U.S. SPECIALTY FOOD INDUSTRY - Business Sweden FOR INTERNAL USE WITHIN CLIENT COMPANY ONLY U.S....
Transcript of U.S. SPECIALTY FOOD INDUSTRY - Business Sweden FOR INTERNAL USE WITHIN CLIENT COMPANY ONLY U.S....
CONFIDENTIAL
FOR INTERNAL USE WITHIN CLIENT COMPANY ONLY
U.S. SPECIALTY FOOD
INDUSTRY
PRE-STUDY
Business Sweden in the USA
August 2016
Market characteristics
Market size and growth and online sales
Geographic focus
Food trends
Sales and distribution
Competitors
Regulatory landscape
Trade shows and events
Conclusions and recommendations
BUSINESS SWEDEN 15 NOVEMBER, 2016 2
AGENDA
BUSINESS SWEDEN 15 NOVEMBER, 2016 3
SPECIALTY FOODS CAN BE DIVIDED INTO VARIOUS
CATEGORIES, ALL REGULATED DIFFERENTLY
SOURCE: USDA, FDA, MINTEL, GOURMETFOODS, SPECIALTY FOOD ASSOCIATION
DEFINITIONS MAY AT TIMES BE VAGUE AND CAN ALSO VARY OVER TIME AND SHOULD THEREFORE BE OBSERVED
Organic Produced without using most conventional pesticides. Before a product can be labeled "organic," a certifier inspects the farm to make sure rules necessary to
meet USDA organic standards are followed
Natural There is no set definition for the use of the term natural or its derivatives. The FDA is not opposed to using the term as long as the food does not
contain added color or artificial flavor
Ethnic Ethnic foods is a term for foods pertaining characteristics of a people,
especially a group (ethnic group) sharing a common and distinctive culture, religion, language, or similar
Local Commonly, local food refers to food produced physically close to the
consumer. There is no universal definition for the geographic vicinity of "local"
Fresh “Fresh” means that the food is in its raw state and has not been frozen or
subjected to any thermal processing or preservation
Better-For-You
(BFY)
BFY foods are low in salt and sugar, high in fiber or with added vitamins, for example. BFY foods are not necessarily healthy foods but are considered to
be a better alternative than a generic brand
Free-From Free-from foods have been designed to exclude ingredients to which some consumers are allergic or intolerant. Examples are foods free from gluten,
lactose, nuts and eggs
SPECIALTY FOODS
ANNUAL SPECIALTY FOOD SALES , BUSD SPECIALTY RETAILING ACCOUNTS FOR 1/3 OF SALES
Total dollar sales of specialty foods grew by 22 percent between 2013 and 2015 while unit sales grew by 14 percent
In 2014, specialty food consumers spent 32 percent of their food dollars on specialty foods
The fastest growing retail channel for specialty foods has been natural retailers while the slowest growing ones have been conventional supermarkets and department stores
Demand for organic foods has been a constant trend since the late 1990s and has recently shown substantial growth reaching sales figures of 39 BUSD in 2014, or 4 percent of food sales, from just over 10 BUSD in 2004
50 percent more households bought more organic products in 2015 than in 2014
The typical specialty food consumer is 25-44 years old, has a household income of 75,000+ USD per year and lives on the West or East Coast of the U.S.
15 NOVEMBER, 2016 BUSINESS SWEDEN 4
THE SPECIALTY FOODS MARKET IS WORTH 120.5 BUSD
AND HAS BEEN GROWING FOR THE PAST FIVE YEARS
SOURCE: SPECIALTY FOODS ASSOCIATION
0
20
40
60
80
100
120
140
2011 2012 2013 2014 2015
THERE IS GREAT POTENTIAL FOR NEW SPECIALTY FOOD PLAYERS TO ENTER THE GROWING MARKET
*THE SIZE OF THE MARKET IS CONSIDERABLY LARGER THAN IN PREVIOUS REPORTS DUE TO A
REDEFINITION OF THE SPECIALTY FOOD MARKET IN 2014, NOW INCLUDING A WIDER RANGE OF ITEMS.
Since 2014, specialty food is defined as foods or beverages of
the highest grade, style, and/or quality in their respective
categories. Their specialty nature derives from a combination of
some or all of the following qualities: uniqueness, origin,
processing method, design, limited supply, unusual application or
use, extraordinary packaging, or channel of distribution/sales.
