INDUSTRY SPECIALTY FOOD THE STATE OF THE SPECIAL REPORT: GROUNDBREAKING STATISTICS OF THE SPECIALTY FOOD MARKETPLACE

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1 S ALES GROWTH OR DECLINE FOR SPECIALTY FOODS & MAINSTREAM FOODS THE STATE OF THE SPECIALTY FOOD RETAILER SPECIAL REPORT: GROUNDBREAKING STATISTICS OF THE SPECIALTY FOOD MARKETPLACE THE STATE OF THE SPECIALTY FOOD INDUSTRY 2005 SPECIALTY 42 FOOD MAGAZINE FOOD PRODUCT INTRODUCTIONS SALES BY PRODUCT CATEGORY SIZE OF THE SPECIALTY FOOD MARKET TOTAL U.S. RETAIL UNIT SALES SALES BY RETAIL CHANNEL

2 THE STATE OF THE SPECIALTY FOOD INDUSTRY 2005 ABOUT THE RESEARCH The NASFT State of the Specialty Food Industry is a joint research project prepared by Mintel International Group and SPINS. The research encompasses three years of sales data ( ) for 28 specialty food segments, pulled from the SPINS database of mainstream and natural food stores. In addition, Mintel surveyed 309 specialty food manufacturers, importers, distributors and brokers, plus 420 specialty food retailers to develop the statistics presented in this report. The State of the Specialty Food Industry BY RON TANNER Specialty Food Magazine and the National Association for the Specialty Food Trade, Inc., present this comprehensive report on the State of the Specialty Food Industry. Working with two research powerhouses Mintel International Group and SPINS Specialty Food Magazine has compiled definitive data on where the industry has been for the past three years, where it is today, and the factors that will affect its growth in the future. Here are some of the highlights: Sales of specialty foods at retail were $24.7 billion in Sales of specialty food increased 16% between 2002 and Beverages, which includes soda, juices and functional beverages, was the fastest-growing specialty segment, up 39.1% between 2002 and ,311 specialty food products were introduced in 2004, with beverages recording the most new product introductions, eclipsing sauces and seasonings. The median annual sales of specialty food manufacturers is $1 million. 12.5% of importers bring in foods from Asia. The median number of SKUs produced by specialty food manufacturers is % of distributors carry more than 5,000 SKUs. The median number of stores serviced by specialty food brokers is 450. Specialty food stores account for 23.3% of specialty food sales. Supermarkets represent 66.9% of specialty food sales. Sales of specialty foods through natural food stores has increased 36.7% between 2002 and The average transaction size for specialty food stores is $30, up from $25 in % of products sold in specialty food stores are purchased direct. Labor, as a percent of sales within specialty food stores, is 17% SPECIALTY FOOD MAGAZINE

3 The Size of the Specialty Food Market at Retail The market size for the specialty food industry has been determined as follows. SPINS and ACNielsen provided three-year scanner sales data for food, drug and mass merchandisers (FDM) and natural supermarkets for sales in 28 segments. To reach the grand total, Mintel added estimated sales of products not collected by scanner data, including bakery, meat, prepared foods and other PLU items. Mintel also estimated Trader Joe s and specialty food store sales, neither of which was included in the original data. TOTAL U.S. RETAIL DOLLAR SALES OF SPECIALTY FOODS Year Sales at current prices Sales at constant 2003 prices** $ million Index % change $ million Index % change , , , , , , * Does not include sales through Wal-Mart ** Adjusted for inflation using the all items CPI Source: Mintel/SPINS/ACNielsen Sales of specialty foods increased 16% between 2002 and 2004, or 10% after adjusting for inflation. Rising sales are the result of increasing consumer interest in specialty foods. Segments that have been especially strong include: condiments; sauces and seasonings; cheese; milk, eggs and other dairy products; and beverages. TOTAL U.S. RETAIL DOLLAR SALES AT CURRENT PRICES ,340 22,856 24,707 $ Millions * Does not include sales through Wal-Mart Source: Mintel/SPINS/ACNielsen Editor s Note: These figures do not include specialty foods that are sold to restaurants, caterers and other foodservice establishments. SALES OF SPECIALTY FOOD BY RETAIL CHANNEL $million % of sales $million % of sales $million % of sales % change Mainstream 10, , , Specialty food stores 3, , , Natural food stores 1, , , Total 15, , , Source: Mintel/SPINS/ACNielsen Sales of specialty foods through all three channels have grown between 2002 and 2004 as consumers expand their food horizons. Sales through natural food stores are growing at the fastest pace, jumping nearly 37% between 2002 and Editor s Note: The total size of the U.S. specialty food market and the sales figures presented above are different because they do not include PLU items, such as cheese, prepared foods, meat/seafood, bread, etc. Mintel estimates that these products account for approximately 38% of specialty food sales. APRIL

