Worldwide demand for convenience foods that are healthy, nutritious and packed with flavor is on the rise. This has packaged food manufacturers increasingly reliant on specialty food ingredients to deliver a quality product to market.

More than ever, these specialty ingredients provide bespoke solutions to production challenges, fueling a health-focused shift toward finished foods in all market sectors.

What Are Specialty Food Ingredients?

Specialty food ingredients offer functional and technical benefits to food products. They’re used in nearly all processed foods to improve certain characteristics, such as color, flavor and shelf-life.

These ingredients are broken down into several categories, including:

• Sweeteners
• Acidulants
• Preservatives
• Enzymes

What Do Specialty Ingredients Do?

Without emulsifiers, salad dressings and sauces would separate or change colors on the store shelf.

Without preservatives, meat and poultry products wouldn’t make it from the processing facility to the deli.

Bread, confectionary and packaged foods wouldn’t look, taste or feel the same without food engineers formulating the perfect specialty ingredient for the product. 

Specialty ingredients solve these food manufacturing challenges and often do so while meeting consumer demand for natural, vegan, gluten-free and other certifications. In many cases, engineers create bespoke ingredients to combine the needs of the manufacturer, the demands of consumers and the realities of a dynamic world market.

Specialty Food Applications by Market

Every aisle in the grocery store relies on specialty ingredients to meet consumer expectations in taste, texture and price. Two sectors, bakery and confectionery, have experienced rapid growth in recent years, although revenue is primarily focused on ready-to-eat products.

Food-grade specialty ingredients are also used in pharmaceuticals, nutraceuticals, and many personal care products. Pharmaceutical applications are expected to increase at 7.8% CAGR from 2022 to 2030, outpacing the specialty food ingredient market as a whole by 1.3%.

Specialty vs. Commodity Food Ingredients: What’s the Difference?

Manufacturers rely on both specialty and commodity food ingredients to formulate products, often tweaking formulas and recipes to improve results and react to dynamic supply chain challenges or regulations.

Commodity food ingredients are unfinished products you’d recognize, such as wheat, rice and corn. These soft commodities are regenerative but often experience price volatility. In most cases, commodity ingredients are minimally processed, usually to make transportation more cost-effective.

Specialty food ingredients are engineered or designed from natural or artificial sources to serve a specific functional role in a finished food product. The chemical process is usually described as “value-added” and denotes that these enhancements create an ingredient that is more than the sum of its parts.

Related: Behind the Label: Natural Flavor Ingredients

What’s Driving Growth?

The two driving specialty food ingredient trends are both focused on consumer preference.

Sensory ingredients, or those that enhance flavor, smell and texture, accounted for 55% of all food and beverage specialty ingredients in 2021. That share is expected to increase alongside demand for packaged foods.

The flavors market is experiencing a seismic shift toward organic and natural ingredients. As a result, manufacturers have relied on natural and natural-certified ingredients to meet changing consumer expectations without sacrificing product quality or shortening shelf life. Other ingredient categories, like hydrocolloids, have been formulated to replace artificial alternatives to achieve a natural designation for popular packaged foods.

Overseas Markets Are Primed to Move

The North American market has matured in the past decade, pushing many manufacturers to focus on overseas consumers. High-population nations in the Asian Pacific region accounted for 25% of total revenue in 2021. The region’s population growth and improving living standards make the region a bright spot for brands in the food and beverage, pharmaceutical and personal care industries.

European specialty ingredients revenue growth has been sluggish by US standards, despite ranking as the third-most valuable region. A combination of lifestyle, regulatory and trade differences have made Europe a challenging market for manufacturers, although specialty food ingredients imports have been on the rise in France, Italy and Belgium.

Organic and Diet-specific Trends

Natural, organic, gluten-free and plant-based diets rely on specialty ingredients to meet a consumer shift toward healthier options. 27% of American adults are choosing to consume less meat, resulting in plant-based food sales growing at three times total food sales.

Price matters, too. Historic inflation through 2022 impacted US consumers and many global markets. Food-at-home prices increased 11.4% in 2022 compared to the previous year, with all food categories tracked by the USDA increasing by more than 5%. While the full impact of sustained consumer prices is yet to be definitively analyzed, consumers were more likely to eat at home and rely on packaged foods due to price and storage life considerations.

Diversify Your Specialty Food Ingredients Supply Chain with Tilley

Tilley Distribution is an industry leader in sourcing and designing specialty food ingredients. Find application-specific ingredients and unmatched customer service by speaking with a Tilley representative today.