Specialty foods continues to be one of the fastest growing segments in the industry, with total sales of $140.3 billion in 2017 and no signs of slowing down. According to the Specialty Food Association’s annual “State of the Specialty Food Industry 2018” report released last June, specialty food sales outpaced the growth of all food at retail – up 12.9 percent vs. 1.4 percent. Between 2015 and 2017, sales in brick-and-mortar retailers grew by 10.7 percent, was up by 12.8 percent in foodservice channels, and increased by 20.9 percent in online sales. The breakdown of consumers based on generation show that iGens (ages 18-23) are particularly engaged in shopping for specialty foods, with 79 percent buying in the segment. A large portion of the other generations were revealed to be specialty food shoppers as well: 67 percent of Millennials (ages 24-41), 65 percent of Gen Xers (ages 42-53) and 60 percent of Baby Boomers (ages 54-72). The takeaway is that this segment is only poised to get bigger as shoppers tastes become diversified through increased exposure to variety and availability. 

We’ve highlighted three trends that we expect to be at the forefront in the specialty foods arena for the next couple of years, if not more: 

 

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CBD-EVERYTHING 

If you haven’t been living under a rock, then there’s no need to tell you that cannabidiol (CBD) is one of, if not the biggest, trend this year in the retail sector. With the legalization of hemp as an agricultural commodity and its declassification as a controlled substance in the 2018 Farm Bill, it seems to be all systems go for the CBD producers who had been in a holding pattern waiting for this legislation to pass. While the signing of the bill just took place this past December, growers have been preparing in anticipation of it.  According to the 2018 U.S. Hemp Crop Report from Washington-based Vote Hemp, the nation’s leading grassroots hemp advocacy organization, the number of hemp acres in the United States more than tripled to 78,176 acres in 2018 from 25,713 acres in 2017“We’ve seen hemp cultivation significantly expand in the U.S. in 2018, with over triple the number of acres planted in hemp compared to last year and the addition of four more states with hemp programs,” said Eric Steenstra, president of Vote Hemp. “Now that we have lifted federal prohibition on hemp farming, it’s time to invest our energy in expanding hemp cultivation and the market for hemp products across the country so that all can reap the benefits of this versatile, historic American crop.” To date, the following 41 states have legalized industrial hemp cultivation: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. And, according to a recent study conducted by High Yield Insights, a company that specializes in market research and reporting on the cannabis industry, around 40 percent of U.S. adults age 21 and over indicated a willingness to explore CBD under the right conditions. “We are seeing many consumers looking to incorporate CBD into their wellness regimen,” said Mike Luce, cofounder of High Yield Insights and a 20-year veteran in consumer insights and market research. “Consumers previously unfamiliar with CBD are rapidly showing interest. Now that the federal government is finally taking steps to clear up the hazy legal picture, people see CBD as an entry point to the therapeutic benefits of cannabis.” With numbers like that, CBD is certainly here to stay, as long as the FDA (which is holding a public hearing next month to discuss developing a regulatory framework for the use of CBD in consumer products, including foods and beveragesdoesn’t decide to create too many roadblocks.   

 

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Plant-Based Holds Strong Against The Meat And Dairy Birthers 

Although the meat and dairy industries have drawn the battle lines against their plant-based counterparts, it looks like the latter are building strength in numbers and are ready to stand their groundMany consumers have become concerned not only with more healthful eating but also with the impact of their carbon footprint and as a result, the plant-based food industry has not just developed solid roots but is exponentially growing due to the increasing demand for meat and dairy alternatives among shoppers. According to the Dairy Farmers of America (DFA), the sales of traditional dairy milk dropped about $1.1 billion last year from $14.7 billion in 2017 to $13.1 billion. Non-dairy milks, on the other hand, are on the rise. A Mintel report from last year revealed a 62 percent growth in non-dairy U.S. milk sales from 2012 to 2017, reaching an estimated $2.1 billion in sales that year and according to the market research firm Markets and Markets, the global dairy alternatives market is forecasted to reach $19.5 billion by 2020 and the global plant-based protein market is expected to hit $5 billion.  Beyond Burger’s pea protein based patties can be found in many mainstream retailers, Nestlé is developing a meatless product called the Awesome Burger that it hopes to release by the end of 2019 and the darling of this year’s Consumer Technology Association’s CES show, Impossible Foods, hopes to launch a retail version of its much-buzzed about plantbased burger also by the fourth quarter of 2019. Even Burger King has hopped onto this trend with its Impossible Foods partnership resulting in a meatless version of its flagship Whopper now being piloted at 59 locations in the St. Louis area and when the fast food restaurants jump on something, you know it has officially become mainstream. The movement has grown so much in popularity that the Plant Based Foods Association (PBFA) has launched a plant-based NSF International certification and logo to make identification of products easier for consumers while shopping. “The launch of the Certified Plant Based seal is an exciting next step for the fast-growing and innovative plant-based foods industry,” said Michele Simon, PBFA’s executive director. “As consumers are looking to purchase more plant-based options, this new seal ensures confidence in what plant-based means.” 

 

Not Just A Pretty Picture – Sustainability In Packaging 

According to an article published by Nielsen last December, shoppers spent $128.5 billion on fast-moving consumer goods products (FMCG) — items such as food, toiletries and other consumables — in 2018 and it predicts that the sustainability market will reach $150 billion by 2021. It also reported that conventional product sales have dropped whereas sustainable product sales have grown 20 percent since 2014. And while Nielsen found that only 34 percent of Baby Boomers are altering their buying habits with the environment in mind, 75 percent of Millennials are making the conscious decision to shop more eco-friendly. Retailers such as Ahold Delhaize and Kroger have both already pledged to eliminate all single-use plastic bags by 2025. Global CPG company Nestlé, also with a goal to make 100% of its packaging recyclable or reusable by 2025, has partnered with Danimer Scientific (a leading developer/manufacturer of biodegradeable plastic products) to develop biodegradeable water bottles using an effective biodegradable alternative to petrochemical plastics. Not only is this trend being noted by retailers and manufacturers, but the states are actively addressing the sustainability issue as well. With Maryland poised to be the first state to ban foam cups and food containers and New York expected to ban single-used plastics statewide (it will be the second state to do so after California), expect more states to follow closely in their footsteps with environmentally safe initiatives meant to reduce waste. While price is the biggest deterrent to companies making the switch, expect “Reduce, Reuse, and Recycle” to become the mantra when it comes to food and beverage packaging design as mounting pressures from shoppers will eventually force several manufacturers to cave.