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early one-fifth of American adults can be considered gourmet consumers, and these "foodies" are fueling a $41.2 billion industry, according to The U.S. Market for Gourmet Foods and Beverages, a new report from market research publisher Packaged Facts, a division of MarketResearch.com. Packaged Facts projects that the market for gourmet foods and beverages will top $62 billion by 2009.

Based on data from Simmons Market Research Bureau, the report estimates that 18.3 percent of adults try to eat gourmet food whenever they can. And that's getting easier to do. Several factors are making gourmet products more available, appealing and affordable, including greater involvement in gourmet on the part of mainstream food marketers, expanding retail distribution of gourmet products and a growing synergy between the natural and gourmet foods industries.

"More gourmet products are using natural and organic ingredients (and appealing to consumers' social consciences by offering products that are good for the environment and for the workers who produce them,) and more natural foods retailers are carrying upscale, gourmet food and beverage items that meet their quality standards," said Don Montuori, publisher of Packaged Facts.

Convenience, too, continues to be a major force influencing everyday purchases of food and beverages, and gourmet/premium products are no exception to this rule. It is no coincidence that some of the fastest-growing products in this market - including bottled water, RTD beverages, bagged salads, and refrigerated "supermarket sushi" - benefit from the convenience angle in terms of portability, being fully prepared, ease of preparation, and no-mess consumption.

The U.S. Market for Gourmet Food and Beverages covers eight product areas: Beverages, Baked Goods, Pasta and Grains, Fresh Produce, Ready-to-Eat Meals, Condiments and Sauces, Cheese, Candy, and Ice Cream and Frozen Desserts. The report charts historical sales and projections; analyzes marketing and new product trends; and offers an in-depth profile of the gourmet consumer.

This report focuses on eight broad categories of gourmet foods and beverages, each of which is covered separately in the following chapters of this report. Listed in descending order of dollar size, these categories are:

• Beverages: The gourmet beverages category encompasses bottled water; ground and whole bean coffee; bagged/loose tea; upscale juice beverages, New Age beverages and premium sodas; bottled or canned ready-to-drink (RTD) tea, coffee, chai, etc.; and beverage mixes and concentrates (cappuccino mixes, chai, cocoa, etc.)
  
  
• Baked Goods, Pasta, and Grains: Baked goods encompass a wide spectrum of products including breads and rolls, crackers, cookies, pastries, cakes, etc., including both packaged and in-store bakery products. Pasta is defined as uncooked pasta, noodles (including Asian noodles) and filled pastas (prepared pasta in sauce is covered in the RTE Meals chapter). Grains include rice - especially exotic varieties, bulgur wheat, couscous, polenta, etc. and mixes thereof.
  
  
• Fresh Produce: This category examines fresh produce (i.e., vegetables and fruit) sold at retail. Included is both specialty produce, such as exotic fruits and baby vegetables; and premium, value-added products such as bagged salads and fresh-cut fruits and vegetables.
  
  
• RTE Meals: This category encompasses completely prepared meals, entrees, soups, and appetizers/snacks that are sold in refrigerated, frozen, or shelf-stable state for consumers to take home and reheat or eat cold. Some examples are frozen entrees and pizzas, fully cooked "heat-and-eat" entrees sold in the meat department, and hot foods sold through the deli department (e.g., rotisserie chickens.) Also included are refrigerated "supermarket sushi," quick-cook frozen meal kits, and instant meal cups and bowls.
  
  
• Condiments and Sauces: The gourmet condiments and sauces category encompasses a wide range of products including all types of sauces and marinades, salsas, pasta sauce, mustard, ketchup, mayonnaise, oils, vinegars, and salad dressings; chutneys and relishes; herbs, spices, and seasoning mixes; along with jams, jellies, dessert sauces, and other sweet condiments.
  
  
• Cheese: The gourmet/specialty cheese category is broadly defined to encompass non-commodity deli and dairy cheeses, ethnic specialty cheeses, and small-production artisan and farmstead cheeses.
  
  
• Candy: This category includes chocolate and non-chocolate products. Chewing gum is excluded.
  
  
• Ice Cream and Frozen Desserts: This category encompasses ice cream, ice milk, gelato, frozen yogurt, sherbet, sorbet, water ices, and frozen novelties (individually packaged single servings of frozen desserts, such as ice cream bars, ice cream sandwiches, or bite-size pieces.) Products sold by the scoop or in bulk through ice cream shops are excluded. Note that the ice cream industry uses the term "superpremium."