The ten largest online food retailers had a combined sales total of 5.5 BUSD in 2015 – an increase of 22 percent from 2014
In part, the reason for this stems from the push to reach out to millennials, who often rely on computers and mobile devices
In 2014, 52 percent of all specialty food consumers stated that they prefer buying specialty foods online
Although online sales increase at a quick pace, it remains relatively small in relation to overall grocery retail sales that in 2015 grew by 1 percent to 982.5 BUSD
The top three most purchased specialty food categories online are chocolate, coffee and cocoa, and tea
Amazon remains the company many industry experts expect to take online grocery shopping mainstream with its service Amazon Fresh
E-COMMERCE GROCERY MARKET SHARE 2014,
SHARE OF TOTAL GROCERY MARKET
15 NOVEMBER, 2016 BUSINESS SWEDEN
E-COMMERCE WITHIN SPECIALTY FOODS IS
INCREASING AMONG MILLENNIALS IN PARTICULAR
5
SOURCE: SUPERMARKET NEWS, IGD.COM, NIELSEN
E-COMMERCE PLAYERS SHOULD TARGET MILLENNIALS AND YOUNGER GENERATIONS TO BEGIN WITH
0%
5%
10%
15%
2013 2014 2019* 2023*
*FORECASTS
A Nielsen survey estimates that the total U.S. online grocery market could grow by 26 BUSD in 2016, to more than 42 BUSD by the end of the year
The top reason why consumers have never bought groceries online has been stated as their preference to pick their food themselves as they consider it a personal experience
SPECIALTY FOOD CONSUMERS PREFER E-COMMERCE
Market characteristics
Market size and growth and online sales
Geographic focus
Food trends
Sales and distribution
Competitors
Regulatory landscape
Trade shows and events
Conclusions and recommendations
BUSINESS SWEDEN 15 NOVEMBER, 2016 6
AGENDA
SCANDINAVIAN SPECIALTY FOOD STORES IN THE
U.S. 2015, PERCENTAGE OF TOTAL
SHARE OF SPECIALTY FOOD CONSUMERS PER
REGION, 2014
15 NOVEMBER, 2016 BUSINESS SWEDEN 7
SOURCE: US CENSUS BUREAU, BUSINESS SWEDEN ANALYSIS
THE U.S. REGION WITH THE MOST SWEDISH FOOD
RETAILERS IS THE MIDWEST
FOR COMPANIES TARGETING SCANDINAVIAN CONSUMERS, THE MIDWEST IS AN IMPORTANT REGION
>40% 0%
0%10%20%30%40%50%60%70%
U.S. states with the largest Scandinavian population Minnesota 32.1% California 3.6% Washington 12.5% Wisconsin 13.5% Illinois 4.6%
Minnesota is the U.S. state with the strongest
Scandinavian heritage and with the highest
concentration of Scandinavian Americans in the
U.S.
Minnesota is also the state with the largest share of
Scandinavian specialty food stores in the U.S.
DIFFERENT U.S. REGIONS ARE RELEVANT FOR VARIED REASONS
BUSINESS SWEDEN 15 NOVEMBER, 2016 8
THE MIDWEST, AND EAST AND WEST COASTS PROVIDE
THE MOST POTENTIAL FOR SWEDISH COMPANIES
SOURCE: BUSINESS SWEDEN, INTERVIEWS, SPECIALTY FOOD ASSOCIATION, U.S. DEPARTMENT OF
AGRICULTURE
Midwest
East Coast
Geographic Region Reason for Attractiveness
Scandinavian population and specialty food stores
Importers that focus on Scandinavian products
High income households Home to many
Scandinavian companies Large portion of U.S.
population
Examples of market players
Chicago Importing
Iverson’s Scandinavian
Imports
Swedish-American
Museum
Haram-Christensen
Scandinavia House
Sockerbit
Fika
THE MIDWEST HAS A BIGGER SWEDISH POPULATION WHILE THE U.S. COASTS SHOW MORE OVERALL POTENTIAL
West Coast
Accounts for 52 percent
of all organic food sales Large number of Swedish
specialty stores are based here
Olson’s Scandinavian
Delicatessen
Nordic House
Viking Foods and Imports
”We mostly import herring,
lingonberries, and preserves
to specialty food stores. We
focus on the East Coast,
mainly because it is the
most convenient and
relevant region for European
specialty foods. It is also
home to many of the
Scandinavian Embassies
and Consulates.”
Walter Seifert
President,
Haram-Christensen Corp.
Market characteristics
Market size and growth and online sales
Geographic focus
Food trends
Sales and distribution
Competitors
Regulatory landscape
Trade shows and events
Conclusions and recommendations
BUSINESS SWEDEN 15 NOVEMBER, 2016 9
AGENDA
BUSINESS SWEDEN 15 NOVEMBER, 2016 10
THERE ARE FIVE DOMINATING TRENDS AFFECTING
PURCHASES OF THE U.S. CONSUMER
SOURCE: WEBMD, THE GOURMET RETAILER, USNEWSWIRE, USDA & FDA, BUSINESS MONITOR
Consumer Trends
Ready made
On the go
Premium
Recipe suggestions
High fiber and protein
Reconsideration of low fat/calorie meals
Focus on fresh vs frozen
Quick, healthy foods replacing formal meals
Snacks appropriate for various times of the day
Strong growth
Considered to be high
quality and value
products
Increasing caution of
ingredients
Focus on natural
products
CONSUMERS HAVE SHIFTED AWAY FROM “LOW FAT” DIET TRENDS TO NATURAL FOOD WITH TRANSPARENCY
TRANSPARENCY
CONVENIENCE
SNACK FOODS
HEALTH AND WELLNESS
PRIVATE LABEL
TOP 5 SPECIALTY FOOD CATEGORY SALES, 2014
MUSD
NEW TERMS ARE EMERGING FOR SPECIALTY FOODS
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CONSUMERS ARE BECOMING MORE AWARE OF AND ARE
DEMANDING SUSTAINABLE AND FAIR FOOD PRODUCTION
SOURCE: SPECIALTY FOOD ASSOCIATION
NEW SPECIALTY FOOD MARKET ENTRANTS SHOULD KEEP TRACK OF THE FASTEST GROWING CATEGORIES
Private label foods and organic foods are two of the top trends within the U.S. food industry
