Wednesday, October 24, 2007

Mid-Week Roundup

Research Roundup: Specialty and Premium Foods
Three New Studies Show a Consumer Flight to Premium Taste and Quality

Consumers are flocking to product lines like Safeway's private label O' Organics line, which combines premium quality and organic ingredients, to create a premium taste product with healthy attributes.
Three just-released studies show consumers are looking for quality when it comes to their food choices and are increasingly opting for premium specialty foods.

The first study, by market research firm Mintel, concludes that consumer demand for quality and taste, as well as an increased interest in international food traditions, are the key drivers for the specialty foods market in the U.S. Almost 73% of U.S. consumers currently report purchasing specialty foods. That's up from 64% just one year ago, according to the Mintel survey released this month. Mintel surveyed 1,092 consumers in July, 2007 for the survey. The results were just released this week.

For the survey, Mintel defines specialty foods as those products that are of premium quality such as "high-end" chocolates, coffee, oils and other premium goods. These foods are generally considered unique (hence specialty) and may be produced by small or local manufacturers, imported, or have exotic ethnic flavors. Other specialty products included in Mintel's definition are coffee and tea, specialty beverages, cheese and olive oils, among other premium products. The products in the categories that fit into Mintel's definition are referred to by the study as "premium," "fancy" and "gourmet." They also are often more expensive than there regular or basic counterparts (premium condiments, coffee, teas, chocolates and the like which are higher priced than basic grocery items in the respective categories).

According to the study, taste is the primary reason consumers buy specialty foods and beverages. Awhopping 88% of survey respondants reported taste as their number one motivation for buying the premium products. Two thirds of the respondents also sighted "personal indulagance" as a key reason for buying specialty food items. They said they buy the premium goods for the pleasure of giving themselves a treat.

Specialty Foods Consumer Characteristics and Demographics

In terms of specialty foods consumer demographics, the new study found the typical specialty foods shopper tends to be younger and more affluent than the average consumer. Further, they also are more likely to buy products that are natural, organic, kosher and halal, in part sighting a perception that these types of foods offer higher quality attributes. Again we see her what we call the Natural~Specialty foods convergence--the coming together of the specialty and natural and organic foods categories do to the similar consumer demands for cleaner and healthier foods combined with a desire for premium taste.

The specialty foods category also is heavily influenced by international travelers. These consumers visit many places in the world and develop new food traditions based on the foods the sample while visiting various contries in the world. When they return home to the U.S. they look for--and demand--these new foods and ingredients in their local food stores. This also introduces retailers to new ethnic foods which results in introducing customers to them once the retailer merchandises the new international products.

The ethnic diversity in the U.S. also is a key means of introducing new foods to consumers, according to the new Mintel study. Hispanics, Asians, Eastern Europeans and others all desire foods from their homeland when they migrate to the U.S. They not only introduce retailers to these foods by requesting them but have also spawned a huge ethnic retailing industry. These immigrants also introduce other U.S. consumers to their food traditions which creates an even bigger market for ethnic specialty foods.

Other Survey Findings

>Of the 1,092 consumers surveyed by Mintel in July, 2007, 61% reported buying Hispanic food products and 55% said they buy Asian products.

>Consumers said 46% of the specialty foods they buy are sourced locally and 29% of the foods are sourced internationally. Mintel doesn't provide a definition of what is "local," whether it means within a 100 mile radious of the shoppers home, produced in the same state they live in, or if "made in the USA" is considered local. As such we question the 46% figure somewhat. Saying specialty foods are produced locally also requires the consumers surveyed to have rather good knowledge of the origins of the specialty foods they buy. We aren't sure that is the case as the majority of products don't have origin information on them--and if they do we aren't fully convinced shoppers retain that information.

>Consumers said only 11% of the specialty foods they purchase are from artisanal producers. This doesn't suprise us in that artisinal-produced specialty foods is still a small niche market and various considerably by region in the U.S. For example in California and parts of the East Coast and New England, there are numerous artisanal food producers. However in other parts of the U.S. there a very few. Also, retailers--especially conventional supermarkets--aren't yet selling many artisanal foods. Generally it's stores like Whole Foods, Trader Joe's, upscale supermarkets, farmers markets and specialty stores that stock artisanal foods in any quantity. As such access to these specialty foods is a key driver we believe in the 11% figure.

