UK food and grocery forecast to grow by 10% over next five years, IGD reports

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The UK food and grocery market is forecast to grow by 10% between now and 2021, giving it a value of £197bn, according to the latest forecasts from IGD.

IGD is predicting a stabilisation of sales at larger stores over the next five years, following a challenging few years for the channel. However, online will remain the fastest-growing format, followed by the discounters:

  • Hypermarkets and supermarkets are set to see a stabilisation in sales by 2021, as large stores evolve to reflect the changing needs of shoppers(see notes to editor)
  • Online is forecast to grow by 68% over the next five years
  • By 2021, discounters will be worth £24.9bn, although growth will be more measured than previously
  • Convenience will remain the third fastest-growing sector, yet will also see a slowdown in expansion
  2016 value (£bn) 2021 value (£bn) Change in value

%

2016-21

Hypermarkets 16.5 16.6 +0.2
Supermarkets 86.6 87.3 +0.8
Convenience 37.5 41.9 +11.7
Discounters* 17.9 24.9 +39.5
Online 10.5 17.6 +68.3
Other retailers** 10.0 8.5 -15.4
Total 179.1 196.9 +9.9

Channels may not exactly sum to market total because of numerical rounding in this table

*’Discounters’ includes all sales of Aldi, Lidl, Netto, and grocery-only sales of principal high street discounters, including Wilkinson

** ‘Other retailers’ includes specialist food and drink retailers, CTNs (confectionery, tobacco and news), food sales from mainly non-food retailers and street markets

Joanne Denney-Finch, IGD chief executive, said: “It has been a challenging time for food and grocery retailers, with an extremely competitive market dampened by unprecedented food and drink deflation. Yet we believe there will be a modest recovery across food and grocery over the next five years, as inflation picks up and shoppers start to benefit from the investments that retailers are making in their stores and ranges.

“For shoppers, it’s an exciting time, with access to a huge choice of quality food and groceries, purchased in whatever way they find most convenient. For those retailers who operate in more than one format, shopping trips can often overlap, underpinning each other to drive customer loyalty. For example, an online grocery shopper who has opted to use the click and collect service at a larger supermarket might also pop into the store while there, to make use of the many services or concessions on offer inside. It’s all about giving shoppers more reasons to visit a store.”

Larger stores

Looking at larger stores, Joanne Denney-Finch said: “The growth of other channels over the last few years has forced larger stores to rethink their layouts. Two-thirds (64%) of shoppers say that changes such as better prices, better loyalty rewards, more staff and local, independent concessions would encourage them to use  larger stores more often.

“Retailers are responding to this, with many now updating and refurbishing their existing space to make it easier for people to just pop in for a few top-up items, while also offering a range of additional services such as click and collect, restaurants, dry cleaners and other concessions. Over the next five years, we expect this time and investment to pay off for larger stores, which is why we are forecasting a stabilisation in sales for this part of the industry.”

Online

On the growth of online, Denney-Finch said: “Online is set to remain the fastest-growing grocery channel, driven by the growth of click and collect services, and new players entering the online grocery arena. A record 29% of British grocery shoppers say they shopped online for their groceries in the last month against 20% in 2010, and more than four in 10 (42%) of all British grocery shoppers claim they could be converted to online shopping. Online is being boosted by retailers investing in the quality and convenience of their service, although we will also see bigger supermarkets refocusing efforts on their core business as well.”

Discounters

“By 2021, we are forecasting that £1 in every £8 will be spent at a discounter, up from £1 in £10 this year,” continued Denney-Finch. “Over half (53%) of shoppers say they have used a food discounter in the last month against 37% in 2010. However, we are forecasting their growth to slow over the next five years, as finding appropriate sites for new stores gets tougher and the supermarkets hone their focus on price, range and customer service.”

Convenience

Denney-Finch added: “Similarly, convenience operators are also finding it tougher to find new store sites. Convenience stores have historically been seen as the ‘go-to’ channel for a top-up shop and 63% of all shoppers still visit these stores for that reason. However, they are now facing increased competition from other channels, such as discounters and supermarkets. We still expect convenience to grow, but that is slowing down as the sector comes to maturity and other channels compete more effectively for the top-up pound.”