”Free-from” and ”better-for-you” foods are appearing more often in conventional retailers. For example, gluten free, lactose free, sugar free
Key terms like ”locally produced”, ”sustainable”, ”whole grains” are more in-demand by consumers
U.S. consumers are returning to simple, clean and old-fashioned foods, e.g. real grass butter, fermented foods and ancient grains
Specialty food sales through food service is growing faster than retail sales: 27 percent versus 19.7 percent
Mainstream retailers account for the largest share of specialty food sales but they are growing at slower rates than specialty food stores, i.e. sales potential may be biggest in specialty stores
2351
3112
3189
3476
3708
Bread and baked goods
Chips, pretzels and snacks
Frozen and refridgeratedmeat, poultry and seafood
Coffee, coffee substitutesand cocoa
Cheese and cheesealternatives
The fastest growing specialty food categories in 2015 were:
Chips, pretzels and snacks (24.5%) Frozen and refrigerated meat (26.8%) Candy and individual snacks (27.2%)
Market characteristics
Sales and distribution
Competitors
Regulatory landscape
Trade shows and events
Conclusions and recommendations
BUSINESS SWEDEN 15 NOVEMBER, 2016 12
AGENDA
FOOD DISTRIBUTION CHANNELS INVOLVE MANY
INTERMEDIARIES AND SUPPLIERS
BUSINESS SWEDEN 15 NOVEMBER, 2016 13
SOURCE: BUSINESS SWEDEN ANALYSIS
SALES AND DISTRIBUTION RARELY TAKE THE SAME PATH UNLESS THROUGH A U.S. SUBSIDIARY
End consumer Points of sale Swedish AB
Sw
ed
ish
fo
od
co
mp
an
y
Co
nsu
me
rs
Sa
les c
ha
nn
els
D
istr
ibu
tio
n c
ha
nn
els
Tra
de
sh
ow
s
Pro
duct adapta
tion:
lab
elin
g
U.S. representation
U.S. SALES AND DISTRIBUTION CHANNELS
3PL
Own warehouse
Fre
qu
en
cy
Retail Chains
Physical Resellers
Online Sales
Imp
ort
er
Dis
trib
uto
r
Bro
ke
r
PRICE VARIES BASED ON THE TYPES OF SERVICES PROVIDED
BUSINESS SWEDEN 15 NOVEMBER, 2016 14
FOOD DISTRIBUTORS' ROLE VARIES FROM PURE IMPORT
FACILITATION TO MARKETING RESPONSIBILITIES
SOURCE: BUSINESS SWEDEN INTERVIEWS
Re
sp
on
sib
ility
LOCAL IMPORTER
IMPORTER AND REGIONAL
DISTRIBUTOR
LARGER IMPORTER
Handles incoming shipments
Carries substantial stock
Sells to local food stores
Sells to distributors who cover
local chain food stores
Sells to distributors who covers
national food stores
25% - 35% price add on sales
Handles incoming shipments
Carries substantial stock
Sells to local food stores
Sells to distributors who cover local
chain food stores
Sells to distributors who cover national
food stores
Markets, campaigns, produces TV
commercials and store activities
25% - 50% price add on sales
Handles incoming shipments
Carries limited stock
Sells to local food stores
Price add on sales no less
than 25%
Price margin
DISTRIBUTORS CAN OFFER ADDITIONAL SERVICES, ALLOWING SWEDISH EXPORTERS TO GROW WITH SAME PARTNER
A NUMBER OF COMPANIES FOCUS ON EUROPEAN IMPORTS
There are a number of importing companies focused on European
and Scandinavian food and delicacies in the U.S.
Haram-Christensen, Chicago Importing Company, World Finer
Foods, B&R Classics and European Imports are among the largest
distributors of European specialty foods to the U.S.
Haram-Christensen distributes Swedish cheese, fish, crispbread,
caviar, chocolate, and licorice, among other premium products
World Finer Foods focuses on premium specialty foods with
nearly 40 imported brands across lingonberries and crispbread and
companies across Europe and the world
Talla Imports, B&R Classics and Olsson’s Fine Foods and
Cheese are other importers of European baked goods and food
Try The World is a relatively new, innovative distributor that ships
boxes with foreign delicacies to subscribers all over the U.S
15 NOVEMBER 2016 BUSINESS SWEDEN 15
COMPANIES THAT IMPORT EUROPEAN PRODUCTS
TYPICALLY FOCUS ON PREMIUM, SPECIALTY FOODS
SOURCE: HOOVERS, HARAM-CHRISTENSEN, CHICAGO IMPORTING COMPANY, BUSINESS SWEDEN
INTERVIEWS
INCLUDING MULTIPLE INTERMEDIARIES MAY HAVE A SIGNIFICANT NEGATIVE IMPACT ON MARGINS
Subscription Distributor
Try The World
Other Distributors
Talla Imports, B&R Classics, Olsson’s Fine
Foods and Cheese
Main Distributors
Chicago Importing Company,
Haram-Christensen, European Imports,
among others
Note
Intermediaries increase the risk of
breakage in the logistics chain and
significantly reduce margins of suppliers
BROKER
Conduct sales and marketing
Usually do not offer logistics
Traditionally small, but have
recently grown in size, limiting
possibilities for smaller producers
Best met at tradeshows/industry
events or via word-of-mouth
DISTRIBUTOR
Can act as wholesale distributor
or importer/distributor
Provide logistics/invoicing but
may not offer marketing/sales
Best met at tradeshows/industry
events or via word-of- mouth
GROCERS
National supermarkets ideally first
want to see U.S. market
acceptance
Smaller grocers are slightly more
approachable
Buyers may evaluate products on
a review period, and are best met
at shows or via broker/distributors
BUSINESS SWEDEN 15 NOVEMBER, 2016 16
DISTRIBUTORS USUALLY DO NOT CONDUCT SALES
ACTIVITIES AND BROKERS DO NOT PROVIDE LOGISTICS
SOURCE: BUSINESS SWEDEN ANALYSIS
IT MAY BE USEFUL TO APPROACH SMALLER SUPERMARKETS AND DISTRIBUTORS TO ENTER THE MARKET
Decreased margins
Requires finding an importer and
distributor or importer/distributor;