Based on the survey results Mintel says the current hot button trends in the specialty foods market for manufacturers and retailers are: premium taste, organic, natural, single-sourced, handmade and artisanal. These attributes show no sign of losing popularity, Mintel says in its new survey report.

Hartman Group Study: Consumers Redefining Premium Quality

Another new study bby the Hartman Group concurs with the Mintel survey that premium taste and quality are currently driving the specialty foods market. The Hartman report also says it would be a mistake for food marketers to assume premium quality is only something more upscale and affluent consumers are seeking, or that it is about mere personal indulgence. Rather, the report says it's consumers themselves, not the specialty foods industry, that is redefining premium quality and driving the flight to such premium taste in the U.S.

In the report, "Premium Food Experiences: Understanding the Consumer Redefinition of Quality," the Hartman Group says premium quality from the consumers vantage point means five key things:

>Consumers are seeking distinct flavors

>Consumers are seeking more fresh and less processed foods

>Consumers have a keen interest in purchasing more locally produced foods

>Consumers are seeking artisanal and hand-crafted specialty foods

>Consumers have a willingness to pay more for premium taste and quality as long as it is reasonable
You can read a complete summary of the survey, including narratives from consumers interviewed, here The article is written by Blain Becker of the Hartman Group, who conducted the study along with others at the firm. much of what the Hartman research found mirrors the Mintel study. However, there also are some differences, and things not covered in the Mintel report. We recommend reading the article linked above by Hartman's Becker.

New Report: Flight to Premium Quality in Frozen Food Category

It's not just packaged and fresh specialty foods that are experiencing a flight to premium quality, according to a new study of U.S. consumers by the market research firm Research and Markets. A just-released research report from the firm, covering the frozen processed foods category--which includes ready-to eat dinners/meals, red meat and poultry products, fish/seafood, vegetables, frozen potato products, desserts, bakery products, pizza's and soup and noodles.

The report says there is a move in the U.S. towards high quality premium foods. It sights what it calls the "Starbucks factor," and says the success and expansion of the coffee king's coffee shops demonstrates the trading up in the coffee category of U.S. consumers, who just a few years ago were fine with drinking low-quality coffee. The same is happening across all food categories, including frozen foods, the report says.

Other key inflencers in this trend towards consumers trading up to premium quality include the success and expansion of Whole Foods Market, Inc., Food shows (and their popularity) on the Food Network, PBS, Bravo and other networks, and the overall celebrity chef phenomenon, which has created "a nation of foodies; consumers who seek out the best," according to the new study.

The just released report also says healthier, more convenient and indulgent frozen specialty foods will see significant growth now and in the years to come. Additionally, the report says artisanal-produced specialty frozen foods are a key growing market for manufacturers and retailers.

Another sign of the flight to premium taste and quality in the U.S. is the fact that those retailers who have introduced premium, natural and organic private label or store-branded product lines are doing the best in terms of private label sales among all retailers, according to the report. Research and Markets sights the huge success of Safeway Stores O Organics specialty foods line as an example of creating a product line which hits on both the flight to quality and natural trends among U.S. consumers today. The report also points to the huge success of specialty retailer Trader Joe's private label premium, natural and organic store brands as an example of the premium and healthy trend in the U.S.

With these examples above, we again are seeing the convergence between natural and specialty foods products (and the industries). Retailers like Safeway and Trader Joe's are combining premium taste attributes with natural and organic ones to create private label product lines that appeal to the growing number of U.S. consumers who want these combined attributes in the products they buy. You can read more about the specialty frozen foods market study here.

We also aren't surprised the flight to premium quality foods extends from fresh and dry packaged goods products to frozen as well. In fact, if it didn't we likely would not be looking at an overall trend--which we believe it is--but rather only a category-specific one. We are seeing the combination of a flight to premium quality and desire for such foods that also are healthier and more natural.

Unlike in the recent past, U.S. consumers no longer want to trade off taste for health. They want their organic cereal and cookies to have the taste of gourmet cereal and cookies. They also want premium specialty foods that offer unique taste experiences. Much of this has been influenced by fusion restaurants, where ethnic cuisines like Asian and Cuban are combined, and where traditional Hispanic foods are given added taste with a "California Cuisine" flair, for example. Sushi bars have introduced U.S consumers to premium, fresh fish, and once exotic tastes like wasabi. Farmers' markets across the country have shown consumers what "real" fruit and vegetables can taste like and they want that same premium taste available to them in their local supermarket.