The average American family - not just the affluent - is becoming increasingly adventurous in its diet. A growing number and range of consumers perceive gourmet foods as affordable self-treat. More supermarkets, health and natural food stores, warehouse clubs, discounters, and other venues are carrying a greater number of gourmet foods and beverages. Mainstream marketers are moving into premium and gourmet lines, either through acquisition or through internal development.

Packaged Facts estimates that total retail sales of all gourmet foods and beverages topped $41.2 billion in 2004, an increase of 9.8 percent over the previous year's sales of under $37.7 billion. During the five-year period from 2000 to 2004, the market experienced a compound annual growth rate (CAGR) of 8.9 percent. This surpasses the growth rate of the overall food and beverage market during the same period: the total market for foods and beverages (again, measured in IRI-tracked retail sales) posted a compound annual growth rate of only 1.4 percent, reaching $217.6 billion in 2004. We project that the market for gourmet/premium foods and beverages will grow at a CAGR of 9.7 percent over the next five years, to top $62.5 billion in 2009.

Beverages is the largest category within the gourmet/premium foods and beverages market, accounting for almost one-third (32.8 percent) of total retail sales in 2004. Next comes the baked goods, pasta, and grains category, representing 16.5 percent of sales, followed by fresh produce (11.5 percent) and RTE meals (10.2 percent.)

Gourmet foods and beverages are sold through a broad spectrum of retail channels. These include conventional supermarkets and grocery stores, gourmet/specialty stores (such as gourmet food stores, coffee and tea stores, chocolatiers, and kitchenware stores,) health and natural food stores, warehouse clubs, convenience stores, ethnic food stores, delicatessens, cafés, mass merchandisers, drugstores, department stores, farmers' markets, and direct sales venues including mail-order catalogs, online, and by-mail subscription services. Certain products are also sold through vending machines and a whole host of alternative outlets such as bookstores, sporting goods stores, video rental stores, office supply superstores, bed-and bath stores, greeting card stores, florists, liquor stores, discount clothing chains, dollar stores, and even car washes.

Packaged Facts estimates that conventional supermarkets and grocery stores lead the market for gourmet foods and beverages, ringing up 49 percent of total retail dollar sales in 2004. Gourmet/specialty stores comprise the second-largest distribution channel, accounting for 21 percent of sales. Another key channel in Packaged Facts' estimation is warehouse clubs, accounting for a 7 percent share. All other outlets claim approximately 23 percent of sales.

Traditionally, gourmet foods sell best in the fourth quarter, when winter holidays mean more gift-giving as well as holiday entertaining at home that revolves around fancy foods. According to the National Association for the Specialty Food Trade (NASFT,) the typical specialty food store generates about one-quarter of its total sales volume between Thanksgiving and New Year's Day. Certain traditional holiday desserts and gift baskets are especially prone to end-of-year sales.

On the other hand, the best season for condiments is the summer, when barbecues and cookouts call for barbecue sauce, meat marinades, ketchup, and mustard. Ice cream and ready-to-drink single-serve beverages also do best during the summer months, and marketers plan their year around the summer, often using this time to launch new products.

Many factors are expanding the appeal of gourmet/premium foods and beverages to consumers. Key influences include demographic changes, Americans' growing interest in world cuisines and flavors and their growing concern with health and wellness, along with rising incomes, a greater sense of entitlement, and the greater availability of gourmet/premium products. The upshot is a larger group of consumers with more sophisticated palates, higher nutritional demands, and the means and desire to fulfill these tastes.