do not take product ownership
May become one of many
products in portfolio
Delivery to national, regional or
independent supermarkets; while
taking product ownership
Requires marketing and sales
solutions or employing a broker
Reach several retailers through a
single channel
Recommended to build strong
business case or customer base
Buyers can be difficult to reach,
requiring additional effort and
timing
Lower threshold to market entry
OF
FE
RIN
GS
IM
PA
CT
BUSINESS SWEDEN 15 NOVEMBER 2016 17
SPECIALTY FOODS ARE SOLD AT THREE MAJOR BRICK
AND MORTAR RETAIL CATEGORIES
SOURCE: MARKET RESEARCH, BUSINESS SWEDEN SURVEY
COMPANIES CAN RETAIN HIGHER MARGINS BY SELLING TO SMALLER SPECIALTY FOOD SHOPS
Retail Type
“Big box” retail
National chains selling high-
volume at low margin with a
broader focus than just groceries
Supermarkets
Retailers focusing primarily on
food/beverage sales at multiple
locations within a state/region
Specialty Food Shops
Single or limited location food
retail shops selling a more
premium, curated product line
High-volume,
Low margin
Low-volume,
High margin
Examples
Target
Wal-Mart
Walgreens
Jewel-Osco
Ralph’s
Giant Eagle Market
Nordic House
Sweden’s Best
The Valley Troll
State
Illinois
California
New York
California
New York
Minnesota
National
Type of Sales
BUSINESS SWEDEN 15 NOVEMBER, 2016 18
PURCHASING IS A DIVERSE PROCESS ACROSS THE
VARIOUS CHANNELS
SOURCE: NEW YORK TIMES
ONLINE INDEPENDENT GROCERS LARGE GROCERS
THE MARKET FOR FOODS ONLINE HAS DISRUPTED TRADITIONAL CHANNELS OF FOOD SALES
Large grocers is the
largest and most
competitive space, with
large, well-known
brands bought in bulk at
low margins
Increasingly, large
grocers are including
specialty foods to cater
to consumer demands
Easy
Difficult
Online sales through
channels like Amazon
have disrupted the
U.S. food industry with
the rise of smaller
brands selling online
Sleeker, more modern
webpages have led to
the decline in market
share of major U.S.
brands
Easy
Difficult
Decision makers: many exist for
various websites; companies can
also sell through their own shops
Specialty food shops
often focus on premium
alternatives to
mainstream brands
Stores like Whole
Foods function in a
decentralized structure
like independent stores,
allowing store and
regional managers to
choose brands
Easy
Difficult
Decision makers: independent
store owners or purchasing
managers on a local level
Decision makers: buyers on a
corporate and national or large
regional level
How much time will the brand require before sales begin?
Will the company invest in marketing and promotion?
FOOD PROFESSIONALS TYPICALLY ASK QUESTIONS REGARDING SUPPORT AS WELL AS PRODUCT QUALITIES
BUSINESS SWEDEN 15 NOVEMBER, 2016 19
FOOD BROKERS, DISTRIBUTORS AND BUYERS WILL ASK
SEVERAL QUESTIONS PRIOR TO BUYING A PRODUCT
SOURCE: BUSINESS SWEDEN ANALYSIS
Time
Requirement
Existing
Business
Support
Product Qualities
Current Portfolio
Is there existing business? Where?
Have consumers requested the brand? Who are consumers?
Has the company proven it is financially sound?
What marketing and sales support can be provided?
Can initial order discounts or demos be provided?
Does the company have any type of PR or social media presence?
Does the product have synergy with existing products in the portfolio (i.e.
pricing, consumers, trends)?
Can the product be sold to existing retailers?
Is the product unique?
Can it be sold in a compelling way?
Does it fit a niche or current consumer buying trends?
IT IS IMPORTANT TO DEMONSTRATE A UNIQUE PRODUCT, WITH COMPANY ABILITY TO SUPPORT GROWTH
SEVERAL STEPS ARE REQUIRED FOR CHAINS
LARGE CHAINS MAY NOT OFFER A “GOOD DEAL”
It is suggested to have loyal customers and established brand value locally before entering large chains
Challenges selling to retail chains stores include:
Agreeing on favorable prices
Shipping on time
Receiving prompt invoice payments
Logistic requirements are high and experienced staff should handle large scale logistic requirements for the U.S.
It is also important to understand the customs process, and have possible contingencies (i.e. the ability to react quickly and possibly delivery inventory by air at higher costs), should products be held in customs
Swedish companies have experienced up to 30 times higher costs having to quickly deliver products following delays
15 NOVEMBER, 2016 BUSINESS SWEDEN 20
BECOMING A VENDOR TO LARGE RETAIL CHAINS IS A
DEMANDING PROCESS AND NOT FOR THE BEGINNER
SELLING TO A U.S. CHAIN CAN BE COSTLY AND TIME-CONSUMING, AND IS NOT ALWAYS A “GOOD DEAL”
Construct a differentiated value
offering according to the store’s
customer base, travel and train
stores
Develop marketing
and branding
1
All process such as
manufacturing and logistics
must run perfectly. Dedicate a
team to fulfilling logistic needs
Ensure processes run
perfectly
2
By being established on the
market you are likely already in
their spotlight, facilitating entry
Approach appropriate
stores
3
Vendor compliance guidelines
vary, but tend to be very long
and detailed, addressing areas
from payment to shipping
Fulfill vendor
compliance guidelines
4
SOURCE: BUSINESS SWEDEN INTERVIEWS AND ANALYSIS
MARKET SHARE OF GROCERY RETAILERS IN U.S.