4 Specialty Food Product Introductions NEW SPECIALTY FOOD PRODUCT LAUNCHES IN THE U.S., Category % change Beverages , Sauces and Seasonings Bakery Confectionery Snacks Spreads Pet Food ,160.0 Desserts and Ice Cream Dairy Processed Fish, Meat and Egg Products Meals and Meal Centers Fruit and Vegetables Side Dishes Soups Weight Control Breakfast Cereals Baby Food ,000.0 Sweeteners and Sugar Total 4,263 4,954 5,119 5,293 5, Source: Mintel/GNPD The single most active category for new products since 2000 has been sauces and seasonings, a mainstay for the specialty food industry. However, rollouts of sauces and seasonings have been declining for several years, as the category becomes saturated. Beverages emerged as the leader in 2004, with 1,020 new product introductions. Other categories that showed strong growth include bakery; confectionery; snacks; desserts and ice cream, and meals and meal centers. 20 SPECIALTY FOOD MAGAZINE

5 Market Segments For this report, the specialty food market has been divided into 28 segments. Detailed definitions are listed below. Dollar and unit sales follow by category on pages ASIAN FOODS: Highly specialized and commonly used Asian foods such as sea vegetables and umeboshi plums, with the exception of soy sauce, which is in the condiments category. Includes brands such as Eden Foods and Yammamoto. BAKING MIXES, SUPPLIES AND FLOURS: All gourmet, ethnic and natural brands. Includes brands such as Arrowhead Mills, Bob s Red Mill Foods, Dassant, Ghirardelli, Hodgson Mills, Martha White and Stonewall Kitchen. BEANS, GRAINS AND RICE: Gourmet and ethnic rice, rice mixes, couscous, beans and grains. Includes brands such as Dean & DeLuca, Fantastic Foods, Lundberg, Near East and Rice Select. BREAD AND BAKED GOODS: Artisan breads, baked goods, scones and muffins; primarily fresh. Tortillas and bagels are excluded. CANDY AND INDIVIDUAL SNACKS: Gourmet and ethnic candy and gourmet jerky items. Includes brands such as Brown & Haley, Chukar, Ghirardelli, Jelly Belly, Lake Champlain, Lindt, Newman s Own Organics, Panda, Perugina and Tropical Source. CHEESE: Gourmet and ethnic cheeses, including organic natural brands. Cheese alternatives (i.e., soy) are not included. Mainstream brands of mozzarella, Parmesan, etc. are not included. CHIPS, PRETZELS AND INDIVIDUAL SNACKS: Gourmet and ethnic items, regional chips and popcorn. Also includes limited selection of natural brands with strong gourmet identification such as Kettle Chips, Terra Chips, and Newman s Own Organics. Includes brands such as Black Jewel, Boston Popcorn, Chile Today Hot Tamale, San Francisco Popcorn Company and Tim s Cascade. COFFEE AND COCOA: Gourmet, natural and ethnic coffee and cocoa; excludes ready to drink. Includes brands such as Green Mountain and Lavazza. COLD AND HOT CEREALS: Gourmet and ethnic items. Includes brands such as Alpen, Familia, Grainfields and Kashi. COOKIES AND SNACK BARS: Gourmet and ethnic items; energy bars are excluded. Includes brands such as Aunt Gussies, Bahlsen, La Tempesta and Walkers. CONDIMENTS: Mustard, mayonnaise, ketchup, olives, marinades, soy sauces, pickled vegetables and barbecue sauces. Includes brands such as Annie s Naturals, A Taste of Thai, Brianna s, Cardini, Haddon House, House of Tsang, Maple Grove Farms and Santa Barbara Olives. CONSERVES, JAMS AND NUT BUTTERS: Gourmet and ethnic items. Includes brands such as American Spoon, Bionaturae, Bonne