Far from being hurt by the faltering U.S. economy, retailers say sales of specialty foods have never been better. They attribute this to the relatively low cost of grocery products, even high-end items.Though statistics on specialty food sales are hard to come by since they cross so many categories, Ron Tanner, spokesman for the New York-based National Association for the Specialty Food Trade, owner

Far from being hurt by the faltering U.S. economy, retailers say sales of specialty foods have never been better. They attribute this to the relatively low cost of grocery products, even high-end items.

Though statistics on specialty food sales are hard to come by since they cross so many categories, Ron Tanner, spokesman for the New York-based National Association for the Specialty Food Trade, owner of the Fancy Food Shows, said the stores that carry these products are bringing in more and more of them. Some mainstream supermarkets may carry up to 1,000 labels of specialty foods, he added.

A reputation for good prices is not at odds with adding specialty foods to a Center Store selection, sources told SN.

"Sales are definitely up, more than any of our core business," said Andrew Kramer, director of ethnic marketing and specialty foods for Albertson's, headquartered in Boise, Idaho. "Depending on how you define it -- kosher, Asian, gourmet -- specialty foods are up vs. the core business, at a higher rate of increase."

Yet, even when doing a good job of selling specialty food, it accounts for only about 1.5% to 2% of a food store's business, according to Bill Lancaster, vice president of corporate sales for Associated Wholesale Grocers, Kansas City. But, he added, "I think customers like selection; they like variety. So I think that specialty foods can be done at the same time as you're a pricer."

Another factor leading retailers to stock specialty foods is the well-documented fact that these products appeal to the higher-spending consumer. Market baskets containing specialty products ring higher than baskets without them, not only because they cost more, but because these shoppers are no longer making a secondary trip.

By putting in specialty foods, like high-end mustards and imported or premium olive oils and vinegars, some stores are not trying to make a statement that they have gone upscale, but just want to broaden the offering.

The specialty grocery buyer for Price Chopper, Schenectady, N.Y., told chain spokeswoman Cindy Breslin that it's not difficult for a mainstream chain to get into the specialty food trade, since its distributors lend their expertise. More challenging is knowing how to correctly merchandise the products.

"You need to show it differently. If you have regular product on white shelves, you might put specialty goods on black, to draw attention to them," said Breslin.

"However, too many of such items can distort the price impression, and make people think we're an expensive supermarket," she cautioned.

Shaw's Supermarkets, West Bridgewater, Mass., took a look at how it was merchandising its specialty products and, considering that ethnic foods are often specialty and that specialty foods are often imported, introduced the World Market format in October 2000 with the opening of its store in Canton, Mass.

Bold signage points out that there is something special on the shelves, and even as the products are in the category, they are segmented out. For example, for the more discerning customer, special vinegars are next to the Heinz; specialty crackers next to the mainstream crackers.

"That format is one we are now repeating in our new stores and our remodels. It's been quite successful, and it's in quite a few stores," said spokesman Bernie Rogan. A design group working with the 185-unit New England chain brought it in, he added.

World Market covers cookies, crackers, condiments, imported and premium domestic olive oils and specialty spices; it clearly designates that these are the special products. But it also highlights products familiar to people of diverse demographics, depending upon the store.

The space is about four feet, supported by a sign overhead and two wings, so the customer sees six special selections in a 90-foot aisle.

The World Market is still separate from other types of food products that are also considered specialty, such as kosher and natural and organic. It is separate and distinct from the Wild Harvest section of natural foods that Shaw's carries, and it's not the same in every store. It intentionally reflects the community, the products used by shoppers in the neighborhood.

"The World Market has become an ethnic portrayal," Rogan said.

Even smaller players recognize the potential of a specialty selection.

Thomas Zaucha, president of the National Grocers Association, Arlington, Va., said "the whole specialty foods arena, which includes ethnic foods, is very, very high priority for NGA and its membership."

