Specialty Food Sales Top $170 Billion in New SFA Research

Denise Purcell | 11 May 2021

Driven by a year of at-home cooking and eating, specialty food sales hit $170.4 billion in 2020, according to a preview of the SFA’s annual State of the Specialty Food Industry research, which will be released in early June.

The overall market—including sales data tracked across 63 categories by SPINS/IRI and estimates for perishable and private-label sales and retailers like Whole Foods Market and Trader Joe’s—grew 7 percent between 2019 and 2020. Pandemic-influenced sales booms in brick-and-mortar retail and e-commerce made up for a foodservice sales free fall, said David Browne, the report’s co-principal writer and researcher.

The brick-and-mortar retail specialty food market reached $83.4 billion in 2020, up 24 percent since 2018 and 19.4 percent between 2019 and 2020. Fully 85 percent of specialty food sales move through MULO, or multi-outlet channels like supermarkets and mass merchants, which reached nearly $71 billion in 2020. The much smaller natural & specialty retail channel hit $12.5 billion in 2020, growing 20 percent since 2018.

Online shopping grew 170 percent between 2018 and 2020 and 80 percent from 2019 to 2020. The average ecommerce customer base skyrocketed in 2020, said Browne, as online shopping became a central fixture to conveniently and safely buying groceries. While Walmart and Amazon benefitted from this boom, specialty food consumers generally sought out smaller platforms like Thrive Market, Hive, and San Francisco’s Good Eggs, where they could find and explore smaller, specialty brands.

Growth in the e-commerce channel is expected to continue. “Eighty percent may have been peak growth, but 50 percent is a conservative estimate for this coming year,” said David Lockwood, former consulting director at Mintel and co-principal writer and researcher for the State of the Industry report.

Foodservice has been gaining momentum over the past decade, accounting for roughly 20 percent to 22 percent of the specialty market sales. Stay-at-home orders and restaurant limits and closures saw sales drop 30 percent, resulting in a market share drop to 14 percent.

“Foodservice is being completely redefined as it opens back up,” said Lockwood. “Takeout and delivery may level off, but they are permanent changes in how foodservice operates and may need their own location. Ghost kitchens, shared kitchens, commissaries are key ways foodservice will change and may also be a way for new restaurants to have lower startup costs,” he said.

Brick-and-mortar sales are on track for above-normal growth through the end of 2021 but will then slow to 4.4 percent compounded annual growth rate between 2022 and 2025. Last year’s growth at grocery was unprecedented but is not sustainable, said Lockwood, and will return to pre-pandemic levels when the maturing specialty food industry had a CAGR of just less than 5 percent.

While MULO dominates in sales, and benefited from consumers gravitating toward one-stop-shopping options during COVID, growing a stronghold in new product discovery is a way natural & specialty can come back post-pandemic, said Browne.

COVID-Influenced Category Shifts
Frozen foods, meal-focused categories, and plant based were among the top sellers and biggest growers in 2020.

Frozen food grew 27 percent, faster than both the center-store and refrigerated departments at brick-and-mortar retail, following three years of lagging sales. Frozen fruits and vegetables, meat alternatives, and appetizers and snacks were among the top-selling categories.

Frozen and refrigerated meat, poultry, and seafood ousted cheese from the top spot in terms of retail dollar sales, though both categories were the only two to achieve sales in excess of $5 billion. Refrigerated plant-based meat alternatives emerged as the fastest-growing category—jumping 130 percent between 2018 and 2020.

Categories that grew more slowly than anticipated in 2020 included chips and snacks and chocolate, indicating that consumers prioritized necessities over indulgence last year. Categories linked to grab-and-go such as snack bars and yogurt also stalled as consumers hunkered down at home.

The full State of the Specialty Food Industry report, including 10-Year Category Tracking and Forecasts in 37 key categories will be released in early June and is available for pre-order here.

Related: Plant-Based Foods Could Ease Rollout of Lab-Grown Meats: Panel; Plant-Based Meat, Dairy Drive Category.