Food Show Memo: A Fancy Food Show in A Not So Fancy Food-Desirable U.S. Economic Climate

The 34th Annual NASFT West Coast Winter Fancy Food Show begins tomorrow (running until Tuesday, January 20) at the Moscone Convention Center in San Francisco, California. Just like fancy food shows past, the huge convention center floor will be filled with exhibitors from all over the world, displaying their respective specialty, gourmet, ethnic and natural-organic food and beverage products to members of the retail trade.

This year the show will be packed with retailers, brokers, distributors, food service operators and other assorted members of the specialty foods trade, as it is every year. The show is sponsored by NASFT, the National Association For The Specialty Food Trade, the leading trade group for members of the specialty foods trade.

Sellers will be selling, brokers will be looking for new lines, specialty foods makers and marketers will be networking, and although the fancy food show isn't traditionally a "selling show," some orders will be taken and deals struck betwen buyers and sellers, as happens each year. And you can bet exhibitors will be selling more aggressively this year than perhaps in any time in the recent past.

On the exhibit floor, the thousands of specialty food and beverage companies displaying their respective wears will be putting the best face on the business, introducing some new products and promoting existing goods. There will be plenty of spin, something that always makes the fancy food show fun, along with some complaining about the currrent bad economic times.

But the true reality of how bad the current times are for specialty foods makers and marketers, as well as brokers, distributors and retailers that focus primarily on the specialty category, will be discussed most seriously off of the exhibit floor, in the hotel bars and San Francisco restaurants where the real business and talk goes on during fancy food show time.

And the times they are rather tough for most in the specialty foods business right now.

Below are some of the things members of the specialty foods trade will be talking about in those San Francisco hotel bars, restaurants (and perhaps at a gentleman's club or two) and on the sidelines off the main exhibit floor at Moscone Center starting tomorrow:

>The recession and financial/credit crisis: The situation is hurting near everybody in the industry, from the big specialty foods makers and marketers to medium-size companies and small-entrepreneurial operations. Manufacturers can't get credit, which for many is needed for production, selling, promotion and in some cases even to temporarily make payroll. The frozen credit markets are allowing only the most credit-worthy to access lines of credit.

>Payables-Receivables: Everybody is holding payables in this down economy. In many cases retailers are paying distributors late, which in-turn means distributors are paying specialty foods suppliers late. As a result, suppliers in-turn are paying their brokers' commissions late. They also are paying other suppliers -- glass makers, label makers, printers -- late. It becomes a vicous circle. And with credit so tight it's near-impossible to get short-term bridge loans to help with cash-flow when payments are late. Many have turned to factoring firms that are in the business of advaning companies money on receivables in return for a substantial percentage of the amount due.

>Consumers trading down: During the two most recent economic recessions, in 2001-2002 following the September 11, 2001 terrorist attacks and in the 1992-1993 recession, consumers still bought plenty of specialty and gourmet foods in the main. Those two recessions were much milder and nowhere as deep as the present one is, and their was no financial/credit crisis like at present, so consumers tended to buy specialty and gourmet products at their near-same levels because it was the one affordable indulgence they could splurge on.

Not now. Consumers have cut way back on everything, including food and grocery products. The first items to go have been items like expensive flavored olive oils, fancy mustards, imported preserves, gourmet cookies and other mainstays of the specialty foods trade. Specialty foods makers and marketers, ranging from the divisions of huge consumer packaged goods companies to mid-level and small artisinal producers, are feeling this sting strongly.

>The shelf space crunch: Retailers ranging from the mega-supermarket chains to the regional U.S. chains, as well as mass merchandisers like Wal-Mart and Target, along with specialty foods chains like Cost-Plus World Market and others, have been increasing the number of skus of their own store brand specialty, natural and organic foods items dramatically over the last few years. This includes the "Big Three" U.S. supermarket chains -- Kroger, Safeway and Supervalu. Store shelf space that once held the products from exhibitors at the fancy food show has now in many cases been replaced by store brands. This trend is growing fast. Grocery wholesalers such as Unified Western Grocers in the west (and others throughout the U.S.) and specialty distributors like Tree of Life, Inc. and others also are pushing their own provate label specialty and natural products more so.