Maman, Clearbrook Farms, Robertson s and St. Dalfour. CRACKERS AND CRISPBREADS: Gourmet and ethnic items. Includes limited crossover natural items. Also includes brands such as Bremner Wafers, Carrs, Just Off Melrose, Partners, Starr Ridge and Venus. FROZEN DESSERTS: Regional gourmet ice creams, all gelato, Italian ices, plus high-end specialty frozen desserts. Includes brands such as Ciao Bella, Out of A Flower and Seattle Sorbet. FROZEN FRUITS AND VEGETABLES: Limited selection of organic and premium brands. Includes brands such as Alexia Foods, Cascadian Farm, SeaPoint, Stahlbush and Tree of Life. FROZEN/REFRIGERATED PIZZA, PASTA, SOUP AND CONVENIENCE FOOD: Includes hors d oeuvres; no entrées. Includes brands such as American Flatbread, Cafferrata, Health is Wealth, Kettle Cuisine, Ling Ling and Nancys. HONEY, SYRUP AND OTHER SPECIALTY SWEETENERS: All pure maple syrups. All honey excluding Sue Bee and other mainstream brands. Includes brands such as Billingtons, Comvita, Shady Maple, Spring Tree and Tate & Lyle. MILK, EGGS AND OTHER DAIRY: Includes yogurt and kefir. Also includes organic, sheep, goat and all milk packaged in glass bottles only. Eggs includes organic, and items such as free-range and Omega 3-enhanced products. Other dairy includes European and organic butters, imported and premium ricotta cheese and crème fraîche. Includes brands such as Emmi and Stonyfield Farms. NUTS, SEEDS, DRIED FRUITS & TRAIL MIXES: Organic and natural brands. Excludes mixes made with artificial ingredients or MSG. OILS: Olive oil, flavored oil, and sesame oil. Includes brands such as Alessi, B.R. Cohn, Colavita, Ka-Me, Spectrum and World Cuisine. PUDDINGS AND OTHER DESSERTS: Gourmet and ethnic brands. Includes syrups and toppings such as Knorr, Da Vinci and Torani. SEASONINGS: Spices, spice mixes (foil packets), baking flavors, salt. Includes brands such as Colemans, Magic Seasoning Blends, Morton & Bassett, Spice Hunter and Zatarians. SHELF-STABLE ENTREES AND MIXES: Grain-based rice and couscous mixes, tabouleh and pasta dishes such as Thai Kitchen items. Includes brands such as Ashoka, Bean Cuisine, Near East, Nile Spice and San Gennaro. SHELF-STABLE FRUITS, VEGETABLES AND BEANS: Gourmet, ethnic and natural canned vegetables, beans and fruit. Includes brands such as Cento, Eden Foods, Gourmet Award, Haddon House, Just Tomatoes, Muir Glen, Pomi, Reese and Ty Ling. SHELF-STABLE PASTA: Imported and domestic pastas, gourmet ethnic and natural items. Includes brands such as Al Dente, Da Vinci, DeCecco, Eden Foods, Ferrara, Raccontto and Roland. SHELF-STABLE AND REFRIGERATED SAUCES, SALSAS AND DIPS: Pasta sauce, salsas, dips, hummus and baba gannoush. Includes brands such as Cedars, Monterey Pasta, Native Foods and Tribe of Two Sheiks. SODAS AND JUICES: Gourmet, ethnic and natural sodas and juices, shelf stable and refrigerated. Includes brands such as After the Fall, Jones, Kogee, Steaz and Tazo. SOUPS: Ready-to-serve, soup cups, soup mixes and instant soups. Also includes miso, bouillon and ramen-type items. Includes brands such as Annie Chun, Baxter s, Dominiques, Knorr and Souperior Bean. TEAS: Includes gourmet, ethnic and all-natural brands, plus premium and exotic varieties of packaged teas. Also includes specific imported varietals, such as assam, oolong and gunpowder green. WATER: Premium brands as well as functional and enhanced waters that do no contain artificial ingredients. APRIL

