Food Gifting in the US reveals that the total market for consumer gifts decreased 8 percent to $92bn in 2006 from 2004. In contrast, the food gift market grew 47 percent in the period, reaching nearly $16bn.

According to Packaged Facts, the publisher of the report, the decrease in the overall gift market stems from a stagnant population growth among children under 14 - a primary target group for gifts - as well as a growing 'what-to-buy' gift-giving frustration.

But people still want to give gifts, says the report, and they opt for gifts of indulgence and experience, gifts that can be shared, and gifts that are sure to please - all of which encompass food.

Using information gathered from a Simmons Market Research Bureau survey of 24,500 consumers in 2006, together with a Packaged Facts online poll of 1,000 consumers in March 2007, the report found that boxed chocolates was cited as the most popular food gift, given by almost half of respondents. The most common occasion for boxed chocolate gifting is Valentine's Day.

With a general increase in self-gifting, one-quarter of people surveyed also said they purchased boxed chocolates and other gift-packaged candy for themselves. Half of candy givers reported buying three or more boxed chocolate or candy gifts in the previous 12 months.

According to Packaged Facts, this suggests that promotions with multiple pricing options might encourage trade-up among customers buying just one item. Most respondents spend less than $20 on a single box of chocolate or other gift-packaged candy, and the majority spend under $100 per year.

However, people are willing to spend more on 'specialty food gifts', such as assortments, nuts and salty snacks, with two-thirds of people who purchase these being willing to spend $20 on a single gift, while 14 percent would spend $50 or more.

Overall, 40 percent of consumers said they purchase specialty food gifts, with the most popular occasion for these gifts being the winter holidays. Some, 42 percent of respondents reported spending more on specialty food gifts in recent years, while just 17 percent said they spent less and the remaining 41 percent spent about the same. Half bought specialty food gifts because they wanted a gift the recipient would use or enjoy. Another 23 percent bought these gifts because they view them as "treats that recipients would not ordinarily buy".

Corporate gifts are also a promising avenue for food gifts, which currently make up about one third - or $2.5bn - of the total corporate gift market.

Interestingly, the consumer polls revealed that brands do not hold much weight for consumers when selecting food gifts. Only 11 percent indicated the importance of brands, while 25 percent said they want food gifts from "a trusted source or store".

"This makes sense, given that many specialty food products are smaller brands that are less familiar," said the report, adding that top attributes sought after are quality and variety, as well as attractive packaging.

According to Packaged Facts, the food-gifting market is highly fragmented, and no one channel dominates. Nearly half of sales (47 percent) are generated through 'brick-and-mortar' retailers (such as grocery stores and confectionary retailers), while online and direct marketers control another 32 percent of sales. Independent, franchise and distributorship food gifting companies make up the remaining 21 percent of the business.

The biggest challenge facing the specialty food gift market is visibility, said the report.

"When asked what stops them from buying specialty food gifts, a third of respondents said they 'don't think of it'. Mainstream retailers' seasonal displays of specialty food gifts influence purchases during the winter holidays. But perhaps more food gifts would be purchased throughout the year if they were given more visibility on an ongoing basis."

Survey respondents also noted 'freshness' (22 percent) and 'spoilage/contamination' (18 percent) concerns, suggesting that marketers - in particular online and direct marketing venues that ship products - could do more to address food quality concerns. Prominent descriptions of packaging methods and money-back guarantees might ease the minds of consumers who don't want to risk getting a stale gift, said Packaged Facts.

The market for food gifts is expected to continue its upward trend over the next several years. Although growth may slow down, a 'healthy' expansion across all channels is still expected.

In total, the market for food gifts is forecast to grow another 45 percent by 2010 to reach over $23bn in sales, with the online and direct marketing channel (61 percent) and consumer market (49 percent) outpacing other segments in growth.

Some of the major growth drivers will be increasing customization and evolving food tastes, including the increasing consumer desire for more organic, ethnic and wellness varieties.

And while the market is currently made up of "a few large player and a sea of small and regional players", the report forecasts that as the market becomes more mature some consolidation will naturally occur.