On top of this trend, food retailers are taking shelf space that has been used to merchandise specialty foods and in many cases replacing the space with more basic, value-oriented (more inexpensive skus of white rice replacing basmati and wild rice skus, for example) food and grocery items because that's what the consumer is demanding in the current severe recession.

Safeway Stores, Inc. is a good example of this. Since late in the first quarter of 2008, Safeway has been adding numerous new items to its store shelves under its Safeway and other value store brands. In many cases these items took the place of manufacturer branded specialty foods items. And this is on top of Safeway's introduction over the last couple years of thousands of skus across all categories of its "O' Organics" and "Eating Right" premium organic and healthy foods store brands, along with its "Safeway Select" premium and specialty foods brand.

There's only so much "share-of-the-shelf." When space is needed for store brands it often comes at the expense of manufacturer, especially smaller manufacturer, specialty food and grocery brands because they have slower movement compared to a store brand -- even if that store brand is a premium one. REtailers also make higher margins on their own brands.

The 130 store Raley's supermarket chain and the upscale Wegmans chain on the east coast are two regional chains, both key customers for specialty foods marketers, that have also been dramatically reducing the amount of space devoted to manufacturer specialty foods brands on their respective store shelves in favor of their own store brands. Both regional chains, as have many others, have been introducing store brand specialty product after specialty product in the last year, ranging from basic items like olive oil to more exotic products like fig and raspberry-infused balsamic vinegar, which is one of the latest lines introduced by Raley's under its "Raley's" store brand.

When retailers like Safeway, Raley's and Wegmans, which are just three examples of the many retailers doing the same, eliminate specialty foods brands for their store brand items, that also hurts distributors and brokers, as well as the brand's manufacturers and marketers. Distributors lose sales and brokers lose commissions.

Cost Plus World Market, long a key customer for specialty foods companies and importers, is another example of this store brand trend. Cost-Plus has been banging out specialty items after specialty item, in category after category -- condiments, oils and vinegars, snacks, confections, beverages and more -- under its "World Market" store brand. Every time it introduces a new line and item it has to either reduce facings of manufacturer specialty brands or eliminate those items all together -- or both. And of course when this happens it also hurts brokers, who lose commissions on lines discontinued by the 300 store chain, which is one of the top specialty foods venues in the U.S.

We haven't even mentioned an additional fact yet -- that in addition to store brand specialty items displacing manufacturer brand items on the shelf, the store brands, which are almost always prices at least 15% (and most often more) lower than the supplier brands take sales away from those manufacturer brands. For example, placing a 16oz bottle of "Safeway Select" Balsamic Vinegar next to two manufacturer specialty brands on the shelf and pricing it 15-20% lower can easily reduce the average weekly sales volume of those two manufacturer brands by 50%. That's dramatic.

>More aggressive buyers: Specialty foods manufacturers and marketers also are getting hit hard by retail buyers and distributor buyers for deeper and longer deals, more promotional monies and higher spoils allowances, among other chargebacks. Distributors are aggressively asking for higher off-invoice promotional amounts and not always passing the full amount on to the retailer. In turn, retailers are demanding better deals from distributors, including more promotional money. In turn, the retailers aren't always passing those deals on to consumers at the shelf. This has always gone on in the industry. However in these bad economic times it's happening more. Everybody is struggling and looking for ways to ease that struggle.

Those specialty foods companies that sell primarily to specialty foods retailers, and there are many, perhaps the majority who exhibit at the fancy food show, are hurting the most. Sales at specialty and gourmet food stores are way down. Shopping at a specialty foods store is generally a planned trip for consumers, unlike a trip to the supermarket which they have to do is. As such, many consumers are completely avoiding specialty foods stores because they know once inside they are likely to spend money they don't have. Better to avoid the stores completely goes the reasoning.

Despite the struggles going on across the specialty foods industry at present, the fancy food show, which starts tomorrow, will still be packed. Perhaps not as busy as last year in terms of exhibitors, but we suspect there will be as many attendees. For some its the only chance they have all year to network with other members of the trade.