6 Dollar Sales of Specialty Foods SALES OF SPECIALTY FOODS BY PRODUCT CATEGORY, 2002 & 2004 Change $ million % $ million % % Sodas, Juices and Functional Beverages 1, , Condiments 1, , Milk, Eggs, Yogurt and Other Dairy 1, , Cheese Coffee and Cocoa Shelf-Stable and Refrigerated Sauces, Salsas and Dips Chips, Pretzels and Snacks Teas Candy and Individual Snacks Cookies and Snack Bars Oils Seasonings Cold and Hot Cereals Shelf-Stable Pastas Soups Frozen/Refrigerated Pizzas, Pastas, Soups and Convenience Foods Crackers, Crispbreads and Rice Cakes Shelf-Stable and Frozen Fruits and Vegetables Baking Mixes, Supplies and Flours Frozen and Shelf-Stable Desserts and Puddings Entrées and Mixes Water Nuts, Seeds, Dried Fruits and Trail Mixes Beans, Grains and Rice Sweeteners Conserves, Jams and Nut Butters Asian Foods Bread and Baked Goods (Frozen and Non-Frozen) Total* 15, , * Does not include sales through Wal-Mart, Trader Joe s or PLU sales Data may not equal totals due to rounding Source: Mintel/SPINS/ACNielsen Editor s Note: The total size of the U.S. specialty food market and the figures presented above are different because the Market Segmentation data does not include PLU items, such as prepared foods, meat/seafood, bread, etc. Mintel estimates that these products account for approximately 38% of specialty food sales. Beverages comprise the largest segment of the overall specialty food market, followed by condiments. Interestingly, four of the five segments that grew the fastest are also the biggest sellers beverages; condiments; milk, eggs, yogurt and other dairy; and cheese. The other fast-growth segment is nuts, seeds, dried fruits and trail mixes. 22 SPECIALTY FOOD MAGAZINE

7 Dollar Sales of All Foods SALES OF ALL FOODS BY PRODUCT CATEGORY, 2002 & 2004 Change $ million % $ million % % Sodas, Juices and Functional Beverages 35, , Condiments 4, , Milk, Eggs, Yogurt and Other Dairy 23, , Cheese 10, , Coffee and Cocoa 3, , Shelf-Stable and Refrigerated Sauces, Salsas and Dips 5, , Chips, Pretzels and Snacks 21, , Teas 2, , Candy and Individual Snacks 26, , Cookies and Snack Bars 7, , Oils 3, , Seasonings 2, , Cold and Hot Cereals 9, , Shelf-Stable Pastas 3, , Soups 4, , Frozen/Refrigerated Pizzas, Pastas, Soups and Convenience Foods 10, , Crackers, Crispbreads and Rice Cakes 4, , Shelf-Stable and Frozen Fruits and Vegetables 6, , Baking Mixes, Supplies and Flours 1, , Frozen and Shelf-Stable Desserts and Puddings 10, , Entrées and Mixes 3, , Water 7, , Nuts, Seeds, Dried Fruits and Trail Mixes 3, , Beans, Grains and Rice 2, , Sweeteners Conserves, Jams and Nut Butters Asian Foods 1, , Bread and Baked Goods (Frozen and Non-Frozen) 15, , Total* 234, , * Does not include sales through Wal-Mart, Trader Joe s or PLU sales Source: Mintel/SPINS/ACNielsen Specialty foods are growing at a rate more than double that of mass-market products 17.9% for specialty foods versus 7.7% for all foods. There is strong variance in percentage of the market within many categories; for instance, bread and baked goods represent 6.7% of total dollar sales yet a miniscule 0.2% of specialty food sales, probably because bread is bought from local purveyors or prepared in-store. In contrast, condiments represent 9.8% of specialty food sales, yet an anemic 2.0% of total food sales. APRIL