Packaged Facts predicts that acceptance and use of gourmet/premium foods and beverages is likely to rise steadily at both ends of the age spectrum and at all points in between. The demographics of the prime gourmet/premium food consumer generally coincide with those of the Baby Boom generation, which is in its peak earning and peak spending years. Baby Boomers have long been predisposed to spend money to enjoy themselves and live the good life. "New Products Trends for 2005," a report released by Information Resources, Inc. (IRI) at the Food Marketing Institute's annual convention in May 2005, forecast that premium and upscale products will become more popular because Baby Boomers are becoming empty nesters and have more spending money. At the other end of the spectrum are the youngest consumers - the so-called Generation Y, also known as Echo Boomers after their Boomer parents, comprised of those age 18-28. The Food Marketing Institute (FMI) calls Generation Y "a generation on the go," saying, "Features they deem important are fast checkout, self-checkout, and quick, convenient meal solutions… They love a variety of foods, including ethnic, organic, and gourmet foods. They eat out more often than anyone and are extremely high in their use of coffee bars." Gen Y consumers have grown up taking for granted gourmet/premium foods and beverages that were once considered exotic or marginalized as ethnic. Dr. A. Elizabeth Sloan, a California-based consultant on food, nutrition, and pharmaceuticals, says they are "the most culinary-aware generation in history." Generation Y consumers are also the most likely to shop at an ethnic specialty store - more than double any other segment - gourmet shop, or natural/organic store, according to the Food Marketing Institute report "Trends 2004 in the United States: Consumer Attitudes and the Supermarket."

In between these two groups is Generation X, currently age 29-40. Although this generation is 35 percent smaller in numbers than Baby Boomers and 32 percent smaller than Gen Y, these consumers are the likeliest group (51 percent) to have children under 18 living at home, and they are the most in the market for convenient meal solutions and value-added ingredients. Their notable openness toward other cultures also makes them a prime target for ethnic foods.

Americans are developing more sophisticated tastes, thanks to a combination of higher discretionary income, better education, more frequent travel, more dining in upscale restaurants, and more food and cooking shows on TV. Consumers are also being exposed to a wider variety of gourmet/specialty foods than ever before, even at the fast-food level, with chains like Dunkin' Donuts offering fresh-brewed espresso and Subway and McDonald's incorporating artisan breads and fancy salad greens into their new menus. The country's changing ethnic composition is also having a major impact on gourmet food and beverage sales. As the United States increasingly becomes and recognizes itself as a multicultural society, ethnic foods are surging in popularity and acceptance. Foods that were once considered ethnic, such as Italian, Mexican, and Chinese dishes, have become mainstream. The consumer base for ethnic foods counts not only immigrants and their descendants, but also mainstream consumers seeking bolder, more exotic taste profiles. Ethnic spices, other ingredients, and cooking techniques provide the intense flavors and textures, visual appeal, and variety that today's consumers want. Besides the vast number of authentic ethnic foods available, mainstream marketers are expanding their product range to encompass fusion flavors such as Thai-topped pizzas and wasabi-laced mayonnaise, and the possibilities opened up by such multicultural tastes will broaden the market still further.

According to the Food Marketing Institute's "Trends in the United States," seven out of 10 shoppers age 25-39 purchase ethnic foods at least once a month. During 2004, the Washington Post reported that one in five Americans is eating more ethnic food than two years ago, and this trend will continue to deepen and expand as consumers become increasingly familiar with tantalizing flavors from a variety of cultures.

A trip to just about any large supermarket shows an ever-expanding range of ethnic and regional products available. Take-out sushi bars are, for example, now a feature in several thousand U.S. supermarkets. Valerie Skala Walker, vice-president of analytic product management and development for IRI, notes, "We have plenty of money to spend at the supermarket and love to bring home foods that remind us of past travels - like the spicy foods we tried in the Southwest or the sourdough bread we had in San Francisco." Many consumers crave the thrill of exploring new tastes, and descriptions that romance the foods' origins (be it a far corner of the globe or a hidden artisan maker) are part and parcel of gourmet food and beverage marketers' arsenal. Flavor & The Menu's "2004 Flavor Forecast" notes, "Quality means that even basic ingredients are upscaled: butter has a higher fat content, sugar isn't plain white, it's muscavado or turbinado, and salt comes from far away places and hallowed waters."

Interest in health and nutrition is accelerating across all age groups, especially among those over 40. More than half (57 percent) of all Baby Boomers (now age 41-59) and 67 percent of those age 60 and older are making "a lot of effort" to eat healthier, according to "Shopping for Health: Making Sense of Nutrition News & Health Claims," the latest consumer survey by the Food Marketing Institute and Prevention magazine (November 2004.) These percentages are significantly higher than those of their Gen X (45 percent) and Gen Y (33 percent) counterparts.

Mass-market sales of olive oil grew 16 percent in 2004, more than twice as fast as the overall cooking and salad oils category. Sales of products claiming antioxidant benefits - including green tea, pomegranate juice, blueberries, and even dark chocolate - are skyrocketing.

