Specialty food sales hit high of $170.4 billion in 2020

The specialty food market reached total sales of $170.4 billion in 2020, a 13% increase since 2018, according to the annual State of the Specialty Food Industry Report from the Specialty Foods Association (SFA).

At retail, specialty food sales grew 24% at retail from 2018-2020, and 19.4% in 2020 alone, with much of this growth attributed to the pandemic's effect on buying, at-home meal preparation and consumption. During this time, categories related to cooking or baking at home soared, benefiting products like baking mixes, pasta and sauces, frozen entrees and meat, poultry and seafood (frozen and refrigerated).

"The ripple across all channels of the specialty food industry has been tremendous," said Bill Lynch, president of the SFA. "We've seen businesses flex their creativity in ways they never could have imagined, from restaurants becoming pop-up specialty food grocers to makers increasing production to meet consumer demand. Despite these historic challenges, the industry has continued to innovate and grow, as outlined in our annual research."

The top categories in specialty food sales in 2020 were led by meat, poultry, seafood (frozen and refrigerated); cheese and plant-based cheese; chips, pretzels, snacks; bread and baked goods; coffee and hot cocoa (non-RTD) and desserts (frozen).

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Fastest-growing categories included seasonings; sauces for pasta and pizza (shelf-stable); beans, grains, rice-dry; fruit and vegetables (frozen); creams and creamers; and plant-based meat alternatives.

The SFA report also highlighted some of the key trends and shopping behaviors that emerged during the pandemic:

• Center store rebirth. A year of home cooking has led to consumers rediscovering the usefulness and necessity of a home pantry.

• Improving discovery. Combined with limited in-store sampling, fewer demos and the decimation of foodservice, 2020 was a rough year for innovation discovery. This will be one of the key issues for the specialty industry in 2021 and beyond.

• Specialty's e-commerce visibility issue. Related to diminishing discovery, specialty is facing challenges with the growth of online shopping as it allows fewer opportunities for impulse buys.

• Plant-based competition. The plant-based specialty food and beverage market grew 42%, nearly twice as fast as the entire specialty market. Much of the growth occurred in 2020 when surge shopping served as a gateway in some categories. But the plant-based sector is shifting as big CPG players innovate in the specialty space, with massive funding and scale, and non-specialty ingredients.

Related:The 'big cheese' dominates the deli department

• Channel shifting. Almost every online e-grocery market saw phenomenal growth in 2020, while drugstores gained new customers by adding grab-and-go and refrigerated aisles. Dollar stores continued pulling people from all other channels, and in 2021 are projected to account for 50% of all newly opened stores. Consumers shopped in stores for groceries that they may have rarely visited much in prior years.