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


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



Geographic focus

Food trends


Competitors





AGENDA

SCANDINAVIAN SPECIALTY FOOD STORES IN THE

U.S. 2015, PERCENTAGE OF TOTAL

SHARE OF SPECIALTY FOOD CONSUMERS PER

REGION, 2014


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


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.



Geographic focus

Food trends


Competitors





AGENDA


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


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%)



Competitors





AGENDA

FOOD DISTRIBUTION CHANNELS INVOLVE MANY

INTERMEDIARIES AND SUPPLIERS


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

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Co

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Sa

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D

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Tra

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Pro

duct adapta

tion:

lab

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U.S. representation

U.S. SALES AND DISTRIBUTION CHANNELS

3PL

Own warehouse

Fre

qu

en

cy

Retail Chains

Physical Resellers

Online Sales

Imp

ort

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Dis

trib

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Bro

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PRICE VARIES BASED ON THE TYPES OF SERVICES PROVIDED


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


Carries substantial stock


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


Carries limited stock


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


DISTRIBUTORS USUALLY DO NOT CONDUCT SALES

ACTIVITIES AND BROKERS DO NOT PROVIDE LOGISTICS


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


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


FOOD BROKERS, DISTRIBUTORS AND BUYERS WILL ASK

SEVERAL QUESTIONS PRIOR TO BUYING A PRODUCT


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


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


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


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



Competitors





AGENDA

SUCCESSFUL U.S. AND EUROPEAN BRANDS USE A VARIETY OF TACTICS TO APPEAL TO CONSUMERS


U.S. AND EUROPEAN SPECIALTY FOOD COMPANIES

POSITION THEMSELVES AS HEALTHIER ALTERNATIVES


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

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About the Company


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


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



Competitors





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


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


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

http://www.fsis.usda.gov/wps/portal/fsis/topics/international-affairs/importing-products

FOOD TYPE

REGULATION REQUIREMENTS

Most restricted food category in the U.S

Importer must be inspected by the FSIS, part of the USDA


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.



Competitors





AGENDA


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


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


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



Competitors





AGENDA


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


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


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




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.


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



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