Consumers are willing to pay a premium for heirloom, organic, and artisan produce, cheese, and lately, meats. Also showing impressive growth are foods and beverages with better-for-you formulations, such as those using no-sugar and whole-grain recipes. A synergy is taking place between the natural foods industry and the gourmet foods industry, with more gourmet products using natural and organic ingredients (and appealing to consumers' social consciences by offering products that are good for the environment and for the workers who produce them,) and more natural foods retailers carrying upscale, gourmet food and beverage items that meet their quality standards. As wellness issues continue to resonate with consumers, premium ingredients will play an increasingly large role in food choices. Mark Erickson, vice president and managing director of the Culinary Institute of America, believes that tomorrow's "hot spots will be where the emerging Mediterranean, Asian, and Latin flavors intersect with the impact of new information on health and diet."

The stresses of life and a new sense of "entitlement" - particularly after a hard day at work - are leading consumers to reward themselves with upscale foods. Since the 1990s, savvy marketers have positioned gourmet/premium foods and beverages as "affordable luxuries."

But what used to be a gift item bought to impress guests when entertaining, or a once-in-awhile treat, is now taking on overtones of a frequent and deserved self-reward. Indeed, the increased availability of such products is fueling what is being called the "democratization of luxury" as lower- and middle-income consumers aspire to buy products that once were the purview of the very rich. The success of Starbucks coffee and Godiva chocolate is a strong signal of how mass-market consumers are trading up to gourmet products that make their appeals to a broad audience. Consumers from all economic strata are springing for a Starbucks Frappuccino on a regular basis; and Godiva's latest advertising campaign squarely targets women who feel what Jacquie Lenart, the company's vice president of marketing, calls "this idea of 'deservingness.'"

Retail distribution of gourmet/premium foods and beverages is expanding as well, leading to greater availability, greater exposure, and more choices, often via "channel blurring." The big supermarket chains are feeling the heat from mass merchandisers like Wal-Mart and Target, which are increasing their food offerings. Conventional supermarkets are also facing increased competition from natural foods supermarkets like Whole Foods Market and from rapidly expanding gourmet/specialty store chains like Trader Joe's. As a consequence, grocers are seeking to distinguish themselves by luring shoppers with premium products they cannot find elsewhere. In particular, retailers are focusing on upgrading their fresh foods departments with expanded produce selections, upscale baked goods, and premium meats - all of which carry higher profit margins and are more likely to make the stores a consumer "destination."

At the same time, more mainstream marketers are moving into premium and gourmet lines, either through acquisition or through internal development. These deep-pocketed marketers are in a very good position to push their products into retail stores and onto consumer tables via their far-reaching distribution networks and huge advertising and marketing budgets.

Convenience continues to be a major force influencing everyday purchases of food and beverages, and gourmet/premium products are no exception to this rule. It is no coincidence that some of the fastest-growing products in this market - including bottled water, RTD beverages, bagged salads, and refrigerated "supermarket sushi" - benefit from the convenience angle in terms of portability, being fully prepared, ease of preparation, and no mess consumption. "What Do Americans Really Eat?", an IRI consumer survey released in 2003, found that although nutrition is valued across meal and snack occasions, it is consistently overshadowed by convenience. Speed/ease of preparation is consumers' top consideration in the food-selection process (even more important than price), with 74 percent of consumers using this criterion to determine their breakfast selections and 60 percent saying it is crucial in their lunch and dinner choices. More meals are also being consumed on-the-go - and increasingly in the car - so portability is another key feature in product development. Consumers have demonstrated that they are willing to pay more - and sometimes a lot more - for the same food if it is presented in a more convenient package, with bagged salads being just one example.

The breadth of the gourmet foods and beverages market makes it difficult to pinpoint the exact number of marketers at any one time. Packaged Facts estimates that hundreds of marketers compete in this market on a national scale, and thousands compete on a regional or local basis. The National Association for the Specialty Food Trade (NASFT) has more than 2,100 members, and there are thousands more small marketers that are local or regional in scale and are not members of this national trade association. In addition, for competitive reasons, many larger marketers that participate in the gourmet foods and beverages arena, particularly divisions of major corporations, do not belong to the NASFT (which tends to be comprised of smaller, independent marketers) and do not exhibit their products at gourmet food shows.