At the NGA's upcoming convention in Las Vegas, slated from Feb. 11 to 14, there will be an area dedicated to ethnic merchandising, Zaucha said, featuring some of the best practices of independent retailers around the United States. Also at that convention, results of a research project on specialty foods will be released, including significant attention to product sourcing and market strategies. "This, to me, is a great growth area," Zaucha told SN.

Last year, for the first time, the NASFT gave 10 independent food retailers awards for the way they sell specialty products. They were A.G. Ferrari Foods, San Leandro, Calif.; Carmine Giardini's, Palm Beach Gardens, Fla.; Citarella, New York; Dorothy Lane Market, Dayton, Ohio; Formaggio Kitchen, Cambridge, Mass.; Jungle Jim's International Farmers Market, Fairfield, Ohio; Liberty Heights Fresh, Salt Lake City; Marty's Fine Foods & Wines, Dallas; Mollie Stone's Markets, Mill Valley, Calif.; and Straub's Markets, Clayton, Mo.

Straub's was remodeling two of its four units when SN visited in November. The 12,000-square-foot flagship store in Clayton is set up so that upon entering, a customer meets Boyajian cooking oils (in fragrant peanut," for example, and roasted garlic") on wire racks, then sees the Dean and DeLuca brand, Joseph Schmidt handmade chocolates, and products from some local vendors, too, like Thompson Farms dried soups (Senate Bean, Cheese Tortellini), from St. Charles, Mo.

Straub's, which celebrated its 100th anniversary last year, developed its reputation in prime beef and other fresh foods. But, "over the last five to seven years," owner Trip Straub explained, "we have tried to refocus on Center Store, to bring that selection up to the standards we've set in fresh."

Unique items include: small bottles of wine for bringing to a restaurant, or in case one dining partner doesn't drink wine, and the Caldrea line of window cleaner, hand lotion and linen spray.

"I think there is a growing demand for these items as people's tastes change," said Price Chopper's Breslin. "We also have a special order service, so that if you can't find an item in our store we will order it for you," Breslin added.

Chicago's Jewel food stores, which are part of Albertson's, also try hard to get what customers ask for, said spokeswoman Karen Ramos.

"When your goal is to be a one-stop shop, we know we are not going to be able to carry everything, but we offer the items that most people want. Also, we are marketing neighborhood by neighborhood. If people are asking for a particular stuffed olive, we get it. That way we are customizing our selection. We encourage people to ask us. At the courtesy desk there is a form, and if it's available, we get it."

Kramer of Albertson's is credited with realizing that crossover cooks were looking for more ethnic items to make everyday meals. So, items that previously were available only to stores with a heavy Latino base, for instance, were broadened throughout the chain's 14 divisions.

"Obviously, the selection varies, based on the size of the store and the size of the targeted audience. The final piece is the marketing behind it," Kramer said. Ads in the weekly circular and store demos usually do the job on that, with the vendor's help.

With a special request, Jewel buys whatever the supplier's minimum quantity is and puts it on the shelf, Ramos said.

"Quite possibly the item will move quickly. We watch that, and if that's the case, we may continue to carry it."

One item that came to mind was Michelle's Honey Cream Syrup, a product from a family recipe made by an African-American woman from Chicago. "She decided to market it because it was enjoyed by so many people," Ramos said, explaining that this supplier started with Jewel and now supplies Albertson's nationally with her pancake syrup.

Before accepting a specialty product, Jewel requires the supplier to have a business plan to ensure that it can provide the item consistently, even if not in all 197 stores.

"Depending on the item, it might be merchandised on an endcap or a Metro rack. At Christmastime, shoppers often look for items like anchovies, capers, stuffed olives, and so forth. We'll put those in wire baskets on an aisle end, tied in with an ingredient for a meal," Ramos said.

"We are trying to provide our customers with the convenience of having a selection of most of the items in one place. The specialty food store may not have pet food, or a pharmacy."