2014
0% 10% 20% 30%
Wal-Mart
Kroger Co
Alberson's Inc
Publix Supermarkets
Ahold Inc
HE Butt Grocery Co
Meijer Inc
Target Corp
Whole Foods Inc
7-Eleven Inc
Trader Joe's Co
WAL-MART IS THE FASTEST GROWING CHAIN
The “giants” of the industry own multiple grocery
franchises, such as Albertsons Company (owns 16),
Kroger Company (owns 12), Ahold USA (the U.S.
branch of Dutch company, Ahold Delhaize, owns 4), and
Supervalu (owns 6)
In 2015, the fastest growing supermarket chain was
Wal-Mart, as the company expanded from its traditional
hypermarket stores to Express stores
Hypermarket chains (i.e. Wal-Mart) have difficulty
entering urban areas due to their size, leading to
increased convenience stores—as a result, 7-Eleven,
added 150 stores to the East Coast in 2015
Health-oriented companies show the most rapid
company growth with stores such as The Fresh Market
and Whole Foods
Online grocery shopping continues to expand, but has
yet to have a significant impact on the industry
15 NOVEMBER, 2016 BUSINESS SWEDEN 21
A FEW GIANTS DOMINATE THE GROCERY SEGMENT:
WAL-MART, KROGER, ALBERTSON’S AND AHOLD
SOURCE: COMPANY WEBSITES, EUROMONITOR
HEALTH-ORIENTED GROCERS ARE EXPECTED TO SHOW THE MOST RAPID GROWTH
SALES IN GROCERY RETAILERS BY CHANNEL;
PERCENT CHANGE 2014-2015
-1.3
1.2
2.1
2.5
2.6
-2 -1 0 1 2 3
Traditional Grocery Retailers
Supermarkets
Convenience Stores
Hypermarkets
Discounters
CONSUMERS PREFER CONVENIENCE IN SHOPPING
15 NOVEMBER, 2016 BUSINESS SWEDEN 22
CONSUMERS ARE INCREASINGLY SHOPPING AT
DISCOUNT GROCERS IN THE U.S.
SOURCE: EUROMONITOR
NEGATIVE GROWTH OF HYPERMARKETS IS PARTIALLY DUE TO MILLENNIAL MOVEMENT TO URBAN AREAS
Shifting
Interests
Hyper-
markets
Smaller
Stores
Discount
Retailers
Interest has shifted from mid-market
products, to premium products from
organic grocers and staple products
from discount retailers
Grocers are building smaller, more
convenient with limited assortments—
this trend is likely to continue as online
grocery shopping grows
Hypermarkets continue to grow, but at
a slower pace due to saturation and
due to millennials moving into urban
areas, where hypermarkets struggle
Discount retailers continue to grow,
after benefitting from customer
retention post-recession
Market characteristics
Sales and distribution
Competitors
Regulatory landscape
Trade shows and events
Conclusions and recommendations
BUSINESS SWEDEN 15 NOVEMBER, 2016 23
AGENDA
SUCCESSFUL U.S. AND EUROPEAN BRANDS USE A VARIETY OF TACTICS TO APPEAL TO CONSUMERS
15 NOVEMBER, 2016 BUSINESS SWEDEN 24
U.S. AND EUROPEAN SPECIALTY FOOD COMPANIES
POSITION THEMSELVES AS HEALTHIER ALTERNATIVES
SOURCE: BUSINESS SWEDEN ANALYSIS
WHILE AMERICAN COMPANIES USE “LOCAL” BRANDING, EUROPEAN COMPANIES USE THEIR HERITAGE
Premium, but affordable Companies to appeal to premium characteristics (primarily high quality
ingredients), while providing a reasonable price point
Mass Audience Focus has shifted from small segments of health conscious consumers
toward mass market aisles (i.e. Silk’s almond milk as an alternative to milk or Chobani’s Greek yogurt)
Changing Traditional Industry Companies seek to change the way consumers eat—Felix
lingonberries market substitution of cranberries, while Wasa aims to replace traditional crackers, and bread
Convenient, but healthy Like traditional producers, specialty producers have also recognized
snacking trends, packaging items conveniently while maintaining health claims
Organic or Natural Organic, natural, preservative-free, or additive-free claims are highly
marketed across successful U.S. and European specialty foods
Heritage While American brands may be able to use “local” branding,
successful European brands market country heritage
ST
RA
TE
GY
M
AR
KE
TIN
G T
AC
TIC
About the Company
BUSINESS SWEDEN 15 NOVEMBER 2016 25
CHOBANI, SILK AND ORGANIC VALLEY ARE AMONG THE
LARGEST SPECIALTY FOOD BRANDS IN THE U.S.
SOURCE: COMPANY WEBSITES, NEW YORK TIMES, DAIRY FOODS
LARGE SPECIALTY FOODS COMPANIES PROVIDE HEALTHY ALTERNATIVES TO MAINSTREAM CONSUMERS
Path to Success Consumer Appeal
Silk is owned by WhiteWave, Inc
and was introduced in 1996
Sales (2015): 46 MUSD
(coconut milk), 242 MUSD (soy
milk), 500 MUSD (almond milk)
Silk gained popularity using
heavy marketing health claims
that soy decreased heart
disease following FDA claim
approval
Consumer focus is both lactose
intolerant/vegan consumers as
well as mainstream health-
conscious customers
Organic Valley is an
independent cooperative of
organic farmers in Wisconsin
Sales (2015): 1.04 BUSD
Organic Valley began with 7
famers selling organic and
sustainable vegetables
The coop now has 1,100 famers
with a focus on milk
Organic Valley targeted urban
families aiming to buy local,
sustainable and organic
alternatives
Chobani was founded in 2005
and was among the first Greek-
style yogurt of its kind
Sales (2015): 1 BUSD
Chobani cites its success to not
outsourcing production and
private equity funding to
compete with giants
Chobani challenged market
giants by offering an affordable
and natural yogurt alternative
to major grocery chains
BUSINESS SWEDEN 15 NOVEMBER 2016 26
WASA, FELIX AND WALKERS HAVE EACH USED
PARTNERS TO INITIALLY ENTER THE U.S. MARKET
SOURCE: COMPANY WEBSITES, NEW YORK TIMES, DAIRY FOODS
EUROPEAN BRANDS ADAPT TO AMERICAN TRENDS OF SNACKING, AND GLUTEN-FREE CONSUMPTION
About the Company
Country or Origin: Sweden
(owned by Orkla Foods)
Sales (2015): N/A –
marketed as leader in U.S.