Marketers participating in the gourmet foods and beverages market range from artisans that make and sell their products in a single shop to huge international conglomerates with a broad portfolio of consumer products. The vast majority of marketers participate in only a few product subcategories, but many of these are leaders in their respective markets.

Some of the more prominent marketers in the gourmet foods and beverages market are divisions of huge multinational food conglomerates. Major companies that are heavily involved in the market include Campbell Soup Co.; Coca-Cola Co.; ConAgra, Inc.; Groupe Danone (France); General Mills, Inc.; H.J. Heinz Co.; Hormel Foods Corp.; Kraft Foods, Inc.; Lancaster Colony Corp.; McCormick & Co., Inc.; Nestlé S.A. (Switzerland); PepsiCo, Inc.; Procter & Gamble Co.; Sara Lee Corp.; Starbucks Corp.; and Anglo-Dutch conglomerate Unilever. Many of these companies field gourmet foods and/or beverages in multiple categories and under multiple brand names. For example, Campbell Soup owns Pepperidge Farm (bread, cookies, crackers, and cakes) and Godiva Chocolatier; and Kraft Foods markets a long list of gourmet and premium brands, including Gevalia coffee and tea, Grey Poupon mustard, DiGiorno and California Pizza Kitchen frozen pizza, DiGiorno refrigerated pasta, Athenos and May-Bud cheeses, Peek Freans cookies and crackers, and Toblerone chocolate. Many other marketers that compete in only one or two product categories within gourmet foods and beverages are foreign-owned. Examples include Barilla America, Inc., the nation's leading pasta marketer (a subsidiary of Barilla Alimentare S.p.A., Italy's largest pasta company); Ghirardelli Chocolate Co. and Lindt & Sprüngli (USA), Inc. (both subsidiaries of Chocoladefabriken Lindt & Sprüngli A.G. of Switzerland); and cheese marketer Lactalis USA, Inc. (a subsidiary of Groupe Lactalis of France).

Independent larger marketers often specialize in a single product niche in which they have built their fame; often, the same products are marketed to retail, foodservice, and industrial accounts. Among key larger independent players are companies like McIlhenny Co., the producer of Tabasco sauce, and Melissa's/World Variety Produce, Inc.

The gourmet foods and beverages market also plays host to a multitude of importers, both large and small, who handle products coming in from all over the world.

Notwithstanding participation by major corporations, the majority of gourmet foods and beverages marketers are still small businesses. Many began as cottage businesses operating from the homes or farms of their owners; and, not surprisingly, women or young couples started many gourmet food firms. Many of these firms are local or regional in scale. Others have a national reputation but sketchy "national" distribution, with products that have gotten positive press and are carried by trendsetting retailers. Many smaller marketers produce an extremely limited line, sometimes consisting of just a handful of items. Others specialize in a single product segment, such as gourmet sausages. Indeed, there are scores of niches within the gourmet foods. Because this is a relatively easy market to enter, new enterprises constantly emerge, eager to test their mettle and introduce their favorite recipe to the world. A few have gone on to become multi-million dollar enterprises. Others have been acquired by larger firms after attracting attention - Hershey Co. just made the surprise announcement, for instance, that it is buying gourmet chocolate marketer Scharffen Berger Chocolate Maker, Inc. Yet, many gourmet foods marketers are just marginally profitable, and many are not even their owners' main source of income. Some marketers also stay small intentionally, content to operate on a local or regional basis, or in a particular niche, supported by a loyal following of retailers and consumers in their area. Such players can have a distinct advantage because they can introduce new products without the months of corporate planning required by larger marketers. They also play an important role in the gourmet foods and beverages market by helping to ensure a place for regional products.

Companies with a strong sales base in natural foods often attempt to appeal to a broader audience by crossing over into gourmet. Adding upscale packaging with sophisticated graphics can transpose a health foods niche product into one with a gourmet image. Likewise, the trend toward healthier natural foods is leading more gourmet/specialty foods marketers to position their products along these lines, by changing existing lines or adding a new product line that fits the natural or organic definition. Products made with premium ingredients that also happen to be all-natural appeal to gourmet and natural food shoppers alike, and are perfectly positioned to fetch a premium price. Accordingly, in some cases companies from the natural foods industry have joined with gourmet foods marketers, one example being HomeGrown Natural Foods, Inc., which brings together Consorzio gourmet condiments, Fantastic Foods natural soup and meal mixes, and Annie's Homegrown natural macaroni-and-cheese mixes.

