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US - Trends in Specialty Foods Market

1.3 Trends in US Specialty Foods Market

As noted previously, total sales of specialty foods in the US in 2010 were $70.3 billion, with $14.4 billion represented by sales to the food service industry. Sales in the specialty foods sector represented 13.1% of all food sales at retail, the same age for 2009. Cheese and cheese alternatives are the largest specialty food category at $3.2 billionfollowed by meat, chips and snacks, bread and baked goods, and condiments (National Association for the Specialty Food Trade , 2011). The specialty food categories with the greatest sales age of all food sales are refrigerated sauces, salsas and dips at 56.9%,  teas  at  49.2%  and  pickles,  peppers, olives and other vegetables at 33.5% (National Association for the Specialty Food Trade, 2011). Additionally, functional beverages is the fastest growing  specialty  food  category,  sporting  a sales increase of 119.5% in 2010, followed by yogurt and kefir with a 48.9% increase (National Association for the Specialty Food Trade , 2011). Sales in pastas and barbecue sauces have also been growing rapidly - interpreted to be linked to the trend of an increasing number of consumers cooking more at home2.

2 NASFT Report

Despite the positive trends outlined above for the specialty foods sector, the food industry as an aggregate has been faced with a number of recent challenges that impact operations, profits and practices, such as high energy costs and high input costs. The economic conditions of recent years have also led to decreased sales across various sectors as consumers cut back on luxury and premium items and shop for bargains, including store labels. During the period of decreased food sales, the private label products, and not premiums had best sustained sales during the economic downturn. The Private Label Manufacturers Association states that nearly one out of every four items sold in American supermarket chains, drugstores and mass merchandise stores are private label store brands. It appears to be a trend in some product categories that within 3 to 5 years of a product introduction, large and/or mainstream manufacturers introduce their own "versions". Retail stores also introduce private labels of specialty foods. An implication of this is that these  typically compete with  products especially those in related retail outlets. Combined with the proliferation of new products it is an indication that companies need to keep innovating.

However, 2010 was a generally good year for the specialty foods industry in the US as it witnessed a rebound in sales compared to the previous crisis years. In 2010, specialty foods makers  focused  on their  existing  items,  with new  product  introductions  about  even with 2009. Launches of premium private-label products, such as store brand cookies and sauces,  declined  to  455  in  2010  from  518  in 2009, demonstrating a return to branded products - a positive indicator for smaller manufacturers of such branded premium products. The increase in specialty foods sales was also across all age groups, with 18 to 24 year-olds purchasing the most specialty -foods, followed by 25 to 34 year-olds. Since younger age groups usually have yet to realize their income potential, less expensive items have an appeal.  Moreover,  persons  in  their twenties have a liking for small luxuries. For example, shoppers  aged  18  to 24 buy more chocolate than those aged 55 to 64, 67% versus 57%, respectively. Younger persons are also more likely than older adults to buy specialty foods as a personal, special treat. Among everyday items, younger consumers seek out specialty beverages, including ever-popular teas and coffees, but also uncommon specialty sodas. Another factor driving the increasing sales in the specialty foods sector is that for economical purposes, young professionals are preparing meals at home on a more regular basis and therefore, are also likely to purchase specialty items.

The highest frequency of purchases in the specialty foods sector was by women and consumers in the Northeast US which according to the US census bureau is the wealthiest region of the US - accounting for as much as 25% of GDP (US Census Bureau , 2011). The Northeast US includes States and Cities such as New York, Connecticut, Maine, New Jersey, Pennsylvania, Rhode Island, New Hampshire, and others.

Another notable trend in the US specialty food market relates to health and wellness: the primary of these being weight loss and weight management as well as general nutrition. The US obesity levels are increasing, even among children, which is now a measured burden - as "$147 billion in yearly medical costs were linked to obesity in 2008". This translates into consumers seeking healthier food options in addition to other lifestyle changes. While on the regulatory side, state governments are responding with increasing regulations, "such as the cities of New York and Chicago, [which] are increasing regulations aimed at the food industry. These include Chicago's famous 2006 ruling outlawing of the sale of foie gras (liver from geese kept in cages and force fed to increase fat-Chicago repealed the law in 2008), and New York City's 2007 regulations requiring that chain restaurants prominently post nutritional values of menu items. This followed New York City's earlier restrictions on the use of trans fats in restaurant foods. City officials estimate that 56% of New York's adults are either obese or overweight, a common problem throughout America.  Local  public school boards around the US are also enforcing better nutrition in meals and snacks served at schools".  The manufacturers' response is to introduce products with reduced fat.

