Specialty Foods are a Major Driver in the Grocery Sector

The Specialty Food Association (SFA) released the second edition of its research report, “Understanding the Real Value of Specialty Foods.” Based on interviews with 1,000 shoppers, 100 retailers, and other data points, the SFA new report outlines the positive impact of specialty products on retailer profitability and shopper loyalty. This impact has only increased in importance since the first edition in 2014.

Describing the current moment as “an era of specialty food prominence,” the report notes that sales of these products have grown from $88 billion in 2013 to an estimated $207 billion in 2023, an increase of 149%. With specialty food and beverages now representing 21.6% of all center store grocery sales in the 63 categories measured by SFA, they are no longer regarded as niche products but a major growth driver in the grocery sector.

“There is a general perception of specialty foods as inherently worth more, whether in price or in time shoppers spend to procure them. This updated research proves that perception correct,” said Bill Lynch, SFA president. “This has meaningful implications for many SFA members and the industry as a whole. In a time of economic uncertainty and fluctuating prices, we hope this research helps food makers, buyers, brokers, and distributors understand the positive impact that specialty products have on retailers’ bottom lines.”

Related Article: Exploring Merchandising Opportunities for Specialty Foods at Hispanic Supermarkets

Top Takeaways about Specialty Foods

Shopper loyalty.  The report outlines a clear relationship between how customers rate their primary store and that store’s selection of specialty food items. Almost half (44%) of primary store shoppers surveyed for the report visit secondary stores specifically “to find specialty food items that their regular store does not carry.” These trips, along with others made to dedicated specialty stores, represent $1,200 in sales per household per year, sales which retailers could be retaining themselves. “If my favorite store carried a wider selection of specialty food products,” said 41% of shoppers surveyed, “I would be less likely to make shopping trips elsewhere.”

“For my stores, specialty foods provide guests moments of joy,” said Dwight Richmond, director of center store for Town & Country Markets. “Helping them re-discover unique foods they loved or encounter new foods they are going to love helps us create a guest who is excited to come back. They’re telling their friends about the ‘treasure hunt’ of foodie finds in our stores, and that makes them a loyal customer for years to come.”

Retailer profits. In addition to the sales generated from retaining more trips, specialty foods are disproportionately more profitable on the shelf, according to this report. The items generate a gross margin dollar return that is 3-4 times higher per unit than mainstream items, which, the report posits, helps to balance out “somewhat slower turns from specialty products.” According to the report’s data, specialty products, with their higher average prices and gross margin rates, deliver a 50.1% return on inventory investment (ROI) for retailers, compared to 19.8% for non-specialty items.

“From a business perspective,” said Richmond, “specialty foods provide needed boosts in margin and dollar-sale profitability across all the categories they belong to.”

SFA’s new report contains sections on the economic impact of specialty foods, consumer insights and market dynamics, retailer case studies, growth opportunities, the role of distributors, private-label trends, e-commerce strategies, and the future outlook for the market.