Food-by-Mail Industry Update – January 2017

Holiday 2016 Recap

We hope everyone had a successful holiday season and is looking forward to a robust 2017. 2016 was an interesting year, and the holiday season was no exception. Most of us went in to the 4th quarter expecting a late-blooming season. We also expected a post-election bump which we did not get.   Instead, sales remained unimpressively flat into the second week of December.  From September 1st through December 11th, year-over-year sales for the same period grew less than 1%.

As a result, we saw companies scale back on production and seasonal staff, and aggressively promote and discount to reduce inventory. Our weekly data shows the first two weeks of December to be down a dismal 2% and 5% respectively. Then our late-bloomer began to flourish. Sales were up 15% in week three of December as compared to the same week the prior year. Even more striking, sales grew 82% year over year in week four.

The industry closed the season with an 8% gain in sales for the September – December season.  Total year, sales grew 9%.  This is an impressive number after such an unimpressive start to the holiday.   The extra one or two days to ship before Christmas made a significant difference.  Companies that anticipated this saw the most benefit, while others struggled to keep up with demand.

Our Specialty Food Index (SFI) is comprised of companies selling protein, fruits and nuts, snacks, confections, pantry goods, gift baskets and other food items direct to consumer.  Here is a closer look at 2016 vs 2015 averages of all companies in the index:

17% were DOWN from 1% to 10%

5%   were FLAT

33% were UP from 1% to 10%

22% were UP from 11% to 20%

22% were UP more than 20%

Best Performers
It is always a challenge to find a collective answer for success in the specialty food business.  So much of it depends on the quality and uniqueness of the offering, trends, demand and of course, timing and luck.  A company that sees outrageous growth in a year of otherwise lackluster results may have developed the first ever, calorie free, fat free chocolate that tastes exactly the same as the real deal.   There are always exceptions and there are always individual stories.  That’s what makes this business so interesting.

We see that even in marketing:  how often to e-mail, how little to e-mail, ratio of off-line to online spend, to discount or not to discount, the success of paid search, to Amazon or not to Amazon.  There is a different answer to every question for every client and the magic is in finding the balance within the obvious limitations.   We were able to find some common themes through all of our best performers.

We found that almost all best performing companies made significant improvements to their site’s usability and customer experience.  Conversion Rate Optimization (CRO) is an important and ongoing part of any e-commerce program.  If the site isn’t performing, search efforts, e-mailing, direct mail and prospecting greatly loses its efficacy.

We have found that most companies are often too close to their own sites to see the issues.   Our top performers have homepages that deliver a very clear message.  A new visitor should arrive at a site and immediately understand what is being sold, what makes it unique and why they should buy it.  This is done with a thoughtful balance of enticing photography and well placed, well written text.  Top performers also have clean and well organized navigation.  They have figured out where they are losing shoppers and where the conversion killers are hidden.  Top performers have a concise shipping table that is easy to understand.  Their checkout process is unencumbered and simple.   There are many CRO best practices.  Look for trends and ideas throughout our 2017 newsletters.

In addition to site improvements, best performers increased their budgets for paid search, circulated more mail pieces and expanded prospecting efforts.  Some companies tried print advertising for the first time with great success.  We are still seeing very positive results in direct mail with carefully chosen lists and the right offer.  The best performers were active both online and offline in increasing traffic and ultimately sales.

Best performers had well thought out, well timed promotions.  They added new products to their offering to re-incentivize older buyers and bring in new ones.  They also had relevant and interesting movement throughout their messaging and on their site rather than re-working the same content over and over.   To find the winning play in all these areas, best performers tested often to find the who, when and why of what is working and what isn’t.

Under Performers
Overall the under performers reduced or maintained marketing spend.   That may seem conceptually obvious, but the true math of it is that costs continue to rise and if spend doesn’t increase relatively, you are simply marketing less.  Postage, paper and list costs increased across the board in 2016.   Static or reduced budgets mean less pieces and a smaller audience receiving them.  We see the same thing in paid search.  Increased competition and higher click costs necessitate budget revisions.  If the site isn’t making up for it in conversion, reduced traffic means decreased sales.

In addition, under performers were slow to make site changes or invest in a much-needed re-launch.  The checkout process, from recipient assignment to submitting an order, was lack luster in most poor performers.   Often copy needs revising and photography needs to be refreshed or re-shot completely.  Some sites feel outdated, which calls in to question trust and reliability.  In some cases, navigation was overwhelming and confusing.  Simple is better.  Insuring that a site is performing should be our first priority as marketers, because in today’s virtual world, all efforts lead to one place.

Another contributor to poor performance was a lack of new merchandise and a stagnant offering.  In addition, some companies that have largely undifferentiated products, i.e. similar products with lots of comparability and availability, struggle to stand out in the crowd.   In certain spaces, saturated markets with extensive competition add to that struggle as well.   It is becoming harder and harder to have a unique reason for being.

With all of its twists and turns, 2016 was a good year.  We saw everything from an explosive 50% increase, to a disappointing 5% decrease.  With an average of 9% growth last year, we are all well poised to learn from our mistakes and bolster our successes.  Here’s to a happy and healthy 2017.

We will be in San Francisco for the Fancy Food Show!  If you would like to meet us, please contact Jennifer Emanuelson at



Tony Cox