Private-label brands from retailers are presenting considerable competition to branded gourmet/premium foods and beverages. While budget-priced store brands still outnumber their more expensive cousins, consumers are embracing premium private labels heartily, and these products continue to emerge across just about every category of the gourmet/premium market.

According to the Food Marketing Institute, more than 79 percent of supermarkets nationwide regularly stock specialty foods. The breadth of gourmet products a supermarket chooses depends on a number of factors. Among these are the retailer's overall philosophy and image, consumer demographics, the particular neighborhood, how much space is available, and what competing stores are selling. "Upscale supermarkets" that carry a wide selection of gourmet foods and beverages tend to emphasize fresh foods and customer service, superior displays, and a more elegant ambiance. Such stores often highlight premium produce departments, in-store bakeries, delicatessens, service meat counters, fresh seafood departments, and fancy cheese counters. They may include a restaurant or café, extensive wine selections, and a gourmet cookware department. Many offer cooking classes and events to promote their gourmet products, a more knowledgeable staff, and even personal shoppers. Examples of leading upscale supermarkets are Rice Epicurean Markets (Houston), Wegmans Food Markets (Mid-Atlantic region), D'Agostino (New York City), Larry's Markets (Seattle), Draeger's Markets (San Francisco Bay area), and Lunds and Byerly's (Minnesota.)

Gourmet/specialty food stores encompass a wide range of retail outlets, from vest pocket coffee bean shops to huge emporiums chock-full of everything. Gourmet/specialty stores can be divided into two basic types: generalist gourmet stores, which carry many categories of food; and those specializing in a particular category - for example, chocolatiers, cheese stores, or coffee bean stores. Whatever form they take, all specialty food stores are characterized by the service and knowledge of their sales personnel and ambience in which they sell their goods. Purchasing fine foods should be a pleasurable experience, goes the prevailing specialty food store philosophy - one in which the customer enjoys a measure of personal attention - and this activity should be an educational experience as well. Noteworthy specialty store chains include Dean & DeLuca; Sutton Place Gourmet (operating stores under the Sutton Place Gourmet, Balducci's, and Hay Day Country Farm Market names;) Zabar's and Fairway Market (New York City;) West Point Market (Akron, Ohio;) and Zingerman's (Ann Arbor, MI).

Falling somewhere between specialty stores and full-fledged supermarkets are Jungle Jim's International Market, a unique 280,000-square-foot food funhouse in Fairfield, Ohio (the company is planning to open a second Ohio store in 2007;) and Trader Joe's, with over 200 stores in 19 states, and more than 2,000 private-label grocery products. Visiting either retailer is as much an entertainment experience as a shopping experience. The synergy between natural foods marketers and gourmet food marketers has a parallel at the retail level. With their premium formulations, many gourmet/premium foods meet the criteria of being all-natural and preservative-free. Indeed, "natural" and "organic" labels have helped many gourmet and premium brands gain acceptance in upscale natural food stores, particularly the growing sector of natural food supermarkets. Perhaps the most dramatic symbol of the mainstreaming of natural foods has been the birth and expansion of natural foods supermarkets such as Whole Foods Markets, whose sales expanded an impressive 23 percent last year. Indeed, one of the ways natural food stores are increasingly appealing to mainstream consumers is by adding foods that more closely resemble their conventional mass-market counterparts, including a sizable tier of gourmet foods and beverages.

Once perceived as no-frills retailers selling bulk quantities of business and household staples at low prices, warehouse clubs are now bulging with gourmet foods and beverages. Costco, for example, sells more premium wine than any other retailer in the country. Warehouse clubs offer gourmet foods and beverages on a year-round basis, often stocking products developed for foodservice and brands that are hard to find in mass channels. Because warehouse clubs do frequent in-store sampling demonstrations of products and do not charge slotting allowances, many marketers of gourmet foods and beverages see warehouse clubs as attractive clients that can give more exposure to their products and pave the way for increased sales via other mass-market channels.

Mass merchandisers such as Wal-Mart Stores and Target Corp. are fast expanding their food offerings. According to the Food Marketing Institute, Wal-Mart, whose food sales were negligible a decade ago, is now the nation's largest supermarket chain, accounting for well over $100 billion in food sales annually. Besides carrying more food in general, over the past year or so both companies have been developing exclusive premium products in an effort to make Wal-Mart Supercenters and SuperTarget stores more attractive to food-savvy shoppers.