And the specialty foods industry is vibrant. It will survive. But we do know of a number of long established specialty foods companies that are on the ropes. We also know a couple that have gone under this year. There also are many specialty foods professionals, ranging from marketers and operations people to sales folks, at all levels, out of work. You can bet there will be lots of networking for jobs at this year's San Francisco fancy food show as well. Most are out of luck though. Hiring is near non-existent. Layoffs are happening. More cutbacks are to come.

But we think there's reason for optimism. The 34th NASFT Annual Winter Fancy Food Show ends on Tuesday, January 20, the day a new American President, Barack Obama, is sworn-in as the country's 44th President. And with Obama's taking office there's a new spirit blowing across the land in which serious people want to do serious things to improve this economy.

Doing so will take time. We suspect all of 2009, and most economists agree, is going to be a wash in terms of remaining in economic recession. We also believe things are going to get worse before they get better.

But members of the specialty foods trade, which includes many natural foods players as well, are a resourceful group. Most are tough. Most are determined. They have seen bad times before. Some will go out of business but most will survive. Additionally, there will be a new wave of industry consolidation once the credit crisis is over as well, we believe.

Right now job one is to survive for a better day. Use the bad economic times to innovate. Some of the best merchandising and marketing ideas are born out of hard times, for example.

As members of the specialty foods trade arrive in San Francisco today for the show's three day run we suggest you look around you at the City By The Bay. It's a perfect example of renewal and reinvention. It was rebuilt after the earthquake and fire of 1906. Much of the city had to be rebuilt again after the 1989 earthquake. It's a place where people from throughout the country and even the world have come to reinvent themselves, despite the high cost of living.

Once the financial capital of the western U.S., that ended. But San Francisco reinvented itself, becoming the advertising and muti-media capital of the west instead, as an example of business renewal.

And of course, Northern California and the San Francisco Bay Area is arguably the top region in the United States, and one of the top globally, for innovation in the specialty, gourmet, natural and organic foods industry.

So, look around. And think like many San Franciscans did after the fire of 1906 completely destroyed the city when they said to each other: "This too shall pass." And so too will the current hard times pass.

But in the meantime its all about being smart, frugal and innovative. The most innovative folks in the specialty foods trade today will become the most successful folks in the business when the recession ends.

Come up with ways to market specialty products in the recession. Themes like the "frugal gourmet." Offer added value. Get creative in promoting; use PR and free media rather than paid advertising. So few specialty foods companies are using social media sites and Blogs for marketing, for example. This is particualrly true of many medium and smaller companies who's Web presence looks like what one would expect in the first or second year of the existance of the World Wide Web, rather than in 2009. The cost of doing so is near-free -- and the potential impact huge.

Innovate, innovate, innovate. And have a good show.

Food Show Memo: Record Attendance at World Food Moscow 2008 Show Demonstrates Russia's Growing Consumerism and International Opportunities

The emergence of Russia as a major food and grocery consuming nation was on display at the recently-ended World Food Moscow 2008 trade show, which featured over 1,300 exhibitors from throughout the world and was attended by thousands more food and grocery industry professionals, all focusing on how to do business in the country of about 143 million that's becoming flush with cash from its sales of oil and other natural resources, along with creating a growing higher-income consuming class, as well as the beginnings of a middle class.

The product exhibitions at the huge World Food Moscow 2008 show, which ran from September 23-27, ranged from basic food and grocery products, fresh produce, meats and other perishables, to non-foods and natural, organic, specialty and gourmet products from throughout the world, including Europe, Asia, the U.S., Canada and Latin-Central America.

Fresh produce, including organics, was a big feature of this year's Moscow food show. Produce suppliers and trade associations from Europe, Latin and Central America, Asia and the U.S. all had a major presence at the show. Many of these suppliers already do some business in Russia but want to expand their respective business in the increasingly affluent nation. Others are hoping to get into the Russian market as it improves its logistics systems and more larger and even upscale supermarkets open throughout the country.

The show also included a series of forums in which various speakers talked about how to enter the Russian food and grocery market, along with ways to increase business in the nation, discussions of Russian consumer behavior and other related topics. The annual Russian Agricultural Outlook forum also is a part of each year's Moscow food show.

Russia's food and grocery retailing industry is going through a rapid modernization process, adopting the western supermarket, superstore and hypermarket models in increasing numbers. Western chains like France's Carrefour (the worlds second largest global retailer) and Wal-Mart (the world's number one retailer) are currently in the process of entering Russia with their first stores.

