Specialty Food Stores
Description
Companies in this industry sell products such as meat, fish, fruits and vegetables, baked goods, candy, and gourmet foods from physical retail locations, often specializing in a single product category. No major companies dominate the industry.
Sales of specialty foods have been increasing worldwide as demand for ethnic foods has continued to grow. In part, the increase comes from immigrant consumers seeking out foods from their own cultures. In the US, it is expected that the buying power of the Latinx population will reach $2.6 trillion by 2026, according to Blavity.
The US specialty food store industry includes about 22,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $20 billion. Specialty food sales grew about 7% in 2023, according to SmartBrief.
The industry includes meat markets, seafood markets, fruit and vegetable markets, baked goods stores (but not retail bakeries), candy and nut stores, and gourmet food stores. Grocery stores and supermarkets, along with superstores and warehouse clubs that sell food, are covered in separate industry profiles.
COMPETITIVE LANDSCAPE
Consumer spending and tastes drive demand. The profitability of individual companies depends on effective merchandising and the ability to generate store traffic. Large companies can offer a wide selection of products and have advantages in purchasing, distribution, and marketing. Small companies can compete effectively by offering locally sourced and specialty products, providing superior service, or serving a local market. The US industry is highly fragmented: the 50 largest companies account for less than 20% of sales.
Competition includes traditional grocery and natural food stores, mass merchandisers, warehouse clubs, and online retailers. Specialty food stores also compete with restaurants and other venues serving high-quality prepared food.
Specialty food stores also compete with their own suppliers, who increasingly are embracing e-commerce as a way to sell directly to consumers. In 2029, Grocery e-commerce sales will represent 17% of grocery sales, according to Grocery Dive. Online sales are also among the fastest-growing channels for importers.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products sold by specialty food stores include fresh meat and poultry accounting for about 25% of sales and fresh fruits and vegetables for about 15%. Others include candy, prepackaged cookies, and snack foods, fresh fish and seafood, and perishable prepared foods for about 10% each. Companies may place special orders for customers looking for unique items.
Specialty food stores include chains, independent retailers, franchises, and cooperatives. Franchises include companies such as the Sweet Factory. Specialty food cooperatives are typically member-owned and -operated. Store size and format can differ significantly. A large specialty grocery store can exceed 50,000 square feet. Companies may use a kiosk format to offer a small selection of products and to fit into non-traditional spaces.
Store layout is typically organized by product type, and companies often place complementary departments near each other to promote incremental sales. Specialty food stores may have in-store bakeries, kitchens, or delis (also known as charcuteries). Retailers offering organic food must follow strict procedures to prevent contact with non-organic foods and substances. Organic merchandise also requires companies to keep records regarding product handling and vendor relationships.
Merchandise mix helps determine locations. For example, specialty grocery stores with a broad range of products may seek out strip malls or areas with other large retailers to help drive traffic. Because customers are willing to travel to buy unique merchandise, stores specializing in a few categories (meat or produce markets) may be farther from major shopping areas. When evaluating store locations, companies typically consider population density, traffic patterns, tenant mix, visibility, and accessibility. Because specialty food products tend to appeal to affluent consumers, companies may also consider education and income levels for the surrounding area.
Specialty grocery stores offer categories similar to traditional supermarkets, but stock unique or hard to find products within each category. Fast-growing specialty food categories include better-for-you options, health and wellness, and fresh products. Companies may also focus on a particular category, such as baked goods. Stores specializing in ethnic foods offer imported merchandise. Perishables, such as produce and meat, require careful inventory management due to potential spoilage. Some specialty food stores offer private-label products.
While companies may buy directly from manufacturers, distributors and farm cooperatives are important because the supply and retail segments for many categories in the specialty food industry are highly fragmented. Large companies may have multi-year contracts with key suppliers and enjoy volume discounts. Small companies may join cooperatives to leverage increased purchasing power. Chains often have separate distribution centers for products requiring special handling, such as seafood.
Sales of specialty foods have been increasing worldwide as demand for ethnic foods has continued to grow. In part, the increase comes from immigrant consumers seeking out foods from their own cultures. In the US, it is expected that the buying power of the Latinx population will reach $2.6 trillion by 2026, according to Blavity.
The US specialty food store industry includes about 22,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $20 billion. Specialty food sales grew about 7% in 2023, according to SmartBrief.
The industry includes meat markets, seafood markets, fruit and vegetable markets, baked goods stores (but not retail bakeries), candy and nut stores, and gourmet food stores. Grocery stores and supermarkets, along with superstores and warehouse clubs that sell food, are covered in separate industry profiles.
COMPETITIVE LANDSCAPE
Consumer spending and tastes drive demand. The profitability of individual companies depends on effective merchandising and the ability to generate store traffic. Large companies can offer a wide selection of products and have advantages in purchasing, distribution, and marketing. Small companies can compete effectively by offering locally sourced and specialty products, providing superior service, or serving a local market. The US industry is highly fragmented: the 50 largest companies account for less than 20% of sales.
Competition includes traditional grocery and natural food stores, mass merchandisers, warehouse clubs, and online retailers. Specialty food stores also compete with restaurants and other venues serving high-quality prepared food.
Specialty food stores also compete with their own suppliers, who increasingly are embracing e-commerce as a way to sell directly to consumers. In 2029, Grocery e-commerce sales will represent 17% of grocery sales, according to Grocery Dive. Online sales are also among the fastest-growing channels for importers.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products sold by specialty food stores include fresh meat and poultry accounting for about 25% of sales and fresh fruits and vegetables for about 15%. Others include candy, prepackaged cookies, and snack foods, fresh fish and seafood, and perishable prepared foods for about 10% each. Companies may place special orders for customers looking for unique items.
Specialty food stores include chains, independent retailers, franchises, and cooperatives. Franchises include companies such as the Sweet Factory. Specialty food cooperatives are typically member-owned and -operated. Store size and format can differ significantly. A large specialty grocery store can exceed 50,000 square feet. Companies may use a kiosk format to offer a small selection of products and to fit into non-traditional spaces.
Store layout is typically organized by product type, and companies often place complementary departments near each other to promote incremental sales. Specialty food stores may have in-store bakeries, kitchens, or delis (also known as charcuteries). Retailers offering organic food must follow strict procedures to prevent contact with non-organic foods and substances. Organic merchandise also requires companies to keep records regarding product handling and vendor relationships.
Merchandise mix helps determine locations. For example, specialty grocery stores with a broad range of products may seek out strip malls or areas with other large retailers to help drive traffic. Because customers are willing to travel to buy unique merchandise, stores specializing in a few categories (meat or produce markets) may be farther from major shopping areas. When evaluating store locations, companies typically consider population density, traffic patterns, tenant mix, visibility, and accessibility. Because specialty food products tend to appeal to affluent consumers, companies may also consider education and income levels for the surrounding area.
Specialty grocery stores offer categories similar to traditional supermarkets, but stock unique or hard to find products within each category. Fast-growing specialty food categories include better-for-you options, health and wellness, and fresh products. Companies may also focus on a particular category, such as baked goods. Stores specializing in ethnic foods offer imported merchandise. Perishables, such as produce and meat, require careful inventory management due to potential spoilage. Some specialty food stores offer private-label products.
While companies may buy directly from manufacturers, distributors and farm cooperatives are important because the supply and retail segments for many categories in the specialty food industry are highly fragmented. Large companies may have multi-year contracts with key suppliers and enjoy volume discounts. Small companies may join cooperatives to leverage increased purchasing power. Chains often have separate distribution centers for products requiring special handling, such as seafood.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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