Wal-Mart has rolled out several dozen new upscale private-label grocery items, including nine-layer lasagna, Key lime pie, and premium chocolate bars. Wal-Mart Supercenters carry new private-label Prima Della deli items including Black Angus roast beef, Italian ham, and - in stores with a seafood counter - lobster, steamed to order. Target, meanwhile, has launched its Sutton & Dodge premium USAD Choice Angus beef brand at SuperTarget stores across the country.

As profits from gasoline and cigarettes shrink, the nation's 138,000 convenience stores are expanding their food horizons catering to the young generation of the "grab-and-go affluent" - consumers who spend considerable time in their vehicles and demand portable meals, but want more than Slurpees and shrink-wrapped sandwiches, according to Jeff Lenard, spokesman for the National Association of Convenience Stores (NACS). Behind the cooler doors in C-stores are some of the hottest products in the beverage industry, including single-serve bottled water, herbal teas, iced cappuccino, chai, nutrient-enhanced New Age beverages and energy drinks, and upscale juices and soft drinks. More than one out of every five bottles of water sold in the country is purchased in a convenience store, according to the NACS. Convenience stores have also developed a healthy business in high-margin, impulse-oriented treats like superpremium ice cream, premium cookies, and gourmet chocolates. Some marketers of premium RTD beverages and ice cream novelties even test-market them in convenience stores before rolling them out to other channels. C-stores are offering more upscale ready-to-eat items as well, including sushi trays and panini sandwiches.

An increasing number of gourmet foods and beverages marketers have their own consumer brand Web sites. For many, the thrust is purely promotional, with company and product histories, nutritional information, recipes, and directions on where to buy the products at retail. Others use their Web sites to sell products directly to consumers as a side business, or to provide retailers and distributors with a fast means of communicating and/or placing orders with the company.

Because the market for many gourmet foods subcategories is fueled by the appetites of enthusiasts who learn about products through word of mouth, selling products online can be very rewarding for small marketers eager to get their products out. Many gourmet foods marketers and retailers have limited or spotty distribution, so delivering orders directly to consumers is, in fact, often a key part of their distribution strategy. The power of a good search engine allows consumers to find gourmet brands and products that may not be available in their local stores, thus enabling marketers and retailers to reach beyond a local consumer base and expand into new areas. Companies that engage in the gourmet/premium food business through e-commerce may be divided into three types:

• Food retailers whose primary or sole business is via the Internet, such as salsa and hot sauce specialist Chile Today Hot Tamale (www.chiletoday.com) or global chocolate source World Wide Chocolate (www.worldwidechocolate.com);
  
  
• Marketers or retailers who take online orders as a side business or service to their customers, such as D'Artagnan fresh meats and charcuterie (www.dartagnan.com) or Zabar's deli (www.zabars.com); and
  
  
• Non-food retailers who include some food items in their merchandise assortments, such as cookware store Williams-Sonoma (www.williamssonoma.com). Online megastore Amazon.com (www.amazon.com) has a beta-site dedicated to gourmet food that already includes hundreds of brands and tens of thousands of products.

In addition, some consumer-direct food businesses engage in subscription services. Among the most notable of these is Gevalia Kaffe Import Service (www.gevalia.com), a unit of Kraft Foods.

Ethnic food sales will sizzle for some time to come, as new flavors and ingredients continue to expand and evolve at a dizzying pace. In today's even more globalized world, new tastes and varieties can move in the blink of an eye from sophisticated white tablecloth restaurants to supermarket shelves. In particular, international cuisines continue to set trends and introduce new flavors. In 2005, Packaged Facts expects Asian foods to take center stage, with the flavors and spices of India becoming more prominent. Spanish and Latin ingredients are also still hot, while Caribbean has slowed somewhat. African and Moroccan flavors are still on the horizon, but getting closer. Also, in 2005 and beyond, we will see more regionalization of international cuisines, as specialty foods from specific parts of foreign countries emerge and gain a following.

Health and wellness concerns will continue to greatly influence the food industry as consumers increasingly look to food as a way to manage their health issues. As interest in low-carb dieting wanes, gourmet/premium food and beverage marketers are moving to develop "light" products that take advantage of both low-carbohydrate and low-calorie formulations through the use of sugar substitutes like Splenda (sucralose.) This is especially true in dessert and beverage categories. Trans fat will also become more of an issue as labeling will be required in 2006. Whole grains comprise another key area poised for expansion during the next year, as does tea, both as an ingredient and as a beverage.

