UK food and grocery market to grow 14.8% by £28.2bn by 2023

The UK food and grocery market is forecast to grow by 14.8% between now and 2023, giving it a value of £218.5bn, according to the latest forecasts released today by food and grocery research organisation IGD.

Continuing last year’s trend, growth is predicted across all major grocery channels, with online and discount set to account for over half of the increase in market value to 2023. IGD anticipates £3 in every £10 of growth over the next five years will come from discounters. The outlook for larger stores has also improved with investments in price, range and the customer experience helping retailers to defend their market share better.

Other key findings of IGD’s research include:

  • Discounters will achieve the biggest cash gain in sales over the next five years (30% of the total) as they benefit from further store openings and format development
  • Online will remain the fastest growing channel
  • The convenience channel is forecast to return to a stronger growth trend in 2019
  • Larger stores remain the most visited channel with 98% of shoppers visiting at least once in the last month, followed by convenience stores (89% of shoppers). 88% of shoppers use both channels
 
2018 value
(£bn)
2023 value
 (£bn)
Change in value
 (%)
2018-23
Hypermarkets
16.4
16.7
+1.4
Supermarkets
89.1
95.9
+7.7
Convenience
40.1
 47.2
+17.6
Discounters*
23.1
31.5
+36.7
Online
11.4
17.3
+52.4
Other retailers**
10.2
9.9
-3.5
Total
190.3
218.5
 +14.8

*’Discounters’ includes all sales of Aldi and Lidl, and grocery-only sales of principal variety discounters, including Wilko
** ‘Other retailers’ includes specialist food and drink retailers, CTNs (confectionery, tobacco and news), food sales from mainly non-food retailers and street markets

Discount will make the biggest contribution to cash growth: +£8.5bn (+37%) driven by rapid physical expansion, with like-for-like growth supported by upgrades to existing stores. While discount growth will slow, it will still be the fastest growing channel in cash terms over the next five years. Physical expansions will continue to drive channel growth as retailers establish stores in new areas that offer a much more supermarket-like experience to shoppers. High quality store interiors, better customer facilities and enhancements to core categories and are set to build customer engagement across a broader range of categories.

Simon Wainwright, Director of Insight at IGD said: “Food discounters are benefiting from targeted investment in key categories such as fresh produce, meat and bakery, along with improvements to the in-store environment and facilities, making stores much more comparable to supermarkets.

“Variety discounters will see strong growth from investment in more store openings, but we will see this balance out with closures elsewhere. Opportunities for these retailers lie in developing the food-for-now and impulse grocery offers, taking a more flexible approach to formats, offering more unique and exciting products, and delivering compelling seasonal events. With almost 8 out of 10 (77%) of shoppers now saying they buy food from variety discounters every month, understanding shopper motivations and behaviour in this channel has never been more important.”

Online will be the fastest growing channel: (+52% over the next five years). Smaller and more recent channel entrants will drive growth as they scale up their operations and target emerging shopper needs. More established players will step up their use of web analytics to improve and personalise shoppers’ online experience. Indeed, two-thirds (61%) of online grocery shoppers say they would like it if online retailers personalised special offers based on what they buy regularly. More rapid and flexible fulfilment options will boost growth, such as click and collect services from more convenient locations such as local c-stores, places of work and unattended lockers. 34% of online grocery shoppers show an in interest in these services.

Simon Wainwright said: “Growth is increasingly being driven by recent entrants to the channel and more delivery options. But we’re seeing more ambition from the Big Four as well, making ordering easier, improving picking, new capacity and faster deliveries. Analytics are also being utilised more effectively to target customers with more personalised content. Rising customer service expectations are encouraging the development of more rapid delivery services and other technological responses such as unattended delivery solutions.”

Improving prospects in convenience: (+18% over the next five years). Though its market share will only grow modestly, the convenience channel will deliver the second biggest gain in sales as it meets the growing demand for smaller and more frequent shopping trips. IGD has identified younger shoppers and food-to-go as key initiatives coming through for the channel, with 42% of 18-24 convenience shoppers conducting a food-to-go shop on their last visit (vs. 25% of all c-store shoppers).

Simon Wainwright said: “Major opportunities exist for making c-stores front of mind for shopping trips, particularly those that help shoppers save time. Younger shoppers are key to growth as they are predisposed to shopping at c-stores for more shopping missions than older shoppers. Having grown up in the era of ‘new convenience’, offering wider ranges, longer opening hours and supermarket quality, younger generations will be key to driving ongoing growth, but have high expectations that need to be met.”

Supermarkets and hypermarkets will experience some growth, following investments to improve the shopper experience. IGD’s forecast for supermarkets continues to be positive, with the channel strengthened by current trading momentum. While growth is set to dip in 2019 as food inflation wanes, recovery is expected as improvements to stores help lift volumes and create an appealing in-store experience for family shoppers. Indeed, over half (53%) of large store shoppers agree that shopping in bigger stores is more enjoyable as there is more time to browse. This rises to 60% among those with children.

Simon Wainwright said: “Supermarkets are now better at defending their position against discounters as they become easier to shop with a focus on product quality and innovation, offering services and products that discounters don’t with fast payments and by promoting omnichannel strengths.

“Maintaining appeal to shoppers will be a continuing challenge as shoppers migrate to more smaller and easier-to-shop formats and online sales evolve at pace. Underused hypermarket grocery space is expected to be converted for use by concessions and we anticipate this helping to strengthen the destination status of large stores and provide new reasons for shoppers to visit. Combining the grocery space and refining the non-food offer also should make stores easier and faster to shop for smaller basket shoppers.”

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