A Taste for Change: What's Driving the Rise of the Specialty Food Market

The demand for specialty foods has seen a sharp increase, forcing food and beverage producers to make dramatic changes to manufacturing processes and product ingredients. 

This article originally appeared in The GrayWay, a journal for business and industry published by Gray Construction.

The recipe for success in the food and beverage industry has always been pretty straightforward: give consumers convenient access to great-tasting food at an affordable price. But over the last five years or so, the demand for specialty foods—such as allergen-free, gluten-free, organic and natural foods—has seen a sharp increase, forcing food and beverage producers to make dramatic changes to manufacturing processes and product ingredients.

Millennials are particularly inclined to seek out specialty food options, but want these options to fit into their “on-the-go” lifestyle. They also want to feel good about the foods they are consuming, demanding transparency about where their food comes from and what it contains.

According to the Specialty Food Association, the specialty food market is a $120-billion-dollar industry in the U.S. Retail specialty food sales grew to $94 billion in 2015, a 19.7 percent jump since 2013.

“Consumers are looking for foods with fewer and cleaner ingredients, and products that are made by companies with values they care about,” said Ron Tanner, vice president of philanthropy, government and industry relations for the Specialty Food Association. “All of these define specialty food.”

Dr. Catherine Adams Hutt has spent her career in both the private and public sectors, leading the food quality and safety programs for such household names as HJ Heinz, Campbell Soup Company, McDonald’s Corporation and Coors Brewing Company. She also served as assistant administrator for the U.S. Department of Agriculture Food Safety and Inspection Service—the regulatory agency for meat and poultry.

THE NEW FACE OF MANUFACTURING: MARKSBURY FARM MARKET MEETS DEMAND FOR LOCAL MEATS

Nestled in the rolling hills of the Bluegrass in Central Kentucky is a 12,000 s.f., USDA-inspected meat processing and distribution facility that specializes in providing locally raised, farm-to-table meats to the region. The plant opened in 2010 in response to this rising specialty food market and hasn’t slowed down since.

Richard McAlister, who co-founded the company with two local farmers and has since added several more partners, said he became interested in starting the business when he, as a consumer, was struggling to find locally pasture-raised meat in the area.

“The age of communication has changed people’s awareness of how food is being produced,” he said. “People are very aware of where their food comes from and how it’s produced. We were seeing that starting to emerge and we felt strongly that Kentucky could support grass-based agriculture. We have an instantly renewable resource in Kentucky—it rains, we have sunshine, therefore, we have good grass. For herbivores, that’s what they are designed to eat. Pig and chickens are omnivores but they can do very well in the pasture. We wanted to encourage that type of agriculture production, and we felt like we could fill a gap where that was needed.”

To learn more about how Marksbury Farm Market operates, go to marksburyfarm.com. Pictured above from left to right are Marksbury Farm partners Greg Correll, Preston Correll, Leonard Harrison, Richard McAlister, Cliff Swaim and John-Mark Hack.

Dr. Hutt says that while food and beverage producers are responding to the demand for foods that are minimally processed and contain more natural ingredients, what consumers perceive as “dangerous” in today’s food supply chain may not have the scientific data to back it up.

“At least one-third of consumers are working to avoid eating foods with genetically modified ingredients, or ‘GMOs,’” Dr. Hutt explained. “I was working in government in the late ‘80s and early ‘90s when they were making decisions about the bioengineering of foods, and they took the evaluation of this science very seriously. The Food and Drug Administration (FDA) has consistently declared that bioengineered foods are safe. The Environmental Protection Agency has also considered the environmental aspects, and believes that with certain caveats and precautions that are in place through regulation, there should be no issue relative to environmental health.”

Regardless, Dr. Hutt says the consumer has the right to make their own decisions about what they want to eat, and food and beverage producers must be transparent about what’s contained in their food and beverage products. Consumers are demanding to know more about food nutrition, pesticide use, animal care and welfare, and the overall environmental impact of the foods they eat.

While opinions vary greatly on the dangers of GMOs, there is little dispute over the danger of allergy-inducing ingredients in foods. The simple fact is, more and more Americans are being diagnosed with food allergies, creating a ravenous demand for allergen-free food and beverage products.

“In 1990, one out of 50 people in America had food allergies,” said Joel Warady, chief sales and marketing officer for Enjoy Life Foods—a snack food producer that specializes in allergy-friendly and gluten-free foods. “Today, it’s one out of 13.”

Enjoy Life Foods went into business just 14 years ago in a 5,000 s.f. storefront, with one oven and one mixer. Fast forward to today, the company just moved into a 200,000 s.f. facility in Jeffersonville, Indiana - the largest facility dedicated to producing allergy-friendly foods in the world.

Why such a dramatic increase in food allergies among Americans? There are many theories, but both Warady and Dr. Hutt pointed to the increasing use of germ-killing soaps and antiseptics in U.S. households.

“Kids used to go out and play in the dirt and, by doing so, would get all of this bacteria in their systems,” said Warady. “What we’ve done by using so much antibacterial soap and hand sanitizer is we’ve weakened their immune systems.”

And while the FDA has designated eight of the most common food allergens in the U.S.—eggs, dairy, peanuts, tree nuts, wheat, soy, fish and shellfish—other countries have designated even more. Warady says, in all likelihood, the list of allergens affecting Americans will continue to grow as well.

The challenge for food and beverage producers, he says, is removing these allergens from foods, while maintaining quality and taste.

“It’s not enough just to be safe, you’ve got to be safe but taste really great because, otherwise, people won’t buy it again,” he said. “The good news is, technology is allowing us to make the product continuously taste better, and I only expect that to improve.”