NEW YORK — Demand for premium food and beverage products is expected to soften as shoppers tighten grocery budgets in the year ahead. A new report from the Specialty Food Association and Mintel forecast the impact of the pandemic on consumer purchasing patterns, pegging the average weekly sales spend for specialty food and beverages at 22% to 25% of total grocery spend, down from 34% prior to the economic downturn.
Sales of specialty food and beverages have topped $158.4 billion, increasing 10.7% since 2017. In brick-and-mortar retail, the specialty food and beverage market grew three times faster than the entire food and beverage market between 2017 and 2019, according to the report. Online sales of specialty food reached $5.4 billion, swelling 50% in 2019 on top of 55% growth in 2018. Food inflation played a role in the three-year growth of the specialty food market overall, as unit sales lagged dollar sales.
Top categories with the highest dollar growth were refrigerated plant-based meat alternatives, shelf-stable and refrigerated creamers, ready-to-drink coffee and tea, and frozen breakfast foods. The categories with the highest retail sales were cheese and plant-based cheese, frozen and refrigerated meat, poultry and seafood, chips, pretzels and other snacks, coffee and hot cocoa, and bread and baked foods.
Millennials represented the highest share of consumers buying specialty foods by generation at 82%, followed by Gen Z at 76%, Gen X at 70% and baby boomers at 59%.
The onset and continued spread of COVID-19 has broad-based implications for the specialty food market, driving a resurgence of home cooking and baking, value shopping, demand for healthy and functional products, particularly those offering immunity-boosting ingredients, and a surge in snacking. Plant-based foods are expected to gain momentum, according to the report, which noted many brands saw increased sales as dairy and meat products disappeared from shelves in March when many shoppers stocked up on staples.
A consequence of the pandemic may be diminished innovation as manufacturers assess portfolios and eliminate low-selling products in favor of more popular items. Retailers and distributors are optimizing assortments and prioritizing essentials.
“The impact of COVID-19 on the specialty food industry cannot be underestimated,” said Bill Lynch, interim president of the Specialty Food Association. “Food retail is an essential business channel, and while that has been beneficial to sales for our members, many of whom are small businesses, the overall landscape is both optimistic and uncertain.”