As an example of the growing consumer affluence in Russia, this year's World Food Moscow 2008 show featured far more specialty, gourmet, natural and organic food and grocery products across all categories, according to the food show's organizers. This included specialty and organic fresh produce items and meats, gourmet, specialty and organic shelf-stable food products from throughout Europe and even the U.S. and Australia, and lots of higher-end premium products including beverages as well as food items.

As is the practice in Russia, foreign companies in any sector who are let in early tend to get preferential treatment by the Russian government. This is the case with overseas food and grocery companies as well. Much of doing business in the food industry in Russia still relies on setting up various joint-ventures with Russian companies, along with going through various layers of government and quasi-government middle men, each who takes a cut of the action.

A new U.S-Russia cold war? "Nyet." Some analysts and pundits are suggesting the U.S. and Russia are on the verge of a new cold war over Russia's recent invasion (after Georgia's invasion) of two breakaway states of the Republic of Georgia, which the U.S. is allied with. No impending new cold war was evident on September 27 however when John Beyrle, the United States Ambassador to Russia , attended the last day of the World Food Moscow 2008 food show. Ambassador Beyrle, pictured above enjoying a slice of apple, greeted Russian officials at the show as well as visted U.S. exhibitor companies and trade groups such as the California Grape Association and USA Pears, among others.

This system isn't in the main preventing European, American and Asia food and grocery companies --big, medium-sized and even small -- from wanting to enter the Russian market though, as was evidenced by the record attendance and number of exhibitors at the just-ended Moscow food show.

The natural and organic products categories, along with imported specialty, gourmet and ethnic food and grocery products, are in the infant stage in terms of category development in Russia. Therefore, Russia is a growing new market for western and Asian suppliers. The potential is very big and lucrative.

Additionally, with western chains Carrefour (based in France) and Wal-Mart (based in the U.S.) planning to soon open their first stores in Russia, the opportunity for western natural, organic, specialty and gourmet foods suppliers and marketers who already do business with these two mega-retailers should be enhanced.

More Russians than ever before also are traveling abroad, particularly those from the country's new upper-income class. As these and other Russians travel to western European cities and to the U.S. more frequently they will acquire an increased taste for and desire of the food products from these countries, just as Americans and Europeans who travel throughout the world do for foods from other lands. This fact will increase demand for imported foods in Russia, creating additional opportunity for western suppliers and marketers.

The organizers of the Food Moscow 2008 food show have a comprehensive photo and video gallery of this year's and last year's shows, ranging from pictures of various exhibitor booths and forum events to the trade show's product tasting events and award presentations. Click here to view that photo gallery.

Additionally, the Netherlands-based Web site Freshplaza.com took photos of the fresh produce exhibitors at this year's World Food Moscow 2008 food show. Click here to view the photo report.

The Food Show Moscow 2008 event is held annually in the fall, usually in late September or early October. According to the show's organizers, this year's show had the highest number of exhibitors and attendees in its history.

Despite a bit of a freeze in Russian western relations, especially with the U.S., American and European companies and food industry representatives attended this year's Moscow show in great numbers.

This fact reflects that despite a chilling of political relations between these western nations and Russia, trade between the west and Russia is still moving forward.

It also reflects the fact Russia is spending billions of dollars to improve its agricultural industries and is looking to U.S. and European companies for much of the expertise and technology to achieve that goal, as it is looking towards the west to help modernize its entire food distribution chain, from the farm and food processing plant to the supermarket.

Marketing Memo: Winter 2008 Fancy Food Show: Day Deux

The Scene: Inside and outside the San Diego convention center

Yesterday saw the San Diego Convention Center packed with food retailers, brokers, exhibitors, distributor representatives, and other two-legged species of folks involved directly or indirectly in the specialty and natural foods business.

Sunday's are always big retailer days at the Fancy Food Shows, especially for independent grocers and specialty foods' store retailers, who still tend to work six days a week in their stores. For these folks, Sunday's are often the only days they can get to the food show. Retail chain buyers who live within driving distance--or a short plane trip away--often visit the show on Sunday as well, so they can be back in their buying offices first thing Monday morning.

