Specialty Food Stores
Companies in this industry sell products such as meat, fish, fruits and vegetables, baked goods, candy, and gourmet foods from physical retail locations, often specializing in a single product category. No major companies dominate the industry.
Sales of specialty foods have been increasing worldwide as demand for ethnic foods has continued to grow. In part, the increase comes from immigrant consumers seeking out foods from their own cultures. In the US, it is expected that the buying power of the Latinx population will reach $1.9 trillion, which is higher than the gross domestic product of countries like Australia, Spain and Mexico, according to Nielsen.
The US specialty food store industry includes about 22,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $20 billion. Retail specialty food sales grew nearly 10% from 2016 to 2018 (compared with 3% for all food sales), driven by product innovations and wider availability of specialty foods through mass-market outlets, according to the 2019-2020 State of the Specialty Food Industry report from the Specialty Food Association, Mintel and SPINS/IRI, which tracks US sales of specialty foods through supermarkets, natural food stores, and specialty food retailers. By channel, retail food stores account for about 75% of all specialty food sales in the US. While online represents less than 3% of specialty food sales, it is the fastest growing sales channel, up 41% since 2016.
The industry includes meat markets, seafood markets, fruit and vegetable markets, baked goods stores (but not retail bakeries), candy and nut stores, and gourmet food stores. Grocery stores and supermarkets, along with superstores and warehouse clubs that sell food, are covered in separate industry profiles.
Consumer spending and tastes drive demand. The profitability of individual companies depends on effective merchandising and the ability to generate store traffic. Large companies can offer a wide selection of products and have advantages in purchasing, distribution, and marketing. Small companies can compete effectively by offering locally sourced and specialty products, providing superior service, or serving a local market. The US industry is highly fragmented: the 20 largest companies account for less than 20% of sales.
Competition includes traditional grocery and natural food stores, mass merchandisers, warehouse clubs, and online retailers. Mainstream retailers such as Kroger, Costco, and Target account for more than 80% of specialty food retail sales and are expanding their presence in specialty foods significantly. Sales of specialty food by mainstream retailers increased 11% between 2016 and 2018, outpacing growth at natural food stores (up 3%) and specialty stores (2%). The rise in specialty food sales by mainstream stores is credited to convenience-minded millennial consumers, who prefer to purchase specialty food wherever they shop, according to the State of the Specialty Food Industry 2019-2020 report from the Specialty Food Association, Mintel and SPINS/IRI. Specialty food stores also compete with restaurants and other venues serving high-quality prepared food.
Specialty food stores also compete with their own suppliers, who increasingly are embracing e-commerce as a way to sell directly to consumers. E-commerce sales represent 36% of manufacturers' sales, according to the State of the Specialty Food Industry report, with coffee ranking as the specialty product most often purchased online. As in other retail categories, online purchasing of specialty foods is growing and resulting in slower year-over-year growth for retail and food service channels, according to Mintel. Online sales are also among the fastest-growing channels for importers.
Products, Operations & Technology
Major products sold by specialty food stores include meat, fish, and poultry (about 45% of sales); produce (about 20%); and baked goods and candy (about
Sales & Marketing
Finance & Regulation
Regional & International Issues
Also includes the following chapters:
Quarterly Industry Update
Trends and Opportunities
Call Preparation Questions
Glossary of Acronyms