In addition to these indications, there are trends within product groups/categories where shifts are observed toward lower fat products. The real growth in beverages lately has been in bottled waters and energy drinks while soda consumption decreases. Given these health and wellness considerations, Caribbean producers should also ensure  that their  products are in line with the  preferences of the health conscious consumer.

Developments on the fair trade front are also worth noting. SPINS reports that sales of Fair Trade  CertifiedTMproducts  at  grocery stores grew by 30% in 2010 compared to the previous year, to $140 million. This was led by growth in packaged coffee (44%), and ready-to-drink tea and coffees (51%). Other notable  double-digit contributors include the refrigerated juices & functional beverages category that was introduced in 2009 at 98%, carbonated beverages at 38%, chocolate candy at 29%, and shelf stable functional beverages at 10%. Frozen desserts were up 8% and teas were up 4% , with cocoa and hot chocolate as the only category to experience a decline, down 8%. Certified coffee imports were up 25% and 47% of all imports were organic.

The table immediately below provides an overview of US imports of select bakery products; seasonings; preserves, spreads, condiments and sauces; and beverages for the year 2010.

Overview of select specialty food imports into the US3

Tariff

Classification

Product Description

Value  of  US

Imports

(1000 US)

Major Supplying Markets (outside the US)

1905.10

Crisp bread

18,495

Germany, Sweden, Finland, Norway, United

Kingdom, Dominican Republic

1905.20

Gingerbread and the like

50,927

Canada, Germany, Sweden, China, Poland

1905.31

Sweet biscuits

1,588,090

Canada, Mexico, Italy, Japan, India, Jamaica,

Dominican Republic, Trinidad & Tobago, Barbados

1905.32

Waffles and wafers

33,548

Canada, China, Mexico, Israel, Netherlands,

Dominican Republic

1905.40

Rusks, toasted bread and similar toasted products

33,548

Canada, China, Mexico, Israel, Netherlands

1905.90

Communion wafers, etc.

1,588,090

Canada, Mexico, Japan, Thailand, China,

Jamaica

2103.10

Soya sauce

68,826

China, Hong Kong (China), Japan, Chinese Taipei, Thailand, Jamaica, Guyana, Trinidad & Tobago

2103.20

Tomato ketchup and other tomato sauces

59,272

Canada, Costa Rica, Poland, China, India,

Jamaica

2103.30

Mustard flour and meal and prepared mustard

27,236

France, Canada, United Kingdom, Germany, Poland

2103.90

Sauces and preparations nes4 and mixed condiments and mixed seasonings

424,114

Canada, Mexico, Japan, Thailand, Italy,Dominican Republic, Jamaica,Trinidad & Tobago

2201.00

Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter nor flavoured ice and snow

2,643,667

Italy, France, Fiji, Norway, Mexico, Barbados,

Jamaica

2203.00

Malt beer

3,748,459

Mexico, Netherlands, Canada, Belgium, Germany, Jamaica, Dominican Republic,

3 The major CARIFORUM supplying market(s) is indicated in bold.

4 Not elsewhere specified (nes)

Trinidad & Tobago

2202.00

Waters, including mineral waters and aerated waters, containing added sugaror other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of heading 2009

1,559,003

Austria, Switzerl and, Mexico, Canada, Italy,

Trinidad Tobago,Jamaica, DominicanRepublic

2208.00

Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80 % vol. spirits, liqueurs and other spirituous beverages

5,741,557

France,United Kingdom, Mexico, Sweden, Ireland,Barbados, Jamaica, DominicanRepublic, Guyana

Source: International Trade Centre (2011)