Monday's, by contrast are busy, but tend to be bit more mellow. Fewer retailers are generally at the show, although many of the big chain buyers do come on Monday as it's a great way to get out from behind the buying desk for awhile. And, of course, those from out of state or from out of the USA altogether, are in town anyway, specifically to spend two or three days at the show. A buyer really needs at least two full-days to see everything available on the huge show floor.

And of course, those show attendees coming from out of state--and especially those from overseas--should have at least half a day or more to enjoy San Diego: The beach, the downtown gaslight district, and at least one park, for starters. Golf isn't out of the question either. The temperatures in San Diego have been in the mid-to-high 70's for the last two days.

Getting out of the convention center hall in the afternoon for an hour or two--taking a short brisk walk, getting some sun (and Vitamin D) on the skin, lunch at one of the downtown gaslight district's cafes--is what some might call food show relief paradise; especially if you're coming from a place that's having snow and near-zero degree temperatures.

In fact, a clothing retailer near the Convention center reported an unusually high spike in sales of floral-print shirts, short pants, sunglasses and even sunscreen for this time of year in San Diego. We jest of course. But there have been a few reports of an unusually large number of very pale-skinned people seen running around the boardwalk and beach in the city yesterday and today.

On the show floor: lots of people and products

Of course, we digress: The real action yesterday, today and tomorrow, when the Winter 2008 show winds-up, is inside the exhibit hall--right?

No doubt about it, specialty, ethnic, natural and organic food and beverage products are in abundance in the convention center hall. Not to mention throngs of people.

Many of these products are new, being introduced for the first time at the show. Some are fairly new products, introduced some months ago, but getting their first widespread exposure at the fancy food show. And others are mainstay products of the exhibiting companies, which are always looking for more distribution, new regions in which to market their existing lines, and the ability to get more skus into stores that currently carry some but not all of their products.

A few new products of note spotted on the show floor

In the beverage category, a company called Bevology has come up with a simple twist on the vitamin water category. The company's Zenergize vitamin-infused drink tabs can be dropped in any brand of bottled water--or tap water for that matter--instantly creating a serving of vitamin-infused water. The tabs are portable--you can carry them around with you when out-and-about--in the office, the car, or at the gym for example--and just drop one in a bottle or a glass of water for a "zenergizing" vitamin drink, as the company likes to call it.

There are seven varieties of vitamin-infused tabs in the line: Immunity, Hydrate, Energy, Thrive, Burn, Empower and Chill.

The vitamin tabs are super-convenient, and cost is far-less than buying ready-to-drink vitamin-infused waters. Functional beverages are the hottest sector of the new age beverage category at present. Bevology's vitamin tabs puts a new twist on the sector, and for now they have very little if any competition.

The ready-to-drink tea category is one of the fastest-growing sectors in the overall beverage category. Berkeley, California-based Adagio Teas is introducing a line of all natural RTD teas that are made from tea leaves rather than concentrates.

There are five varieties in the tea-leaf-based line: Black, Green, Jasmine, White and Oolong tea. The teas contain no sugar or preservatives. They offer the taste of fresh-brewed leaf tea in a ready-to-drink offering.

The tea line should do well, especially with tea connoisseurs who generally avoid RTD teas because of the lack of quality taste.

Additionally, the all natural, preservative-free and sugar-free aspects of the tea line should appeal to the health conscious consumer. A premium tasting, all natural, healthy, ready-to-drink tea line hits three of the top consumer hot buttons for 2008. The tea drinks also come in 100% recyclable PET plastic bottles, adding a green element to the line's overall offering.

In the prepared foods category, importer Liberty Richter is introducing a line of frozen meal entrees and snacks from India. The prepared, frozen meals and snacks are called Kitchen's of India. Prepared ethnic foods are currently a hot and growing category. Further, there aren't many authentic, ready-to-heat Indian foods' lines on the market at present. If the entrees and desserts taste good and aren't overpriced, Liberty Richter could have a winner on their hands.

In the confection category, the world-famous Jelly Belly jelly bean candy company is introducing a dark chocolate-flavored jelly bean variety. The decadent jelly bean is made with real dark chocolate and cocoa powder.