The flight to premium taste and quality demonstrated in these three surveys offers a myriad of opportunity to specialty and natural foods manufacturers, marketers and retailers. Combining such attributes as premium taste with natural or organic is a hot button for many consumers. Artisanal produced foods and locally grown also offer great sales opportunities. Natural and specialty foods consumers are converging more and more in the U.S. Understanding that will be key for food marketers looking to succeed in today's and tomorrow's competitive market.

Natural~Specialty Foods Memo's Product Marketing Roundup

A Woman's Place is At the Top: Specialty Food manufacturer and market Glory Foods has named its first female president. Her name is Jacqueline Neal. Glory foods is well-known in the specialty foods industry for its home-cooked, Southern-style canned vegetables and side dishes, frozen entrees, side dishes and bagged vegetables. Ms. Neal has extensive experience in the food industry, including stints with Heinz, Quaker Oats, Nabisco, Kraft Foods and others. She not only should add much to Glory Foods with her extensive experience at major packaged goods companies, but having a woman's touch in the top spot at the specialty foods company should also provide additional insight since woman still make up the majority of food shoppers.

A New Definition of a "Hot" Presidential Candidate: San Francisco, California-based Dave's Gourmet has launched a new line of hot sauces with labels featuring caricatures of the 2008 candidates for United States president. There's Rudy, Hillary, Barack and others, all looking out at you from the hot sauce label. Dave, owner of the specialty foods company, is even getting in on the act himself. He has a caricature of his own face on one of the labels, describing himself as a "write in" candidate for President in 2008.

To spice things up a bit Dave's is holding its own "Presidential" competition via its website here. Here's how it works: Each bottle of Presidential hot sauce that's purchased counts as a vote for that candidate. If you buy one Hillary Clinton caricature bottle and three Barack Obama bottles that means you gave Barack three votes and Hillary one. Dave says he encourages "ballot stuffing" as well. The more you buy the more you vote.

Currently the company's website has Hillary Clinton in the lead with 13% of the hot sauce vote, followed by Obama with 11%, none of the above with 10%, And Rudy Giuliani with 9%. The top four is pretty close, although Hillary seems to have a fairly solid lead. There is a five-way tie for fifth place however between Fred Thompson, Mitt Romney, Al Gore (is he running?), John McCain and hot sauce Dave himself. John Edwards isn't doing so hot--he brings in the rear at 7%, second to last to Newt Gingrich (6%), who even though he hasn't announced he is running has his own hot sauce and the honor of placing last in the voting. Dave's is giving the profits from the sales of the Presidential candidate hot sauces to charities involved in cancer research. Now, that's hot.

Tea for Two: U.S. immigrant Ahmed Rahim used to manage two tea houses in Prague in the Czech Republic. Shortly after he came to the U.S. he and his sister Reem started a tiny specialty tea company called Numi Tea in his Oakland, California apartment. Today, just eight years later, Numi Tea is one of the fastest growing specialty, natural and organic tea companies in the world. It sells its teas not only in the U.S. but throughout the world, including in China, a country where consumers know their teas. Rahim is going back to his tea house roots a bit. Numi is moving into a new facility in Oakland and the brother and sister team decided to include a public tea house in the facility. You can read about the Rahim's, Numi and the new tea house and facility here. It may sound cliche but it has to be said: There's is a true American success story.

Beer and Clamato: For ages many Hispanic (and other) consumers have combined beer with tomato or Clamato juice to make a beer cocktail. Until now they had to buy the beer and tomato or Calamato juice separately and mix their own cocktail. Not any more. Anheuser-Bush is currently testing a beverage called Chelada, which is a combination of Budweiser beer and Clamato Juice, which is a tomato juice and clam juice product that's been on the market for decades. The folks at Bud know this combination is big with many Latinos and are betting the ready-to-drink combination will be a big hit with what is currently the fastest growing ethnic group in the U.S. Bud also plans to sell the beverage in Latin and Central America and perhaps elsewhere. Read more here.

