Private Label Buyer

You might think the recession’s impact would dramatically affect a vulnerable category such as gourmet and specialty foods, complete with plummeting sales and disappearing consumers abandoning their favorite premium-positioned specialties. But the reality, according to a March 2010 report by New York-based National Association for Specialty Food Trade (NASFT) and Mintel International Group, Chicago, is that the recession has both helped and hindered the specialty food industry; retail sales grew incrementally, reaching $50 billion in 2009 (up 9 percent from 2007 through 2009), but other trends, such as the migration of consumers to “big box” and warehouse stores, and the rising cost of premium ingredients, present other sets of challenges.

The report — “NASFT: State of the Industry Report – The Market U.S.” — confirms significant sales shifts within the specialty food sector. Sales of “staple” items were up, such as yogurt and kefir (+39 percent), shelf-stable pastas (+30 percent), beans, grains and rice (+ 30 percent), and baking mixes, supplies and flours (+18 percent). Other segments remained fairly flat, including cookies and snack bars (+1.4 percent) and cooking oils (-1.6 percent).

The top five segments of specialty foods are similar to those of years past: cheese, condiments, frozen and refrigerated entrees/pizza/convenience foods, chips/pretzels and snacks, and frozen and refrigerated meats, poultry and seafood. Segments such as frozen fruit and vegetables saw big growth (up 24 percent from 2007 through 2009), perhaps because consumers traded down from fresh organic produce to items that keep in the freezer but still are of premium quality.

Small indulgences also have had much success, says Nancy “Fern” Phillips, chief marketing and sales officer with The Lollipop Tree of Portsmouth, N.H.

“The economy has actually helped our business because it has caused a trend toward small indulgences,” she explains.

And small rewards that can be enjoyed for little money attract consumers who are looking to create an “experience” at home.

“Brownie mixes, cakes and cupcakes and condiments are recession-proof,” Phillips adds. “A new jar of pepper jelly, for instance, costs very little, but it can dress up an hors d’oeuvre offering. Brownies are always a family favorite to bake and eat. And cupcakes are the personal little ‘treat.’ More dining-in at home means fresh-from-the-oven is possible for cakes and cupcakes. And fresh-from-the-oven is better than fresh-from-the-bakery, even the in-store bakery.”

New private label products are successfully being brought to market to compete with premium and super-premium branded items in order to capitalize on this trend. Mid- and high-range price points are the dominant focus in the specialty food world, where the value proposition is more often a value-added proposition, as in, “Will the consumer pay more for a product with super-premium ingredients (Meyer lemons, for example, or Belgian chocolate)?”

Phillips says the answer to the question is yes, “as long as the price point remains close to the products without the special touches.”

Baking mixes, brownies and pancake/waffle mixes, a segment that saw 18 percent growth in the last two years, offer those special touches that are a step above average. For example, Lollipop Tree’s line includes items such as Lemon Dessert Bread with Crystallized Lemon Peel, a pancake mix with wild Maine blueberries, and brownie mix with premium Barry Callebaut chunk chocolate.

Another specialty item performing well during the recession is premium coffee.

“Coffee is a relatively inexpensive and ‘necessary’ purchase,” says Alison Rosenblum, brand manager for Coffee Bean International, Portland, Ore. “With the ‘coffee wars’ going on, consumers are being reminded that they have more and more choices where they can buy their daily fix, but they are not willing to sacrifice on the increasing level of quality to which they are becoming more and more accustomed.”

Of course, coffee isn’t the only place where consumers aren’t willing to sacrifice quality for price. For gourmet and specialty brands, customers who were won over to private label brands during the economic downturn will continue to want all the quality of the “treat” post-recession, but at a lower price point.

Quality for the specialty food buyer generally means natural, high-end ingredients, as well as few preservatives or artificial flavorings/colors.

“All-natural is the price of entry in the specialty food world,” Phillips points out. “The quality of own brand entries has increased as consumers realize they do not have to ‘settle’ for national brands, which continue to try to appear more natural and … higher quality, without raising prices. Emphasis is on try; the consumer is becoming smarter and knows many ingredients used in national brands are neither all-natural nor good for you.”

Retailers and manufacturers understand that today’s consumers are more educated and selective about what goes into their shopping carts and onto their tables.

“People are definitely reading labels and are very interested in what’s in the product,” says Frankie Whitman, vice president of marketing for FullBloom Baking Co., Newark, Calif. He adds that consumers “want to be able to read the label and pronounce the ingredients.”

Retailers and manufacturers also understand that specialty food consumers are more likely to cook meals at home, as long as the experience can be made “special.” And according to Kelly Cox Semple, private label manager for York, Maine-based Stonewall Kitchen, these consumers won’t be changing their cooking habits anytime soon.

“I believe the trend will continue for some time, if not indefinitely,” she says. “We have launched a number of new lines and products to address consumers’ increased home cooking and entertaining, and continue to develop products that will fit that need.”

In addition to their cooking skills, Americans also are developing their taste buds. International flavors are growing in popularity, particularly flavors such as wasabi, Phillips says.

“The Lollipop Tree Wasabi Lime Pepper Jelly is right up there with sales for the Lollipop Tree’s flagship product, Original Pepper Jelly,” she notes. “Five years ago, the average American consumer did not know what wasabi is!”

Even basic items such as frozen pizza are taking on international flair. Liz Bradley, CEO of Olive Street Table, Santa Barbara, Calif., says her company makes a high-end, all-natural kosher pizza with vegetarian Provençal toppings on a French pastry crust. Olive Street Table plans to make the pizza available for private labeling in the near future.

It takes more than a unique and exotic product to grab a consumer’s attention, however. Retailers need to be increasingly savvy in how they market their specialty and gourmet products.

For example, Rosenblum says sampling works well with gourmet coffee products.

“Of course, cross-merchandising coffee with like and complementary products such as baked goods increases visibility, and we also seek inspiration from coffee trends we’re putting into place at our downtown Portland coffeehouse, Public Domain, such as promoting coffee together with French presses and other brewing equipment.”

Phillips agrees that there are strong benefits in employing a good cross-merchandising strategy.

“Private label entries seem to perform better when merchandised by category, so the consumer can ask the value proposition and value-added questions,” she says.

Of course, Phillips concludes, the offerings must deliver on their promises, and they must be delicious. PLB