Dark chocolate confections are the fastest growing sector in the category. Fueling this huge consumer growth is the combination of premium taste and the numerous scientific studies which show the positive health benefits of eating a moderate amount of dark chocolate. In creating the variety, Jelly Belly is combining the fun of jelly beans with the quality and healthy attributes of dark chocolate. Not a bad idea.

Another company, Shape Foods, is showing how the specialty or premium foods market and the natural and healthy foods markets are all converging. The company is introducing a line of premium, culinary-quality flax oils at the show.

The premium oils, made from flax seed which is full of health benefits, come in a pure flax oil variety and various blends: flax and sunflower oil, flax and olive oil, and flax, olive and sunflower oil triple blend. flax oil is high in omega-3 health benefits, and the combination of healthy goodness and premium quality in the cooking oil line is right on trend.

Ecofish, Inc., a specialty seafood company based in Dover, New Hampshire, is demonstrating the growing convergence between specialty and premium foods and natural, organic and sustainable ones. Ecofish is introducing multiple lines of sustainable seafood--canned, fresh, frozen and grab-n-go lines--at the Winter 2008 show.

Under their Henry's & Lisa's Natural Seafood brand, the company offers everything from salmon and mahi mahi, to scallops and natural shrimp--and so much more. They also offer a line of celebrity chef, value-added seafood entrees. Ecofish is combining quality seafood, premium taste and sustainability into a complete product and corporate package. There's nothing "fishy" at all about that.

At the show: Learning, networking and catching up

This year's fancy foods show in San Diego has an impressive lineup of educational seminars and sessions--ranging from marketing and finance, to meet-and-greets and classes with world-famous chefs.

Many manufacturers, retailers and others take advantage of at least some of these educational seminars and events. However, the real action at the fancy food shows is on the show floor, at the tables off to the side, and in the hotel bars and restaurants after hours.

On the show floor is where the networking happens--but only some of it. The shake of the hand begins the meet-and-great. Business cards get exchanged, commitments to follow-up with phone calls are made. Exhibitors pitch their lines to sometimes weary retail buyers, who've heard a similar pitch at each previous booth they visited.

Still, other exhibitors, especially representatives of the bigger and international companies, are more low-key. They know most buyers aren't likely to make a commitment on the show floor. And they're right--it is mostly about making an introduction and networking with retail buyers on the exhibit floor, which is as it should be.

Inside the show: On (and around) the exhibit floor

Much of the real networking--and potential deal making--happens on the perimeter of the show floor, at the various tables and benches that are usually scattered about there. This is where brokers take potential principles to discuss possibly taking on their lines.

It's also where company presidents take their marketing and sales people to discusss how the day is going so far. Further, it's where retail buyers often discuss an issue or two with key vendors--and even catch up with the competition. We like to view it as the food show version of the courtroom trial sidebar, where lawyers and the judge discuss matters outside the ears of the jury and courtroom spectators.

Outside the show: Where the smokers and cell-talkers go

Outside, in front of the convention center, is an interesting place as well. This is where the smokers go to have a cigarette or cigar. Where show attendees venture away from the exhibit hall to call their offices or customers on their cell phone. Cell phones don't often work inside the convention center. And even when they do, it can be difficult to have a good conversation amid the bustling noise on the show floor. It's also a likely place to meet someone you know--often a business associate, customer, or fellow food show traveler.

Outside the show: After hours

Not all the networking and deal-making is even done during show hours, on the exhibit floor, along its perimeter, or outside the hall in the smoking and cell phone zones however.

In fact, much of the quality networking and deal making is done after show hours. It's done over drinks in the various hotel bars. It's done over dinner--usually paid for by an exhibitor--at a three or even four star restaurant.

At times its even done at less classy places, like strip clubs (so we've heard) and out of the way watering holes, far away from the food show's main venues. in Just like the course of day-to-day business, where some of the best work gets done outside of the office, so it goes at the food shows.

Marketing and selling are relationship businesses in the main. And sometimes much of that relationship building--and thus marketing and selling--gets done outside of the 9 -to- 5 routine.

Working a food show is lots of work, especially as an exhibitor. One talks to so many people during the day it's hard to focus on any single person--even a key buyer. As such, it's often outside the food show--over drinks, at the dinner table, and at various other venues--where the real deals get done.