8 Unit Sales of Specialty Foods UNIT SALES OF SPECIALTY FOODS BY PRODUCT CATEGORY, Change Units Units Units (million) (million) (million) % Sodas, Juices and Functional Beverages Condiments Milk, Eggs, Yogurt and Other Dairy Cheese Coffee and Cocoa Shelf-Stable and Refrigerated Sauces, Salsas and Dips Chips, Pretzels and Snacks Teas Candy and Individual Snacks Cookies and Snack Bars Oils Seasonings Cold and Hot Cereals Shelf-Stable Pastas Soups Frozen/Refrigerated, Pizzas, Pastas, Soups and Convenience Foods Crackers, Crispbreads and Rice Cakes Shelf-Stable and Frozen Fruits and Vegetables Baking Mixes, Supplies and Flours Frozen and Shelf-Stable Desserts and Puddings Entrées and Mixes Water Nuts, Seeds, Dried Fruits and Trail Mixes Beans, Grains and Rice Sweeteners Conserves, Jams and Nut Butters Asian Foods Bread and Baked Goods (Frozen and Non-Frozen) Total* 6,061 6,804 6, Data may not equal totals due to rounding Source: Mintel/SPINS/ACNielsen Unit sales show an overall increase of 8.5% between 2002 and 2004, but dropped slightly in 2004, especially in pasta, desserts and puddings, sweeteners and other categories hurt by the low-carb craze. Unit sales within these categories should rebound in Rising prices of imported products due to the weak dollar contributed to the discrepancy between dollar sales increases and unit movement. 24 SPECIALTY FOOD MAGAZINE

9 Sales Growth or Decline for Specialty Foods and Mainstream Foods by Product Category Soda, Juices and Functional Beverages 13.9% 39.1% Condiments 8.4% 26% Milk, Eggs, Yogurt and Other Dairy 8.7% 37% Cheese 19.5% 29.1% Coffee and Cocoa Shelf-Stable and Refrigerated Sauces, Salsas, and Dips 5.4% 7.0% 20.6% 21.3% Chips, Pretzels and Snacks Teas 7.9% 7.1% 6.6% 15% Candy and Individual Snacks 1.3% 9.6% Cookies and Snack Bars 4.1% 16.5% Oils 8.1% 13.3% Seasonings 2.6% 12.8% Cold and Hot Cereals.7% 23.4% Shelf-Stable Pastas Soups 3.2% 3.3% 2.1% 3.4% Frozen/Refrigerated Pizzas, Pastas, Soups and Convenience Foods -0.8% 7.3% Crackers, Crispbreads and Rice Cakes 5.4% 9.2% Shelf-Stable and Frozen Fruits and Vegetables Baking Mixes, Supplies and Flours 5.6% 6.7% 5.0% 16.3% Frozen and Shelf-Stable Desserts and Puddings Entrées and Mixes 2.6% 1.2% 4.6% 10.1% Water 15.3% 19.4% Nuts, Seeds, Dried Fruits and Trail Mixes 15.6% 25.4% Beans, Grains and Rice 6.1% 18.1% Sweeteners 7.3% 11.5% Conserves, Jams and Nut Butters 1.8% 10.9% KEY Specialty Foods Bread and Baked Goods (Frozen & Non Frozen) -20.8% Asian Foods 5.4% 7.8% 10.6% Mainstream Foods * Does not include sales through Wal-Mart, Trader Joe s or PLU sales Source: Mintel/SPINS/ACNielsen In all but six of the 28 segments, sales growth of specialty SKUs top those of all SKUs. Specialty foods are broadly selling at a quicker pace than food products in general. APRIL

