Big brands move into growing gluten-free market

Jewel's Food Market in Baxter, Minn. Jewel's will start selling products exclusively online next month.

When Amy Hansmann's brother was diagnosed with Celiac disease in 2004, she and her mother would spend hours trolling the grocery store, reading labels, looking for food he could eat.

Celiac disease is an autoimmune disease in which eating gluten causes damage to the small intestine. Gluten is found in flour, but also in barley, malt, rye, spelt and in ingredients like modified food starch."

Because it was not easy to find products that were completely gluten-free in 2004, Hansmann and her mother considered driving nearly 500 miles from their home in Baxter, Minn. to a store in Milwaukee that sold them.

The hunt for these foods led Hansmann to open up Jewel's Food Market, a store catering to those with Celiac and food allergies, in 2008.

With Celiac disease becoming more common and gluten-free diets gaining popularity, there are more gluten-free products available than ever before. In 2004, when Amy's brother was diagnosed, the gluten-free market was worth $580 million. By 2012, it's expected to be worth $2.6 billion. It's not just small companies anymore either; Anheuser Busch has released a gluten-free beer and General Mills has gluten-free Bisquick and cake mixes.

This growth, however, doesn't translate to more business for Amy Hansmann. Customers can now go the local Cub Foods and buy many gluten-free products, often for less than what Amy can sell them for.

"People have come to expect Wal-Mart prices all the time," Hansmann said. "But they don't understand why the prices are so low."

A small store like hers can't buy from General Mills since the company requires a minimum order of $3,000 worth of merchandise per week. So Hansmann sells products from smaller companies that have higher wholesale prices.

At the end of this month, Hansmann is closing her storefront in Baxter and moving her business exclusively to her company's website. She also plans to focus marketing efforts on small town clientele across the country who don't have access to big grocery stores, but whose food allergies make shopping difficult.

Hansmann will move her inventory to a space in a shared warehouse and will no longer have to pay $2000 a month in rent.

We'll check in with her in a few months to see how the transition is going and whether she's able to tap into the expanding gluten-free market.

Hansmann is a source in our Public Insight Network. Do you have a story you'd like to share with us? Tell us here.

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