lingonberry sales
Country Or Origin:
Scotland
Sales (2015): N/A—
however, the U.S. is
largest market for Walkers
Country or Origin: Sweden
(owned by Italian
company, Barilla)
Sales (2015): 27.5 MUSD
Distribution
Felix is imported and
distributed exclusively
by major U.S. distributor,
World Finer Foods
Walkers partnered with
Europa Food, becoming
the #1 imported cookie
Since, Walkers started a
U.S. importing subsidiary
Wasa uses multiple
major distributors of
European products to
import and distribute its
crispbread
Sales Channels
Felix lingonberries are
found at major retailers
(Walmart, Target) as well
as specialty/premium
grocery stores
Walkers sells its cookies
online on its web shop, as
well as in major grocers
(Walmart) and specialty
stores (World Foods)
Major grocery stores carry
Wasa in the specialty
cracker or deli section
Wasa is also sold
unbranded in IKEA USA
Customer Appeal
Brand PR compares
lingonberries with
cranberries/similar jams,
cites Swedish heritage
and health benefits
No artificial flavorings,
colorings or additives
Also launched a gluten-
free line in the U.S.
Company marketing
focuses on convenient
snacking, Swedish
heritage and health
benefits
Market characteristics
Sales and distribution
Competitors
Regulatory landscape
Trade shows and events
Conclusions and recommendations
BUSINESS SWEDEN 15 NOVEMBER, 2016 27
AGENDA
U.S. FOOD REGULATORY BODIES THE U.S. LIFTED EU BEEF BANS IN 2015
The U.S. market had been closed to any EU beef import
since January 1998, when the U.S. introduced import
restrictions on beef, sheep and goats and their products
on the basis of BSE concerns
USDA has recently started to lift bans on countries
exporting beef to the U.S.
Beef from Ireland was the first to be sold in the U.S. in
early 2015, while Lithuania became the second EU
country to export beef to the U.S. in September 2015
15 NOVEMBER, 2016 BUSINESS SWEDEN 28
FDA AND USDA REGULATIONS MUST BE MET IN ORDER
FOR FOOD COMPANIES TO DO BUSINESS IN THE U.S.
SOURCE: USDA, FDA, NEW YORK TIMES, GLOBAL MEAT
MEAT IS THE SINGLE MOST REGULATED FOOD CATEGORY TO IMPORT TO THE U.S.
U.S. Food Import Requirements
FDA
The Food and Drug
Administration protects
public health by
assuring that foods are
safe, wholesome,
sanitary and properly
labeled
The Department of
Agriculture promotes
agriculture production
sustainability and the
preservation and
conservation of natural
resources
USDA
The USDA is the main regulating body setting
federal guidelines and regulations for meat, poultry,
and eggs to protect the environment
The FDA promotes and protects public health by ensuring the food supply is wholesome, sanitary, safe, and honestly labeled
“We stopped [exporting to the U.S.] because you needed
a special USDA approval, and it was difficult to
maintain in terms of cost and the volume we were
exporting at the time, but when we had all the regulations
in place, we were able to export pretty quickly” Karsten Davidsson
President, AB Sten Davidsson
USDA IS CONTROLLED UNDER SEVERAL ACTS IT IS IMPORTANT TO HAVE THE CORRECT DOCUMENTS
To import meat, poultry, or egg product ingredients to the
U.S. – the products must be approved under FSIS
inspection or under equivalent foreign inspection system
and does not require Prior Notice to FDA
Products that contain 3% or less raw meat; less than 2%
cooked meat; or less than 2% cooked poultry meat fall
under FDA regulations, not USDA
If facilities handle FDA regulated food products as well
as USDA regulated products then they must comply with
FDA requirements only for the FDA regulated products
The documentation used to provide this support can take
various forms. At a minimum, however, the documents
will need to provide a basis for determining:
The country of origin of the meat or poultry product
ingredient
The establishment where the meat or poultry
product ingredient was processed
15 NOVEMBER, 2016 BUSINESS SWEDEN 29
PRODUCERS OF MEAT AND POULTRY PRODUCTS MUST
COMPLY WITH USDA REGULATIONS
SOURCE: USDA IMPORT PERMIT GUIDE, INTERVIEWS
(FSIS)
The Food Safety and
Inspection Service
(FMIA)
Federal Meat
Inspection Act
(EPIA)
Egg Products
Inspection Act
(PPIA)
Poultry Products
Inspection Act
FSIS DOCUMENTATION IS USUALLY NOT A PROBLEM FOR SWEDISH COMPANIES BUT STILL IMPORTANT TO FOLLOW
Further details on USDA regulations can be
found here
FOOD TYPE
REGULATION REQUIREMENTS
Most restricted food category in the U.S
Importer must be inspected by the FSIS, part of the USDA
15 NOVEMBER, 2016 BUSINESS SWEDEN 30
HERBS, UNPROCESSED FOODS, MEATS, SUGAR AND
HONEY ARE THE MOST REGULATED FOODS
SOURCE: USDA, FDA, BDG INTERNATIONAL, INTERVIEWS
MARKET ENTRANTS SHOULD MAKE SURE TO KNOW THE PROPER CATEGORIZATION OF THEIR PRODUCT
Must go through both the USDA and the FDA before it can be imported
to the U.S. due to risk for insects and other infestations
Subject to a sugar quota with high duty fees or restriction if exceeded
Examples include chocolates, frostings and honey
Importer needs an authority license as well as FDA registration every
other year in order to sell the product
Beef, Pork and Poultry
Unprocessed Foods, such as Dried
or Fresh Herbs
Foods with High Sugar Content, e.g.