10 The Specialty Food Supply Chain Manufacturers, importers, distributors and brokers all help move specialty food products to the retail environment and into the homes of consumers. MEDIAN ANNUAL SALES BY SUPPLIER, 2004 Manufacturers $1,000,000 Importers $1,000,000 Specialty foods come from a diverse group of suppliers, ranging from small domestic manufacturers with a handful of products to billion-dollar distributors with tens of thousands of specialty food products. Distributors $6,000,000 (mean) Brokers $3,250,000 Source: Mintel/TechnoMetrica 0 1M 2M 3M 4M 5M 6M Median annual sales $ Distributors and brokers typically represent multiple manufacturers and thus carry significantly more SKUs than manufacturers or importers. Manufacturers carry significantly fewer SKUs than importers, who typically bring in multiple lines of products. SKUs BY TYPE OF SUPPLIER Mean Number of SKUs Manufacturers 75 Importers 218 Distributors 3,242 Brokers 4,169

11 Specialty Food Manufacturers Specialty Food Manufacturer Median Sales: $1 million SALES OF SPECIALTY FOOD MANUFACTURERS Average annual sales Under $50, % $50,000 -$200,000 $200,000 -$750,000 $750,000 - $3,000, % $3,000,000 - $10,000, % $10,000, % % of manufacturers 19.4% 19.9% Specialty food manufacturers tend to be small entrepreneurial businesses. Nearly 8% of respondents had miniscule sales under $50,000 and seven of ten manufacturers have sales of less than $3 million. SKUs OF SPECIALTY FOOD MANUFACTURERS Number of SKUs % 10 or fewer or more 16.8 Manufacturers in the specialty food trade appear to divide neatly into fifths, based on the number of SKUs produced. 35% of manufacturers make in excess of 50 SKUs, and 20% manufacture a limited line of fewer than ten products. SALES OF SPECIALTY FOOD IMPORTERS Average annual sales Under $100, % $100,000 - $500,000 $500,000 - $1,000,000 $1,000,000 - $4,000, % 23.5% 26.5% $4,000,000 - $10,000, % Over $10, % % of importers Many specialty food importers are medium sized; 50% do annual sales between $500,000 and $4 million. Only 5.9% do in excess of $10 million. The size of specialty food importers roughly mirrors that of specialty food manufacturers. Specialty Food Importers Specialty Food Importer Median Sales: $1 million SKUs OF SPECIALTY FOOD IMPORTERS Number of SKUs % 10 or fewer About 40% of importers carry 50 or fewer SKUs, reflecting the fact that many bring in limited lines, usually from one country. The 25% of importers that stock more than 201 SKUs average 672 items. GEOGRAPHIC SOURCE OF IMPORTS Region % of importers Europe 80.0 Asia 12.5 South America 10.0 Africa 10.0 North America 5.0 Other 7.5 Four of five importers obtain specialty food products from Europe, reflecting a long tradition in the industry. Imports from Asia, South America and Africa are growing as American consumers desire foods from these regions. Source: Mintel/TechnoMetrica Total is greater than 100% due to multiple regions APRIL

