Fancy Food Show – Same Same but Different
The first major food/beverage trade show of the year, The Winter Fancy Food Show, rolled through Moscone Center in San Francisco a couple of weeks ago, attracting over 1,400 exhibitors and 25,000 visitors. After eating our way through the show and talking to countless entrepreneurs and a few large players, we are pleased to report that the mood on the floor concerning the food and beverage industry and its consumers was extremely positive and optimistic. MHT Partners hasattended the show for years, and every year it seems to grow both in terms of exhibitors and attendees. The general vibe was similar and the major trends were also familiar – same same but different – from recent years. A few trends that struck us:
The Sparkling Water Revolution
Sparkling water is one of the hottest consumer products in years. Among changing consumer preferences, new market entrants, private equity investments, and strategic acquisitions, sparkling water has the makings of a craft beer-type revolution. Americans, once heavy soda drinkers, have been looking to reduce sugar, calorie, and artificial sweetener intake. Enter a sugar free, calorie free, flavored sparkling water, which when consumed, has many of the desired taste features of a traditional soda. According to Nielsen, the sparkling water category has doubled over the past 4 years, growing from $961 million in the 52 weeks ending June 1, 2013 to $1.8 billion in the 52 weeks ending May 27, 2017.
Private Label Wine: More Than Just Two Buck Chuck
Private label consumer goods are usually easy to spot on the shelf and on our favorite ecommerce sites. Whether its Kirkland Signature® toilet paper, Safeway Select® ice cream, or AmazonBasics® batteries, the retailer name is front and center on the package and products are sold at a discount to national brands. Private label has long been a lucrative component of retailers’ strategies, primarily due to the needs of value-driven consumers and higher profit margins for retailers generated by private label sales. In the beer, wine, and spirits categories, however, only a few retailers have been emboldened enough to use their private label or “house brand” on the label. Costco, the largest domestic wine retailer, is the clear outlier in all three categories. The leading club retailer relies on a network of well-known wineries, breweries, and distillers to produce premium beverages sold at competitive (yet not rock bottom) prices, and loyal Costco consumers don’t seem to care that each label proudly displays the Kirkland logo. Trader Joe’s takes a similar tact in beer and spirits, albeit with craftier, whimsical labels such as Trader Jose Mexican Style Lager. In the wine aisle, Trader Joe’s largely relies on a different strategy, whereby consumers shop dozens of brands across varietals and price segments that appear to be national brands but actually represent the 474-store chain’s “retail exclusive” wine assortment.
Pills for Pooches
Like other facets of the pet industry, the pet pharmacy space has mimicked its human counterpart, the human pharmacy space. More specifically, the pet pharmacy space is a large, dynamic and evolving industry.
The Shifting Terrain for Outdoor & Enthusiast Retail
Walking the floor of the Outdoor Retailer (“OR”) conference in Salt Lake City this summer, we were struck by an odd mixture of moods. On one hand, demand for outdoor products remains strong, feeding the growing $120 billion U.S. market. On the other hand, a pallor seemed to hang over the event. These are good times, but an air of uncertainty crept into many of our conversations at the show. Consumers want these goods, are willing to pay for quality, and the show’s participants are happy to supply them, but the issue of how products get from OEMs into end-users’ hands remains very much in question.
Two Worlds Collide (in a good way)!
A theme we like a lot, and have had good experience with, is the intersection of healthcare services and consumer. Why?
The Battle for Food Convenience
Today’s food and beverage landscape demands convenience, expediency, and cost-efficiency, each of which seems to constantly inspire new technologies, innovative brands, and exciting trends. In the ongoing battle for food convenience, two trends currently rise to the top: (i) grocerants and (ii) meal-kit delivery services. First, a grocerant (a phrase which, not surprisingly, combines the words “grocery” and “restaurant”) is a supermarket that sells prepared meals to consume onsite or take home. They are an extension of what’s known in the grocery circle as a service deli, the manned counters offering build-your-own sandwiches, salads, pastas, baked goods, and rotisserie chickens. Grocerants take the service deli concept to the next level by providing sit-down service and full bars. They are identified as a freestanding restaurant that is either adjacent to or within the supermarket. For many, Whole Foods serves as an appropriate paradigm for the term grocerant, where oftentimes you will see people who come to Whole Foods solely to dine in, sans shopping lists and carts. This is not to be confused with the Whole Foods’ locations that offer salad bars, hot food, and casual dining spaces, a concept that has been core to Whole Foods for many years. According to the NPD Group, in-store dining and take-out of prepared foods from U.S. grocerants has grown nearly 30% since 2008, and accounted for 2.4 billion new visits and over $10 billion in consumer spending in 2016.
Hunting on the Upswing
“If it’s brown, it’s down!” used to carry a fairly “Hatfield and McCoy” / “Jed Clampett” feel, and growing up in Northern New England, the sight of a whitetail deer in the back of a pickup was a pretty common scene come November. Having lived in large, coastal cities for the past couple of decades, I’ve not witnessed much of that, but a closer look at the sport and hunting industry reveals a vibrant arena. The U.S. hunting industry grew from $23.3 billion in 2012 to approximately $27.4 billion in 2017.
Probiotics: A Growing Variety of Healthy Gut Punches
By now, even the non-foodie, non-health nut crowd has heard of probiotics and some of the confusing new terms like “gut health” and “friendly bacteria.” In a nut shell, nutritionists have realized that over the past 100 years, the packaged food and beverage industries became experts at processing, which helps shelf life and reduces food waste. Refrigeration also become a key component of our elongated farm-to-factory-to-table supply chain. Unfortunately, many of the elements being stripped out of our foods and beverages as a result of the evolution of food processing and storage have numerous health benefits, including improved digestion and an improved immune system. Countering this probiotic deficiency means loading up on probiotic products chock full of impossible-to-pronounce friendly bacterium, such as “lactobacillus acidophilus” and “streptococcus thermophiles.” Early informed consumers simply looked for labels with “probiotic” on the front, but it was slim pickins.