IGD has released its latest data on the UK convenience channel. It shows the performance of the sector as the country exits its two-year pandemic episode, while facing into the developing cost-of-living crisis.
Market data for the first half of 2022, split by segment and category, shows the extent to which the channel has been permanently reshaped by Covid-19, while our forecast to 2027 gives our mid-point projection for its future direction of travel.
2022: another year of pandemic ‘rebound’
Although the pandemic is more or less behind us, the volatility it created continues to reverberate through the performance of the UK convenience sector in 2022. Therefore, in the first half of the year it was the turbulence from the pandemic that remained the key influence on the ‘shape’ of channel performance, while the impacts of the unfolding cost-of-living crisis will only become more apparent in data for the second half.
In fact, the topline view of the first half of 2022 looks very much like a return to a ‘normal’ level of growth (+2.2%) in UK convenience after the two ‘switchback’ pandemic years. Our shopper data supports this with a consistently stable 88% of shoppers using a convenience store. However, looked at in more detail the ongoing effects of the pandemic can still clearly be seen in both the diverging fortunes of the channel’s constituent operator segments and the relative outcomes for the different product categories.
With city centres and travel hubs reviving it was the Multiples segment that grew fastest in H1 2022 (+6.1%), as their high-performing stores in these locations came back to life. Meanwhile the categories seeing the highest levels of growth were those in food-to-go missions, such as Hot food and drinks and sandwiches and wraps, as people’s working lives and consumption behaviours returned to a more pre-pandemic pattern. 36% of shopper missions were for food to go over April-June 2022 an increase of 16% from 2 years ago.
2022 versus 2019: a permanently changed channel?
While the performance data for H1 2022 shows a sector shifting back towards the ‘normality’ channel of 2019 it’s clear that the changes wrought by the pandemic on the convenience channel persist in several ways. Sector value remains elevated overall, versus 2019, and within that, specific segments, Symbols above all, retain a level of enhanced share that suggests shoppers continue to use these (mostly local) stores more than they did before the pandemic.
It's also clear that in terms of their product mix Alcohol, though well down from 2020’s peak, retains an elevated share within the channel, suggesting that in-home consumption continues to benefit versus 2019, to the detriment of out-of-home operators. Having sustained almost £390m of incremental spend in H1 2022 the increased importance of Alcohol in the convenience mix is obvious and is something that retailers will focus on long-term.
There’s also some indication that alongside long-lasting impacts of the lockdowns that the subsequent rebound is also shifting the balance of the product mix to the benefit of particular categories. Food-to-go categories such as Hot food & drinks and Sandwiches & wraps, which were seriously depressed by the pandemic, have not only regained ground in 2022 but have now surpassed the share they had in 2019, indicating a wholehearted return of convenience stores as a key destination for these missions. However, the biggest ‘rebound winner’ is Soft drinks, now significantly ahead of its 2019 share having gained almost £250m of additional spend. This buoyancy is partly linked to the recovery of food-to-go missions, but also suggestive of the re-emergence, and even an increase, of general impulse shopping in convenience stores.
Channel growth accelerating in H2
While convenience channel growth in H1 2022 was relatively modest by historical standards, growth has manifestly picked up pace in H2. A key driver of this is the growing impact of rapidly rising inflation, however, we also know for sure that the hot summer weather seen in Q3 (July – September) has also benefitted the channel especially in categories such as Soft drinks and Alcohol. Then, along with inflation we also expect the sector to get a further boost from the football World Cup in Q4.
Our current projection for the full-year outcome for the channel is +3.9%. So after +2.2% in H1, this implies growth will step up significantly to +5.6% over the six months of H2. With the ongoing trajectory of inflation, a notable unknown, upward pressures on price could take that second-half performance higher still. However, we see rising volumes (albeit relatively modest in comparison to the influence of inflation) still playing a part in that outcome, as convenience stores play a highly resilient role in the UK shopper’s repertoire.
Subscribers can read our new report for a detailed look at UK convenience retailing 2022 performance.