12 Specialty Food Distributors Specialty Food Distributor Mean Sales: $6 million SPECIALTY FOOD DISTRIBUTOR SALES Average annual sales Under $500, % $501,000 - $3,000,000 $3,000,000 - $10,000,000 $10 million % % of distributors 16.7% 27.8% Although the multi-billion-dollar distributors dominate in specialty foods, there is still a robust group of small distributors. Nearly 45% of respondents report their distribution business at less than $500,000; most of these distributors service a single metropolitan region with a limited selection of specialty foods. SKUs OF SPECIALTY FOOD DISTRIBUTORS Number of SKUs % 100 or fewer , ,001-4, , The mean number of SKUs carried by specialty food distributors is 1,249, suggesting that the distribution network for specialty food is extremely robust. THE CUSTOMERS OF SPECIALTY FOOD DISTRIBUTORS 1,500+ customers 5% 501-1,499 Customers 35% 50 and under Customers 10% Customers 20% CUSTOMERS OF SPECIALTY FOOD DISTRIBUTORS BY RETAIL CHANNEL Delis 2% Foodservice/ Restaurants 5% Gift Stores 10% Other 10% Specialty Food Stores 35% Customers 30% Natural Food Stores 10% Supermarkets 25% Most distributors work with extensive chains and/or service stores in highly saturated market areas. Forty percent of distributors service more than 500 stores. Distributors sell their specialty food products through multiple channels, primarily specialty food stores and supermarkets, followed in importance by natural food stores, gift stores and other stores. The distributors that service specialty food stores are significantly smaller in sales than those that sell to supermarkets and natural food stores. 28 SPECIALTY FOOD MAGAZINE

13 Specialty Food Brokers Specialty Food Broker Median Sales: $3.25 million SALES OF SPECIALTY FOOD BROKERS Average annual sales Under $500, % $500,000 - $2,000, % $2,000,000 - $5,000, % Over $5,000, % of brokers A wide range of brokers service the specialty food industry. While one-quarter report annual sales under $500,000, more than 31% boast sales in excess of $5 million. 31.2% SKUs OF SPECIALTY FOOD BROKERS NUMBER OF STORES SERVICED BY SPECIALTY FOOD BROKERS 2,001-5, % Over 5, % 500 or fewer 10.5 % 1,001-2, % 501-1, % 501-2,000 Stores 26.3 % 2,000+ Stores 15.8% Under 100 Stores 21.1 % Stores 36.8% The median number of products handled per broker is 1,500, allowing this trade segment to well-represent the manufacturers and importers whose products and product lines they sell. The median number of stores serviced by brokers in 2004 was 450, a manageable amount. More than 15% of brokers are on the large side, calling on more than 2,000 stores. APRIL

14 Specialty Food Retail Operating Statistics SPECIALTY FOOD SALES THROUGH SUPERMARKETS Sales at current prices* Year $ million Index % change , , , *Does not include sales through Wal-Mart **Adjusted for inflation using the all items CPI Sales of specialty foods through supermarkets and other mainstream stores increased 15% between 2002 and Some mainstream stores have significantly increased their selection of specialty foods to meet consumer demands. An example of a specialty growth area includes kosher products, which are offered by some 10% or more of specialty manufacturers. Sales of specialty foods through specialty food stores increased 20% between 2002 and The growth of the category is enticing more small stores carrying specialty items to appear in the urban and suburban landscape. SPECIALTY FOOD SALES THROUGH SPECIALTY FOOD STORES Sales at current prices* Year $ million Index % change , , , Source: Mintel/SPINS/ACNielsen SPECIALTY FOOD SALES THROUGH NATURAL FOOD STORES Sales at current prices* Year $ million Index % change , , , *Adjusted for inflation using the all items CPI Source: Mintel/SPINS/ACNielsen Sales of specialty foods through natural food stores increased an impressive 37% between 2002 and 2004, by far the most significant jump by retail format. The line between natural food stores and specialty food stores is fuzzy, and will become even blurrier as natural food markets add highmargin specialty offerings. 30 SPECIALTY FOOD MAGAZINE

