COVID-19 continues to cause significant shifts in the food and drink industry

• Total UK food and drink market sales declined by 12% during 2020
• Grocery retail share of the market grew from 64% in 2019 to 81% in 2020
• Eating out sector shrank by over 50%
• Q2 is a critical period for the eating out industry

Eating In vs Dining Out 2021 – the second report in a series that examines the impact of COVID-19 on the UK food and drink market – quantifies how the pandemic shifted spend from foodservice to retail channels in 2020, and the factors that will affect the market in 2021. Produced in collaboration with leading foodservice consultant, Peter Backman, the report gives a unique, total view of in-home and out-of-home food and drink spend.

Nicola Knight, Senior Retail Analyst at IGD, said: “Food and drink retail sales grew by 9.9% in 2020 and e-commerce was the clear winner in the sector as shoppers switched to online due to lockdown restrictions and stay-at-home guidance. But the overall food and drink market declined by 12%, predominantly driven by consumers eating more meals at home due to government closures within the eating out sector.”

Despite restaurant delivery, innovation in relation to meal kits and in-home ‘experiences’, the research highlights that in general, consumers haven’t been consistently replicating out-of-home habits within the home, contributing to the decline in that market. For example, a steak dinner with all the trimmings in a restaurant can be replaced with a supermarket steak and oven chips for a fraction of the price or traded for a lower value dish.

The second part of the report assesses the many factors that will shape the UK food and drink market in 2021, which include consumer behaviour, government support, supply chain resilience, the lasting impact of the economy and labour market, and EU exit.

Peter Backman, foodservice consultant, commented: “The second quarter of 2021 is going to be critical for the eating out market. Without any current indication of when the industry will reopen or government support, many businesses are sitting on a knife edge. We’ll see property debts, plus substantial hospitality costs due and the end of support measures, which will sadly mean that many businesses will have no choice but to shut up shop.

“That said, the swift roll-out of the vaccine and an increase in consumer confidence are likely to paint a brighter picture for the second half of the year.”

In the short term, whilst eating out remains largely ‘closed’, the food and grocery retail market will need to deliver for food and drink shoppers that have few alternatives. This will manifest itself in high levels of demand for online. For out-of-home, the agility with which operators responded in 2020 will need to continue in the face of continued unpredictability.

Nicola Knight explains: “With normality hopefully beginning to return in the second half of the year, we're expecting to see a return to some pre-COVID shopping habits, albeit with some more frugal habits emerging.

“2021 is going to be another interesting year of shifting behaviours and spend. We’re delighted to be working with Peter Backman, so that we can look at the market in its entirety, rather than the ‘retail’ and ‘hospitality’ silos that have historically shaped the food and drink industry. It’s a fresh, new approach.”

The report takes a quarter-by-quarter view on the potential outlook for 2021 to help retailers, operators and suppliers begin to plan for the next 12 months. Updates will be launched throughout 2021 in line with the changing landscape. 

ENDS

For media enquiries and interview opportunities please contact Charlotte Jackson at [email protected]

Notes to editors:

1. IGD is an organisation of two interconnected communities. The profits from Commercial Insight are reinvested into Social Impact, which together work to drive change that makes a tangible difference for society, business and the individual.
   
   Commercial Insight is delivered through six core areas:
    
   1. Retail Analysis – providing trusted data and insight, straight from the heart of retail;
   2. ShopperVista – providing insight that creates the foundation for progressive shopper and category thinking;
   3. Events – providing compelling experiences that connect people and ideas together;
   4. MarketTrack – the most trusted, rigorous market read in the retail sector;
   5. Supply Chain Analysis – providing answers and unlocking potential;
   6. Solutions – personalised solutions that address the critical customer and commercial challenges.
       

   Social Impact from IGD is delivered in four key areas:

   1. People
   2. Health
   3. Sustainability
   4. Economics


2. Peter Backman is an expert and commentator on the structure and dynamics of the foodservice sector and its supply chain, both in the UK and internationally. For over 30 years he has been involved in the sector as a researcher and consultant, blending his knowledge with a deep understanding of the trends, key players and challenges of organisations with an interest in foodservice www.peterbackmanfs.com
3. IGD defines retail as food and drinks sales through supermarkets, convenience stores, discount, online retailers and other (butchers, bakers etc). This is split by physical stores and online.
4. Peter Backman defines foodservice as Commercial: Restaurants, quick service, pubs, hotels, leisure, staff catering (some). Non-commercial: Healthcare, education, services e.g. prisons, staff catering (some).
5. All content is owned by IGD and Peter Backman. If you use or refer to any content in this press release, please credit IGD and Peter Backman.