State of the Specialty Food Industry" — a study commissioned by the association and performed by global market research firm Mintel and Schaumburg, Ill.-based SPINS — sales of such foods rose 22.1 percent between 2010 and 2012. Total specialty food sales in 2012 topped $85.8 billion.
Cheese and cheese alternatives make up the largest category here, with U.S. sales reaching $3.6 billion in 2012, the association says, followed by yogurt and kefir at $2.3 billion. Mediterranean is the fastest-growing cuisine, importers surveyed in the study reported, followed by Latin, Italian and Vietnamese.
Some of the growth likely can be tied to food gifting sales. Sales of food gifts grew 2.5 percent between 2011 and 2012 to reach $11.2 billion, "Consumer Food Gifting in the U.S.," an October 2012 report from the Packaged Facts division of MarketResearch.com, states. Moreover, Packaged Facts points to myriad untapped opportunities within the food gifting space.
"To expand purchase frequency, we believe the industry can do more to ensure that food gifts are priced at tiers that allow for expanded lower-income market participation," the market research firm says.
Mind the trends
Whether geared toward gifting or self-indulgence, today's specialty and gourmet foods need to mesh with current consumer wants and needs. And in this non-name-brand-dominant sector, retailers are well-positioned to be the ones to create products that do so — at price levels that meet the expectations of their particular shopper bases.
"Seasonal products and holiday gifts are exciting categories," notes Kim Maalouf, marketing director for Urbana, Ohio-based Robert Rothschild Farm, which produces specialty items ranging from spreads and preserves and mustards and condiments to sauces and rubs and dessert toppings. "Retailers can create a seasonal section in their stores and rotate delicious seasonal items based upon specific holidays or flavors. This allows the consumer to try new products throughout the year, whether they are entertaining or creating a family meal."
Another exciting category (and one that ties in with the overall trend toward health and wellness) is the vegetable segment, says Teri Valentine, president and CEO of The Perfect Bite, Glendale Calif.
"Vegetables with sauces that are innovative or combinations with unusual or hard-to-find grains can bring customer loyalty when these are customized just for the customer," she explains.
Although she acknowledges that many retailers might have been "burned" by investing in natural, organic and GMO-free foods early on, they shouldn't give up on opportunities here.
"Customers are ready now, and buyers need to try again," she asserts.
Another prime private brands opportunity lies in specialty tea, says Holger Lohs, CEO of Haelssen & Lyon North America Corp., a New York-based importer, exporter and processor of fine teas. The tea category is trending toward the specialty end, in large part because of consumers current health awareness.
"Tea has such a good reputation for being healthy," he says. "But low-quality teas are [hurting] that reputation. Retailers need to adapt to the demands for high-end quality tea."
One of the persistent challenges on the store brand side here, Lohs says, is the sourcing situation. Many times, the category buyer — usually responsible for tea, coffee and more — approaches store brand product procurement from a commodity mindset, working mainly with the supplier that handles the mainstream tea offerings. To do well in the specialty tea arena, however, retailers need to broaden their horizons to work with true specialty tea experts, he suggests.
Confectionery is yet another category that represents an opportunity for store brand growth. Here, retailers would be wise to consider the consumer trend toward upscale healthy indulgence, says Barry Rosenbaum, president of Hicksville, N.Y.-based Nassau Candy.
"Nutmeats and fruits, along with dark chocolate, are today, in general, very hot categories," he points out. "Were finding growth throughout regular-sized pieces, as well as smaller pieces, and were definitely seeing a lot of impulse purchases."
Package to please
Almost as critical as product quality on the specialty and gourmet side is attractive and informative packaging. A new trend across a number of categories here is that toward pouch packaging, Maalouf says.
"When a gourmet product has a single-serving use, it is convenient for the consumer to have it in a pouch," she says. "Plus, they look modern, have more room for messaging and are lighter in weight for shipping."
For specialty tea, its critical that the packaging's photo depict what's actually inside. Lohs says he recently came across two separate private brand teas with photos that could mislead shoppers. One product was a pouch billed as iced tea, but a photo of a teapot for hot tea graced the pouch front. The other was a package of tea bags for hot tea — its box showed a photo of an iced tea product on the front.
"Its a simple thing — use the right picture," he says. "I think the consumer also wants to know where the tea comes from. ... Like we see the coffee industry doing, tell a little story on the package itself. This tea is from India, this is the farm where it comes from, these are the leaves and they are processed this way."
In addition, sustainability-minded tweaks to the packaging (and the product, as organic options are gaining ground) are another effort retailers should consider, Lohs says.
When it comes to confectionery, nothing tempts trial more than the product itself, so tubs and see-through or windowed resealable standup pouches hold appeal, Rosenbaum notes. They also up the convenience quotient for consumers because both are recloseable.
"Of course, some of it is price-driven," he adds. "Were in a fortunate position as a manufacturer to be able to vary the sizes of the tubs and the bags to hit price points that a retailer might want for their private label program."
Show it off
Specialty and gourmet foods are more likely to be impulse buys than many other products, so they often don't make an appearance on consumers shopping lists. Any extra attention that retailers can give to store brand options here from a product placement and marketing standpoint, therefore, will help draw shoppers attention — and build trial.
Maalouf recommends merchandising own-brand specialty and gourmet items along with similar competitive products, assuming those competitive products exist in the store. However, the store brand items should be placed at eye level, where consumers will notice them.
Think outside the "regular" section, too, Rosenbaum advises — especially with specialty and gourmet items such as fine chocolate. In fact, he believes that specialty confectionery doesn't necessarily have to be placed in the candy aisle at all.
"We very much like seeing the products merchandised in the produce department, in the deli department and in the bakery," he says. "We also like to see them merchandised on end caps, which aren't that easy to get. We know, statistically speaking, that most consumers walk through produce, deli and bakery, but they dont necessarily walk through every grocery aisle."
Overall, Valentine advises a customer-centric approach.
"Listen to who your customers [are], educate them on your products and stick to your standards set," she says. "Everyone knows what standards are in place for natural food stores, but do they know for traditional stores?"
Price, too, plays a role in convincing shoppers to pull own-brand specialty and gourmet items off the shelf and into their carts. The store's private brand items, therefore, need to be priced appropriately based on competitive products, Maalouf says, if they are not one-of-a-kind offerings.
"Retailers should advertise and promote their brand to create brand awareness with the consumer," she adds.