ERA OF SPECIALIZATION

AMITY K. MOORE

As specialty food gains ground with consumers, it's also picking up more shelf space in the supermarket.

Some of the reasons for stocking specialty items, according to retailers, are customer demand for variety and increased availability of a wide selection of products, product loyalty among local customers and healthy margins.

Retailers polled by SN defined specialty food as items outside the mainstream, including ethnic, regional, organic, natural and gourmet consumables.

Moreover, "gourmet" is not necessarily synonymous with "specialty." According to Scott Silverman, vice president and director of specialty food and wines at Rice Food Markets in Houston, gourmet refers to "a high-end cottage industry, prime ingredients and beautiful packaging."

Said Silverman: "We're generally speaking about a lot of smaller companies."

Retailers stocking specialty food know that shoppers often are looking for variety.

"It is necessary to carry specialty food to enhance our variety image, and because customers seem to be looking for new and special food," said Peter Dudis, director of grocery operations at Big Y Foods, Springfield, Mass.

Ruth Kinzey, corporate communications manager at Charlotte, N.C.-based Harris Teeter, agreed.

"Our customers appreciate having a wide variety from which to select. In fact, offering a wide variety of specialty food is one feature for which Harris Teeter has established a reputation, thereby [differentiating itself] in the marketplace," Kinzey said.

Even wholesalers have been forced to jump into the specialty-food arena to meet the demands of their retailing clients.

"Certain items we don't normally stock, we're having to carry just to satisfy their needs," said Sam Canova, category manager at Associated Grocers, Baton Rouge, La. He said he has noticed a surge in the demand for unique and special products, partly generated by additional retailers entering his market.

"They're handling different items than we do and bringing them into our area. We're being forced to match up and have items available," Canova said.

Items most in demand are salad dressings and other condiments. Even in his own area of Cajun spices and crawfish, he's noticed an increase in the number of people trying to contract distribution for their "special" recipes.

"It seems there are a lot more people cooking who feel they have a good enough product to put out on the market. We're getting a lot more local items," he said.

Picking items that appeal to the locals is part of Salisbury, N.C.-based Food Lion's strategy when adding specialty food to the Center Store mix.

"Usually they are local favorites or items that are of regional flavor -- something that's particular to an area of the country," said Chris Ahearn, corporate communications manager for the chain.

Many of Food Lion's specialty items are produced by local growers or manufacturers who supply products directly to the stores, she added.

Specialty lines sometimes comprise ethnic foods. For example, Food Lion has brought in packaged goods that appeal to a growing base of Hispanic customers in Florida, Texas and Charlotte, N.C., stores.

"We're devoting more space to putting those kinds of products together in a central location so people know where they can get those kinds of foods," Ahearn added.

This kind of micromarketing to a targeted consumer is often done for ethnic and specialty food. "When specialty food is carried, one could be micromarketing," said Harris Teeter's Kinzey.

"For example, the appeal would be to a consumer who was interested in a regional brand or imported product or required a special diet," she added.

Some specialty food -- like ethnic items -- fits an ethnic demographic, while other lines may fit an age or socioeconomic demographic, and still others may not be correlated to a demographic at all.

That is why Rice's Silverman said it isn't necessary for all supermarkets to carry specialty items. "It depends on the demographics of the neighborhood and whether it warrants carrying [specialty items].

"For example, we carry a large kosher variety in several of our Epicurean markets. We carry more kosher food in some stores than in others," he added.

The profits from specialty can make it worth a retailer's while. "A lot of those products are fairly generous in their suggested margins," Silverman said.

"It may be in the high 20% range, if it's a price-sensitive gourmet item. Otherwise, it may be in the 30% to 40% range. If we have to warehouse and order it ourselves, it may carry a 50%-plus margin," he added.

To draw shoppers' attention to these items, Silverman said Rice uses endcap displays to play up specialty food.

In addition, its Epicurean markets adopted the expression "haute," which has been used in several advertising campaigns, as well as store circulars.

Like Rice, Big Y Foods relies on display. Special signage used in conjunction with a different colored fixture, found adjacent to the traditional display, differentiates specialty foods from mainstream groceries, Dudis said.

For example, specialty jams and jellies are on a separate rack next to the Welch's grape jelly, explained the chain's spokeswoman, Claire D'Amour.

Others grocers, like independent Evans Supermarket, Detroit Lakes, Minn., place the products as close to like items as possible.

Store manager Jim Watland said he takes customer requests for specialty items. "We may bring in only one item and deal with that customer on a one-on-one basis," he said.

Monthly promotions and cross merchandising raise awareness of specialty items at Harris Teeter.