Chocolate
Cheese
Import regulations for other foods than the mentioned do not differ much but a helpful rule of thumb for food importers in
the U.S. is that dry, non-perishable foods such as dry cookies, coffee, hard candies, etc. are less regulated and
have a longer shelf life, lasting longer during the transportation of the product as well as in stores.
Market characteristics
Sales and distribution
Competitors
Regulatory landscape
Trade shows and events
Conclusions and recommendations
BUSINESS SWEDEN 15 NOVEMBER, 2016 31
AGENDA
15 NOVEMBER, 2016 BUSINESS SWEDEN 32
THE TWO BIGGEST U.S. SPECIALTY FOOD TRADE
SHOWS ARE THE SUMMER/WINTER FANCY FOOD SHOWS
SOURCE: BUSINESS SWEDEN INTERVIEWS, TRADE SHOWS WEBSITES
Summer/Winter Fancy
Food Show
Description: Arranged by
the U.S Specialty Foods
Association
Audience: Global buyers
and more than 47,000
specialty food professionals
~2,670 exhibitors
Over 55 countries
represented
Time: January 22-24 in San
Francisco; June 25-27 in,
New York
Description: This ECRM
Efficient Program Planning
Session (EPPS) is made up
of one-on-one strategic
meetings that connect
decision makers in an effort
to maximize time and
uncover industry trends
Audience: Attracts
thousands of buyers, sellers
and brokers globally
~200 exhibitors
Time: August 22-25, San
Diego
Natural, Organic and
Specialty Food EPPS
WHILE LARGE SHOWS OFFER A MASS AUDIENCE, SMALLER SHOWS OFFER ONE-ON-ONE BUYER MEETINGS
1 2
Description: A lineup of
industry thought leaders
that offers succinct, focused
sessions and new sweets
and snack-products are
showcased by suppliers
from 90+ countries
Audience: More than
16,000 professionals
attended in 2015 with global
participation.
~700 exhibitors
Time: May 23-25 in
Chicago
Sweets & Snacks Expo 3
Description:
International non-perishable
food suppliers present items
and programs to retailers,
distributors and importers
from the U.S., Canada,
Europe, and Latin America
Audience: ECRM Expos
Attracts thousands of
buyers and sellers, both
American and international.
~115 attendees
Time: July TBD, in
Scottsdale
The International Foods
EPPS
4
SUCCESS BEGINS WITH SELECTING A RELEVANT TRADE SHOW PROS AND CONS BASED ON SHOW SIZE
15 NOVEMBER, 2016 BUSINESS SWEDEN 33
THOROUGH PREPARATION IS NECESSARY WHEN
ATTENDING OR EXHIBITING AT U.S. TRADE SHOWS
SOURCE: BUSINESS SWEDEN RESEARCH AND INTERVIEWS
Logistics
3 Pricing and shipping information to retailers is important to have
ready for prospective buyers
Companies should work with trade show account managers and/or
import agents to ship samples to the show on time
Select
relevant
shows
Research in advance what trade show would be relevant for your
company
Smaller companies may benefit from smaller settings, where they
are able to garner attention hard to obtain at large shows
1
Book
meetings
in advance
Booking meetings with buyers prior to the trade shows remains key
in order to maximize outcome
Providing accurate information to trade show websites is key (i.e.
identifying your product type, shipping information and capabilities)
4
EXPOSURE TO, AND COMMUNICATION WITH BUYERS WILL BE EASIER AS AN EXHIBITOR THAN AS AN ATTENDEE
Map
retailers
2 Companies are recommended to do their homework and map their
target retailers in advance
The more knowledge manufacturers have about the retailers, the
easier it will be to explain why a manufacturer should be in stores
Me
diu
m
Sm
alle
r L
arg
er
Pros: high attendance, including many
buyers
Cons: difficulty gaining buyer attention,
less focus on specific products
Pros: often more specialized than large
fairs, with relatively high attendance
Cons: difficulty in gaining buyer attention
Pros: often specialized, some shows offer
one-on-one buyer meetings
Cons: limited press attention, fewer
buyers are present
15 NOVEMBER, 2016 BUSINESS SWEDEN 34
INDUSTRY PROFESSIONALS DISCUSSED THE SELLING
POINTS OF VARIOUS TRADE SHOWS
SOURCE: BUSINESS SWEDEN INTERVIEWS
“The difference between ECRM events is they are very specific
(i.e. cookies, or frozen goods) with pre-scheduled one-on-one
appointments with buyers. Buyers use events like the Natural,
Organic and Specialty Food EPPS to find newer companies that
they might not meet otherwise. The “sweet spot” is smaller to
mid-sized manufacturers.” Sarah Davidson
Vice President, Grocery, ECRM
“We had our largest attendance ever this year, at the Summer
Fancy Food Show in New York with 47,000 attendees—of those
about 2,700 were exhibitors from all over the world. We also offer
a lot of educational opportunities and networking, along with the
possibility to have matchmaking at the show.”
Member Services Representative
Specialty Food Association
“We bring in importers and buyers that would work with Swedish
and other international suppliers to the International Food Event.
