UK food and grocery to be worth “over £200bn” by 2020

The UK food and grocery market will grow by 13% between now and 2020 and will be worth £200.6bn, according to the latest forecasts by IGD, unveiled at the Convenience Summit today (June 4).

IGD’s figures suggest that online, discounters and convenience will remain the engines of growth:

·       Online sales, the fastest growing part of the market, will have almost doubled in value by 2020

·       Discounting will have grown by over 80%

·       Convenience stores will remain the third fastest growing grocery sector

·       While all three will expand, growth will be slower over the next five years than the previous five 

Superstores and hypermarkets will experience a modest fall in sales by 2020 but they will still be the biggest slice of the grocery market.

Joanne Denney-Finch, IGD chief executive, said: “There’s probably never been a better time to be a food and grocery shopper, with prices down and the choice of outlets up. That makes it a testing time for grocery retailers but there has been some market growth and we’re predicting further growth for the next five years. The unprecedented food and drink deflation across a broad range of categories means, however, that growth is slower than anticipated.”

She added: “Online sales are still on a rapid growth curve. A record three out of 10 (28% of) shoppers said they shopped online for their groceries last month, compared to 22% in 2010 when we started tracking the data. People are making the most of new devices, faster connection speeds and more click and collect points. Over the next five years, online will remain the fastest growing grocery sector, although we expect the rate to moderate slightly as retailers refine the model and put more focus on encouraging shoppers into stores.

“Food discounters have enjoyed remarkable success over the last few years. One in nine shoppers (11%) told us they used discounters for the majority of their grocery shopping last month, compared to just 3% who said they did in 2010. We expect the discounters to maintain strong momentum and open many more stores, including in more affluent areas. However, we do expect growth to be harder won as the pool of best locations gets smaller and the major supermarkets fight back.      

“Convenience stores have a similar challenge in finding ideal new locations and face rising competition from other formats, including the discounters, for top-up shopping. They do, however, remain popular with shoppers. They are the most used type of grocery format, with people visiting them 12 times a month on average. Given their large network, they have the benefit of being visible and available in many communities, which means most people have easy access to them.

“Although fewer superstores and hypermarkets are being opened, the new additions have an updated use of space while many existing stores are reaping the benefits of a refit. This makes it easier for people to shop if they only want a few items. There has also been an increase in the range of other services, such as new restaurants, drycleaners, and a greater focus on clothing as well as new strategic alliances – which we expect to provide a boost. These stores are being adapted to the new way in which people shop, but given the time and investment required we do anticipate a slight fall in food and grocery sales through these outlets by 2020.”

Year to April

2015

Value (£bn)

Year to April

2020

Value (£bn)

Change in value

%

2015-20

Change in value

%

2010-15

Superstores and hypermarkets

71.7

69.6

-2.9

4.2

Small supermarkets (3,000 – 25,000 sq ft)

35.4

35.8

0.9

8.3

Convenience

37.7

44.1

17.0

27.4

Discounters*

12.8

23.2

82.2

106.9

Online

8.9

17.2

92.9

116.7

Other retailers**

11.0

10.8

-2.3

0.9

Total

177.5

200.6

13.0

16.6

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

*Discounters include all sales of Aldi, Lidl, Netto, and grocery only sales of principal high street discounters such as Poundland

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

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