Tanka Bars and Bites: Seldom in the vast world of niche marketing do we see a food product targeted to native Americans in the U.S. Asian Americans, Afro-Americans, Latino's, Woman and others---yes--but creating a product and targeting it to Native Americans is new and rather interesting marketing strategy in the food industry. And that's just what motivated Karlen Hunter, among other reasons, to create the Tanka Bar, which is a modern version of a traditional food called Wasna, a mix of meat and berries that plains Indians used to pack into Buffalo horns to sustain them on long journeys. Hunter, CEO of Native American Food Company, and a member of the Lakota Indian tribe, hopes the Tanka Bar and its sister product Tanka Bites, a bite-sized version of the Tanka Bar, will be a healthy alternative for young people who are more likely to grab a snack of potato chips or candy.

"We want to show them (young native Americans) that this is our original fast food," Hunter recently told the New York Times. Her message--and product--are timely in that Native Americans are among the highest sufferers of obesity and diabetes in the U.S. Her marketing message is creative and culturally relative as well. "In Indian country we don't say, 'this is good for you'...that will turn them away. We say, 'in traditional times our people could run great distances eating this food. So taste it. It tastes good.' "

The Tanka Bar and Tanka Bites are made primarily from Buffalo meat and cranberries. The Buffalo meat is softer than beef jerky and the cranberries give the bar a slightly fruity taste. The initial run of 1.5 million bars and bites has sold out. Hunter says her dream is to make the product "the first national break-out product made on an Indian reservation." The bars and bites are produced on a Lakota reservation where Hunter lives and works. To make the products the first reservation-produced national break-out product, Hunter also wants to get non-Native Americans to buy the products. Among her marketing tools are Myspace and Facebook sites which introduce the bars and bites, discuss their origins and heritage, and talk about their nutritional benefits. Read all about the bars and bites and their heritage and other facts here.

Natural~Specialty Foods Memo's Retail Roundup

Retail Innovation: Illycaffee's Push-Button Cafe

Triest, Italy-based premium coffee producer, marketer and retailer Ilycaffee has found an innovative, inexpensive and quick way to build and open a cafe with essentially the push of a button. Ilycaffee has taken the "Push Button House," designed by Adam Kalkin, and turned it into a rapid-construction cafe for hard to build locations or places where the retailer wants to set up and operate a cafe temporarily. In fact that's what the premium coffe company going to do with there first "Push-Button Cafe" when they set it up in New York City's bustling Columbus Circle between November 28 and December 29 of this year.

Manhattan, and Columbus Circle, are teaming with holiday shoppers and others during this period of time. A great opportunity for a retailer like Illycaffee to sell thousands of gallons of specialty coffee drinks and lots of deserts in a prime location without the investment of actually building or leasing a permanent "brick and mortor" store in the area. That's if they could even find a location in the high-rent, retail mecca of Columbus Circle where the temporary cafe will be located.

Illycaffee's Push-Button Cafe opens at the push of a button in 90 seconds and go anywhere.

The "Push-Button House" is an innovation designed by Kalkin to be used in areas where there has been a natural disaster, such a Huricane Katrina, or the current wildfires in Southern California. It's also designed for lower-income people (or anyone who wants to live in one frankly) who can't afford a traditional house but wants to own rather than rent. It's essentially a "house in a box." It comes prefabricated in a container. And with the push of a button it transforms into a living space in about 90 seconds. It has a kitchen, small dining room, bedroom, bathroom, living room and even a small library. You can read more about the "Push-Button House" and view pictures of it here.

As you can see in the pictures above and below, the "Push-Button Illycaffe" has pretty much everything a "brick and mortar" cafe would have. It's also rather attractive. We find this concept not only innovative but effective as well. Food retailers can use it to extend their brands to places they currently aren't: fairs, sporting events and a myriad of other venues. Manufacturers could use it to sell their products direct to the public, as could small start-up and artisanal food and beverage companies on limited budgets.

The uses are as varied as the retail imagination is. It's also great for test marketing and special events or seasonality retailing like Illycaffee is doing. In many ways its a serious lemonaide stand concept for grown-up and start-up retailers. Once word gets out on what Illycaffee is doing we expect others to adapt the "Push-Button House" for their own retail uses like Illycaffee has.

