Pandemic accelerates transformation of UK food and grocery market
The UK food and grocery market is set to grow by 10% - or by £19.1bn to £211bn - between 2019 and 2022, according to the latest market and channel forecast research from IGD. The new report reveals the impact of COVID-19 on the overall market over the next three years, with a breakdown of expected implications and performance on individual channels.
The pandemic has accelerated the shift to online, a channel IGD expects to mostly retain the loyalty of new shoppers gained during the pandemic. Discount will, however, become the fastest-growing channel in 2021 and 2022, as shoppers looking to economise due to rising unemployment.
Online: +£7.0bn / +59.2%, 2019-2022
- Online market share will increase from 6.2% in 2019 to 8.9% in 2022
- Online will be the fastest-growing channel in 2020, following dramatic increases in shopper numbers and bigger order sizes
- The value of the online channel will overtake that of hypermarkets in 2020
- Online will take £1 in every £11 spent on grocery in 2022.
Simon Wainwright, Director of Global Insight at IGD, said: “We forecast e-commerce will gain market share faster than previously predicted, following the dramatic influx of new shoppers and bigger order sizes in 2020 as a result of COVID-19. While we expect growth to pause in 2021, it will later resume, with continuing expansion from Amazon and the launch of online operations by M&S through Ocado supplementing activity by the Big Four.
Discount: +£6.3bn / +25.4%, 2019-2022
- Discount market share will increase from 12.8% in 2019 to 14.6% in 2022
- Discount will be the fastest-growing channel in 2021 and 2022
- Aldi and Lidl’s rapid expansion is expected to continue
- Some variety discounters will see rapid growth as they scale up their focus on grocery, with new openings from B&M and Home Bargains
Commenting on the discount channel, Simon Wainwright said: “Though eclipsed by the surge in online sales in 2020, discount will be the fastest growing channel in 2021 and 2022 as unemployment climbs and shoppers across the income spectrum look to economise. Store network expansion will enable this growth, with smaller store formats enabling Aldi and Lidl to boost their reach into urban areas and some variety discounters scaling up their grocery operations.”
Convenience: +£5.4bn / +13.2%, 2019-2022
- Convenience market share will increase from 21.4% in 2019 to 22% in 2022
- The channel benefitted significantly from meeting local shoppers’ needs during lockdown
- Growth in the channel will moderate over the next two years
On the convenience channel, Simon Wainwright said: “Having benefited significantly from meeting local needs during lockdown, growth for convenience stores will slow in 2021 and 2022. There is a key opportunity for stores that develop their role as destinations for local community needs going forward, but the slow recovery of trading in city centres and transient locations is likely to affect overall channel performance.”
Large stores: Supermarkets +£0.7bn/ +0.8%. Hypermarkets –£0.1bn/-0.3%, 2019-2022
- Hypermarket market share will decrease from 8.4% in 2019 to 7.6% in 2022
- Supermarket market share will decrease from 46.1% in 2019 to 42.3% in 2022
- After a boost to sales in 2020 from the pandemic, supermarket growth will turn negative by 2022
Concluding with large stores, Simon Wainwright said: “Strong growth at the start of the pandemic – driven by shoppers stocking up and preferring spacious stores – has receded. We expect hypermarkets to revert to sales declines as more shoppers migrate to other channels. After a boost to sales in 2020 from COVID-19, supermarket growth will turn negative by 2022. The channel will lose ground, particularly to discount and online, though it will defend its share better than hypermarkets.
“Retaining the loyalty of shoppers who switched to them at the start of the pandemic will be the priority for operators of large stores. Making stores easier to shop while also differentiating through their range and emphasising value will be vital as stores pivot towards more functional retailing.”
For additional channel analysis or questions regarding the impact of COVID-19 on the food and grocery market, please get in touch for comment or interviews with IGD analysts.
A preview of the IGD Retail Analysis report can be accessed here.
For media enquiries please contact Alexandra Crisp at [email protected] or +447590183295
Notes to editors
Notes: Channels may not exactly sum to market total because of numerical rounding in this table.
- ‘Discount’ includes all sales of Aldi, Lidl, and grocery only sales of the principal variety discounters.
- ‘Other retailers’ includes specialist food and drink retailers, CTNs, and the food sales of mainly non-food retailers and street markets.
(See Appendix for more detailed channel definitions)
- IGD is a research and training charity which sits at the heart of the food and grocery industry. It has a trading subsidiary that provides commercial services. The profits from these commercial services fund the charity.
- IGD’s new primary forecast for the UK food and grocery market, one of four for scenarios modelled in the report assumes that:
- The virus impact will be largely limited to a single outbreak, though local lockdowns will be implemented to keep the virus in check
- Economic recovery will be gradual
- EU exit negotiations will not result in a trade deal by the end of the forecast period
- Eating out expenditure will not have returned to 2019 levels by 2022
- Population growth is reduced by a higher death rate and reduced inward migration IGD has limited its forecast horizon to 2022 instead of its usual five-year timeframe. This is because of extreme uncertainty about the future and a lack of longer-term macroeconomic data.
- Follow IGD’s communications team on Twitter for all the latest retail insights: @Comms_IGD
- All content is owned by IGD. If you use or refer to any content in this press release, please credit IGD