Whether they are DINKs (dual income/no kids) or Empty Nesters, married couples with no children under age 18 at home are now the dominant household unit, followed by one-person and married-with-children households. Notes A. Elizabeth Sloan in Food Technology (April 2005,) "Developing and repackaging products for the one-third of households now 'cooking for two' is a very big idea." More than two-thirds (69 percent) of women in the Baby Boom group say that products that are easy to prepare strongly influence their food purchasing decisions, according to Yankelovich Monitor (2004;) while 42 percent look for resealable packaging, 28 percent are swayed by products that are easy to clean up, and 27 percent favor individual portion-sized packaging. Bertolli USA is on the cusp of this trend, with its Bertolli Dinners for Two restaurant-quality pasta meals that go from freezer to skillet to table in 10 minutes, as are Babé Farms, Inc.'s salad blends in resealable bags and Dole Food's "just the right size" salads in half-sized bags.

The antithesis of foods that are mass-produced, artisan foods are foods that are grown or produced in limited quantity, in a "traditional manner." This encompasses a combination of emphasis on the uniqueness and quality of each ingredient, traditional craftsmanship and artistry, the place where the products are made or grown, and the passion and personality of the producer. While artisan breads, artisan cheeses, and hand-crafted chocolates are the best known examples, interest is also expected to grow in products such as "heirloom" kurobuta pork and premium Kobe-style beef from free-range American raised Wagyu cattle, both listed by Bon Appetit magazine among their "What's Hot" ingredients for 2005; artisan teas such as the Flowering Teas from Numi Tea, whose leaves are exquisitely hand-sewn into decorative rosettes that unfurl into beautiful flowers as they infuse; and small-batch adult soft drinks in old-fashioned glass bottles. In an October 2004 paper delivered to Bord Bia (the Irish Food Board), the aptly acronymed TASTE (Traditional, Artisan, Specialty Trade Expertise in Food) Council notes, "Artisan foods offer a unique experience, a sense that care and creativity have been baked into them and it's only a matter of time before general-market consumers begin to expect more artistry in their foods." The paper goes on, "The challenge is for food companies to create products of artistic enticement that can be scaled-up to a profitable level." Bord Bia established the TASTE Council in 2003 to help develop a world-class artisan and specialty foods sector in Ireland.

Choosing to buy foods and beverages from marketers whose policies support environmental and social causes is no longer just a health food store niche. Nearly half of organic sales now come from mainstream retail outlets including supermarkets, grocery stores, and warehouse clubs. In 2003, sales of organic foods and beverages totaled $10.4 billion, nearly tripling since 1997, according to the Organic Trade Association. But beyond the possible self-serving health benefits of organic foods, a growing number of gourmet food marketers, retailers, and consumers are going out of their way to support ethical causes, perhaps partly to assuage their guilt at being among the "haves" of the world. For example, the gourmet coffee industry is in the forefront of offering products that are not only organic, but that provide a fair living wage to third-world workers (Fair Trade) or aid the environment (Shade Grown). Starbucks was one of the first major corporations to show such responsibility, in 1998 forming a partnership with Conservation international to encourage environmentally sound coffee-growing practices, and in 2000, beginning to sell Fair-Trade certified coffee through all its coffeehouses. It is estimated that Fair Trade coffee now accounts for about 5 percent of U.S. specialty coffee sales.

A market is beginning to evolve for Fair Trade tea and chocolate as well, as the availability of third-party certification catches up with demand. Plantations Arriba chocolate bar, certified by the Rainforest Alliance, claims to be the first Fair Trade chocolate bar introduced in the United States. Other related trends with a taste for social responsibility include sustainable agriculture and humane treatment of animals. In June 2005, in conjunction with the Humane Society of the United States, both Wild Oats Markets and Whole Foods Market took the extraordinary step of adopting cage-free egg policies, refusing to sell or use eggs from battery-caged hens.

Superpremium ice cream marketer Ben & Jerry's (although now owned by Unilever), yogurt maker Stonyfield Farm, and salad dressing, pasta sauce, and popcorn marketer Newman's Own are also in the forefront of marketing social responsibility as well as gourmet products.