Retail Briefs

Whole Foods' New Market Hall Store: In mid September we wrote about the new Whole Foods Market "Market Hall" style store which was set to open in Oakland, California on September 26. The store, a first-of-its-kind design for Whole Foods, opened on the 26th to much acclaim from shoppers, suppliers and Oakland city officials. We recently read an excellent profile and review of the Oakland "Market Hall" store, which we have visited, written by Julie, a blogger for the sfist, a San Francisco Bay Area-based blog. You can read her piece on the new Oakland Whole foods Market Hall here. She has great pictures of the European-style food hall format store as well.

Columnist Dissed For Liking Whole Foods: Liberal San Francisco Chronicle columnist Mark Morford likes the new Whole Foods Market Hall store in Oakland. In fact, he likes Whole Foods in general and recently said so in his Chronicale column. (You can read the column, "Is it OK to love Whole Foods?" here.) In response to his positive column on the supernatural grocer Morford receives an email box full of angry and nasty responses from readers who have a distain for Whole Foods. These anti-Whole foods folks essentially acused Morford of "selling out" his "Liberal" credentials by giving the grocer an overall favorable nod despite having some intellegent critiques of how they do business.

Morford didn't take the nasty detractors sitting down though. He does what a writer should do. He took fingers to keyboard and wrote another column (10-12-2007) about those who dissed him for liking Whole Foods. In that column (read it here) Morford said most of the letters he recieved were in agreement with his point of view on Whole Foods or were a i reasonable and polite disagreement with his opinion. There was a segment of letters however which Morford takes off on.

These letter writers he says are absolutist, extreme and voracias Liberals. Morford asks: "Does the Extremism of some progressives spell danger to delicious evolution?" His answer: "Well, yes." But read his 10-12 column for yourself as it's witty, satirical and biting. He makes a number of larger political and social points using his writing about Whole Foods--and the "Whole-Paycheck-label-crowd's" letter-writing responses to his column--as not only the chief topic at hand but as a metaphor for the larger issues of public discourse and debate. The column is pretty humorous as well.

FTC Re-opens Whole Foods' Merger Wound: Federal agencies just don't like losing court battles. That was the case when the U.S. Federal Trade Commission (FTC) lost its first try to stop the Whole Foods' acquisition of Wild Oats Markets, Inc. A judge ruled in favor of the acquisition/merger but the FTC then went back to court and tried again. The same judge once again ruled in favor of the acquisition, which then went through in September.

Now the FTC is back again, this time appealing the ruling with a new court motion designed to overturn the merger on anti-trust grounds despite the fact that Whole Foods is well on its way to integrating Wild Oats into its operations. In fact, it's this integration the FTC aims to stop with its appeal. This is an unusual move by the FTC, attempting to stop a merger not only after it has gone through, but at a point where the acquiring company is well on its way to integrating the company it has purchased into its culture and operations. You can read more details about the FTC's appeal here and here. For a satirical take on the FTC's new court filing to stop the Whole Foods' acquisition of Wild Oats take a look at this dialogue from the Wonkette Blog. The topic: "The FTC hates Hippies."

H.E.B's New Natural-Specialty Cypress Market: H.E.B's newest retail format, its 112,000 square-foot upscale Cypress Market, made its debut yesterday when the first store opened in the Cypress neighborhood in Houston, Texas. The huge store features the largest meat market (full-service and self service) in the area. It features aged prime, all-natural and organic meats. The store also has a giant fresh fish and seafood department. The department will get fresh fish deliveries seven days per week in order to ensure optimum freshness, according to H.E.B. A large selection of both wild, farmed and locally-fished seafood and fresh fish are offered in the upscale department.

The store's produce department is expansive and upscale. It features over 900 varieties of fresh fruits and vegetables, including more than 100 varieties of certified organic produce. Cypress Market also features a huge wine department which includes a temperature controlled wine cellar and tasting room. The wine department features at least 2,000 different varieties of wines from throughout the world, according to an H.E.B. executive. The store's bakery is equally as expansive and upscale. It features a wood-burning hearth oven. Artisan, craft and organic breads are baked in the bakery multiple times daily. The store also has an international cheese shop that includes a cheese aging cave. The cheese shop offerers over 400 varieties of cheeses from throughout the world.