15 Specialty Food Retail Operating Statistics Specialty Food Store Annual Average Sales: $2.69 million Annual Sales Per Square Foot: $ Weekly Sales Per Square Foot: $7.37 SPECIALTY FOOD STORE TRANSACTIONS Transactions per week 2004 Fewer than , , The broad range of weekly transactions from fewer than 100 to more than 5,000 again illustrates the diverse subsegments of the specialty food retailing industry. SKUs CARRIED BY SPECIALTY FOOD STORES Number of SKUs or fewer , , Specialty food stores range from small mom-and-pop operations, to massive markets with thousands of SKUs. This diversity is reflected in the number of SKUs carried, with one-fifth carrying fewer than 100 and almost one-third stocking in excess of 2,000. SPECIALTY FOOD STORE TRANSACTION SIZE Estimated average transaction size % of % of $ transactions transactions Up to $ $ $ $ $ Median transaction size $25.00 $30.00 Mean transaction size $33.10 $44.70 In general, retailers estimate that they made significantly fewer transactions under $20 in 2004 compared to Increased estimates of large sales ($51+) rose to nearly one quarter of all transactions, helping pull the mean up 35% over the median. It appears that the consumer was purchasing significantly more at specialty food stores in 2004 than 2003, possibly reflecting a healthier economy. Editor s Note: Survey respondents were asked to compare 2003 and 2004 sales in the survey that was fielded in February 2005, creating comparable transaction statistics. Produce 4.6% PERCENTAGE OF SALES BY DEPARTMENT Other 18.4% Specialty Grocery 23.1% Specialty grocery is the most important department, but still represents less than one-quarter of sales. Non-food is the second most significant section, followed closely by wine and other alcoholic beverages and deli and prepared foods. Meat and Seafood 5.6% Cheese 6.8% Non-Food 12.8% Bakery 6.8% Deli and Prepared Foods 10.1% Wine and Other Alcoholic Beverages 11.8% APRIL

16 Specialty Food Store Labor Statistics Labor as a percent of sales: 17% Average staff turnover: 11.2% FULL-TIME STAFF IN SPECIALTY FOOD STORES 6-25 Full-Time Employees 17.1% 26+ Full-Time Employees 17.1% 2-5 Full-Time Employees 34.7% 0-1 Full-Time Employees 31.9% PART-TIME STAFF IN SPECIALTY FOOD STORES 6-25 Part-Time Employees 27.1% 26+ Part-Time Employees 11.9% 2-5 Part-Time Employees 32.6% 0-1 Part-Time Employees 28.4% STAFF TURNOVER AT SPECIALTY FOOD STORES 26%+ of Staff Replaced Annually 14.3% 11-25% of Staff Replaced Annually 17.2% 1-10% of Staff Replaced Annually 28.6% None of Staff Replaced Annually 38.9% Source: Mintel/TechnoMetrica Source: Mintel/TechnoMetrica Employment figures support the fact that many specialty food retailers are smaller operations 31.9% had only 1 (or no) full-time staff in 2004, suggesting that they are family operations. Although part-time employees are an important part of the labor picture, full-time staff are more common than at non-food retailers. The retail specialty food industry is characterized by a surprisingly low turnover rate. More than two-thirds report 0-10% turnover in an average year. SOURCES OF NEW FOOD PRODUCTS 2004 Fancy Food Shows 96.4 Trade magazines 80.6 Customer recommendations 59.7 Presentations at your store 36.5 Other trade shows 28.1 Other 15.6 Multiple answers accepted Source: Mintel/TechnoMetrica Nearly all retailers find new items at trade shows, and a large majority does so in trade magazines. Customer recommendations are important, mentioned by nearly 60% of respondents. SPECIALTY FOOD STORE PURCHASING METHOD 2004 % (mean) Through distributors 53.1 Direct purchases 50.5 * The separately asked questions means that figures may not sum to 100 Source: Mintel/TechnoMetrica Roughly half of all purchases by retailers come through distributors, while the other half are derived by direct contact with manufacturers or importers. Clearly, the role of distributors is an active one. Ron Tanner is editor of Specialty Food Magazine For further information and free contents pages on the 125-page NASFT State of the Specialty Food Industry Report 2005, please contact Greg Truckenmiller at or at info@mintel.com. NASFT members are entitled to a 40% discount on the purchase of this report. Please quote NASFT to be eligible for this special offer. 32 SPECIALTY FOOD MAGAZINE