In this feature from PLMALive! Len Lewis looks at the growing craft foods and beer sector where premium, artisan-style products rule.
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A Crafty Strategy
The growth of craft or artisanal products has been one of the most exciting developments in the food and beverage industries over the last few years. These terms are mostly interchangeable and have been used to describe small-batch production by skilled workers in everything from beer and soft drinks to pickles and ice cream. But has it become just an overused marketing ploy?—a fad, a food bubble that’s about to burst? Or, is the craft food movement a sustainable long-term trend—a consumer backlash against so-called “Big Food” and a valuable point of differentiation for private label marketers and retailers? The category’s become so popular that Hartwick College in Oneonta, New York has established the state’s first Center for Craft Food and Beverage, with testing facilities and a curriculum that includes business planning and development for craft food producers.
Many stores have already jumped in. Fairway supermarkets in New York is carrying artisanal pasta under its own label. Safeway is selling a line of European artisan-style breads under the Safeway Select label. Trader Joe’s also markets artisanal breads and baguettes as well as artisan-made cheeses. Aldi US has artisanal snack crackers in flavors like Jalapeno Monterrey Jack and Italian Herb and Mozzerella. Kroger’s Private Selection includes a variety of artisan foods like applewood smoked bacon and cheddar angus beef burgers, as well as frozen lobster and shrimp ravioli. And Martin’s supermarkets in South Bend, Indiana makes Signature Specialty popcorn like Caramel Crunch and Praline Pecan.
But beer is the backbone of this artisanal trend. There are nearly 3,500 craft breweries everywhere from Brooklyn, New York to Astoria, Oregon. And the category accounts for sales of $19.6 billion. That’s nearly 18 percent of total beer industry sales. It’s so profitable at retail that even a six-pack can yield margins in excess of 30 percent. That’s why chains like Trader Joe’s had aggressively expanded variety with beer-like the Boatswain line from Wisconsin. Whole Foods has even opened brewpubs with its own products at selected stores. And Heinen’s supermarkets in Cleveland, is partnering with local breweries for limited edition products.
The business is also being explored by national brands like Pepsico, which hopes to revitalize its troubled soft drink business. The company has introduced Caleb’s Kola, named after Caleb Bradham, the 19th century inventor of the Pepsi formula. It’s also planning to roll out Stubborn Soda with flavors like black cherry and tarragon, orange hibiscus and pineapple cream. Other producers are experimenting with flavors like mint, elderflower, lavender and a variety of hand-pressed fruits.
Overall, the craft food movement has struck a chord with consumers, particularly Millennials, who feel it represents higher quality, minimally processed foods with a certain exclusivity that they are willing to trade up in price for. They feel more connected to these products than mass-market brands and research indicates that these are the same consumers attracted to natural and organic products.
The issue is that increased demand for craft products means higher production and the need to cut costs. But this is the opposite of what the craft food movement is all about and could result in a backlash by consumers who feel they’ve been misled.