The store also features a Central Market "Cafe on the Run," which has numerous upscale meals for takeout or catering. There also is a full-service eat-in restaurant nearby in-store. Other ser vice highlights include a tortilleria where homeade tortillas are made, an eat-in sushi bar which also offers sushi to go, a cafe/coffee bar with an in-store coffee bean roaster.

The store also has the "Cooking Connection," an in-store department staffed full time by a professional chef and assistants. The department oeprates numerous "H.E.B. Showtime Cooking Stations" located throughout the store. Store culinary professionals will interact with shoppers every day of the week, consucting over 30 in-store demos or tastings each week, according to an H.E.B spokesperson.

Specialty, gourmet, ethnic, natural and organic grocery products and non-foods play a major role in the store. The shelves are full of premium specialty, international, natural and organic groceries. There also is a large store-within-a-store natural and organic health & beauty care and nonfoods area. A "Healthy Living Department" features row upon row of natural and organic bulk foods.

H.E.B. is one of the pioneer retailers of natural and specialty foods with its Central Market format. This format inspires the specialty and natural product offerings in the Cypress Market, which takes the Central Market concept to its next level in terms of upscale, premium, natural and organic retailing. The store also offers a huge selection of basic groceries and an expanded basic non-foods offering in its 112,000 square-feet. Everything from small appliances and kitchenware (basic and upscale) to various types of furniture and other offerings. H.E.B says on of the goals is for the Cypress Market to not be just an upscale specialty market but also a complete destination retail shopping center for consumers. It is.

Mid-Week Roundup Ender
Unmentionable Cuisine: We happen to be big believers in the concept of cultural relativism when it comes to food choices. That one regions food choices, like eating beef from cattle, can be considered unmentionable in another culture. We also are major advocates of fresh, all natural foods, procured locally whenever possible.

However, we aren't sure if the cuisine being offered by Britian's Famous Wild Boar Hotel restaurant might not just be taking the concepts of natural, fresh and locally procured just a little to far. The restaurant, located in Crook, near Windermere, in Cumbria UK, is preparing and serving up pancakes made from grey squirrels to diners, according to a story in the London Daily Mail (10-16-2007). And the price is right--as an introduction to the squirrel pancakes, which head chef Marc Sanders describes as "Peking duck-style squirrels wraps, the restaurant is currently offering them to diners for free as an introduction to the new dish on its menu.

Head Chef Marc Sanders diplays his creation: Grey Squirrel Peking Duck-style wraps or panckaes.

The grey squirrels also are locally procured. They're caught on the hotel's 72 acre wooded grounds. Hotel general manager Andy Lemm says the grey squirrels are everywhere on the grounds. "Our diners seemed to enjoy the squirrel pancakes," Lemm told the Daily Mail, "and I thought they tasted rather nice, a bit like rabbit," he added.

Grey squirrels are killing off red squirrels in the UK. As such the reds have become an endangered species while the government has encouraged hunters and others to eliminate the greys. Britian's Lord Inglewood, a conservationist, warned Brits that the red squirrel would soon become extinct if grey squirrels are allowed to go on increasing. Red squirrels are native and the greys aren't.

Lord Inglewood also suggested one way to deal with the problem would be to foster a market for grey squirrel meat. He told Brits that Americans eat grey squirrel and even have a number of recipes for the meat, including what he discribed as the most popular dish in the U.S., Brunswick Stew, which the Lord says "is casseroled squirrel."

He wants famous British chefs like Jamie Oliver to promote grey squirrel-based dishes for school dinners. (Really, the Lord told the Daily Mail that, we couldn't make it up.)

Meanwhile, chef Marc Sanders decided to take the Lord up on his suggestions by creating the squirrel pancakes and putting them on the hotel's menu. The hotel's general manager also had a hand in the dish since he was looking for a way to help rid the grounds of the grey squirrel infestation.

Fresh, all natural, locally procured--the grey squirrels do hit all the hot buttons with today's foodies. And we must say the squirrel Peking-style pancakes do look attractive in the picture. Perhaps what was once unmentionable cuisine will become tomorrow's new trendy food dish. We're not sure though, those grey squirrels are rather cute. And a wise man once told us never to eat meat from an animal that's much cuter than you are.

We would give the squirrel pancakes a go as the Brits say. Would you? Let us know if you would in the comments link below.

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