The meeting is on a smaller scale, but tailored toward international
companies, with pre-scheduled meetings with buyers and
educational events to further understand the U.S.” Liz Lantz
Vice President, International Business Development
ECRM
“Fresh Summit is a top 200 tradeshow in the U.S. with exhibitors
from over 50 countries. The size of the exhibit is over 600,000
square feet (56,000 square meters) of exhibitor space and over
1,000 exhibitors. However, it’s still fairly specialized—everything
has to do with the fresh produce industry.” Kathy Means
Vice President, Industry Relations
Produce Marketing Association
Large audience and diverse products Smaller audience, but product-specific
Smaller audience, international focus
SMALLER SHOWS LIKE THE INTERNATIONAL FOOD EVENT OFFER PRE-SCHEDULED ONE-ON-ONE MEETINGS
Large audience and product-specific
Market characteristics
Sales and distribution
Competitors
Regulatory landscape
Trade shows and events
Conclusions and recommendations
BUSINESS SWEDEN 15 NOVEMBER, 2016 35
AGENDA
BUSINESS SWEDEN 15 NOVEMBER, 2016 36
THE U.S. SPECIALTY FOODS INDUSTRY IS A LUCRATIVE
MARKET OFFERING FURTHER GROWTH POTENTIAL
SWEDISH COMPANIES MAY GAIN MARKET SHARE IF RELEVANT GEOGRAPHIES AND SALES CHANNELS ARE TARGETED
MAIN TAKEAWAYS KEY RECOMMENDATIONS
The U.S. specialty foods industry hit almost
121 BUSD in 2015 sales, resulting in a CAGR of
13% from 2011
Online food sales still represent a marginal part of
overall food retailing with 4% of total shares but
grew with 22% for the ten largest food retailers
52% of specialty food consumers prefer to
purchase online
Typical specialty foods consumers live on the
Pacific, Northeastern and Midwestern coasts
The highest concentration of Scandinavian
population is in Minnesota, California,
Washington, Wisconsin and Illinois
Main food trends include transparency of
ingredients, convenience, snack foods, health
and wellness focus
Swedish specialty food producers should look
into entering the U.S. as it is a market offering
potential for future growth
Online sales channels should be focused on
initially
The Pacific, Northeastern and Midwestern coasts
should be focused on
If the Swedish heritage is used as a marketing
tactic, Scandinavian populations should be
targeted in Minnesota, California,
Washington, Wisconsin and Illinois
When marketing the Swedish specialty food
producers, trends such as transparency of
ingredients, convenience, snack foods, health and
wellness should be highlighted
Market Characteristics Sales and Distribution Competitors, Regulatory
Landscape and Trade Shows
BUSINESS SWEDEN 15 NOVEMBER, 2016 37
ENTERING THE U.S. FOOD INDUSTRY IS TOUGH AND
SETS HIGH EXPECTATIONS ON PRODUCING COMPANIES
ABILITY TO DEMONSTRATE UNIQUENESS, CAPACITY AND IDEALLY U.S. REFERENCES ARE AMONG KEY CRITERIA
MAIN TAKEAWAYS KEY RECOMMENDATIONS
Sales and distribution of food involves many
intermediaries and suppliers in the U.S.
The main stakeholders are brokers, importers,
distributors and grocers
Ability to demonstrate a unique product, with
company capacity to support growth and
references from the U.S. market is of high
importance to become a market player
Wal-Mart, Kroger, Albertson’s and Ahold are among
the giants that dominate the market
Becoming a vendor is a demanding process and
not for the beginner
Consumers are increasingly shopping staple
products at discount grocers and premium
products are bought from higher-end organic grocers
Swedish specialty food producers should be aware
of the complex sales and distribution reality they
face in the U.S.
Companies that can demonstrate a unique
product, with capacity to support U.S. growth
and ideally already with references from the
U.S. market should initially focus on entering the
market
Swedish food producers should focus on selling to
smaller scale, regional specialty food chains or
even independent stores in coastal metropolitan
areas
Swedish premium food products should enter
the specialty food market in the U.S. as they are
more likely to succeed as there is a higher
potential to be discovered by buyers
Market Characteristics Sales and Distribution Competitors, Regulatory
Landscape and Trade Shows
BUSINESS SWEDEN 15 NOVEMBER, 2016 38
EUROPEAN BRANDS MARKET PRODUCTS FOR THEIR
CONVENIENCE, HEALTH BENEFITS AND HERITAGE
OVERALL, SWEDISH COMPANIES WILL NEED TO SHOW ADAPTABILITY AND FLEXIBILITY TO SUCCESSFULLY ENTER THE U.S.
MAIN TAKEAWAYS KEY RECOMMENDATIONS
Chobani, Silk and Organic Valley are among the
largest local specialty food brands in the U.S.
Local production, affordability and
healthy/organic are highlighted factors
Wasa, Felix and Walkers are European brands that
have used partners to initially enter the U.S. market
Convenience, health benefits and national
heritage are factors effecting customer appeal
Meats, unprocessed food, high-sugar foods and
cheese belong to highly regulated foods
Fancy Food Show is the most relevant U.S.
specialty food trade show
Swedish food producers have to perform a full
food export process to exhibit
As U.S. competition is high, Swedish food
companies with the ability to highlight products
offering convenience, health benefits and Swedish
heritage are recommended to enter the market as
they have a higher chance of succeeding
Swedish producers of meats, unprocessed food,
high-sugar foods and cheese should not focus on
entering the U.S. market due to the regulatory
complexity
Fancy Food Show should be visited regularly
for networking purposes but not exhibited at until
the market shows interest
Market Characteristics Sales and Distribution Competitors, Regulatory
Landscape and Trade Shows