The food and drink retail sector will experience an annual growth rate of +15.1% in 2023 driven by high inflation, according to a new forecast from IGD.
Removing inflation from 2023, the market will decline by 2% in real terms as shoppers reduce how much they’re purchasing to save money, IGD forecasts.
In addition, IGD predicts 2024 will see a continuation of trading down to cheaper products, and shoppers switching to discount retailers such as Aldi and Lidl. The multiples will look to compete using loyalty schemes, price matching, and own-label price reductions.
The total UK food and drink market is predicted to be worth £315.2bn by 2028, experiencing a growth of 19% from 2023. However, growth is down in real terms across the total landscape due to the impact the cost-of-living crisis is having on consumer spending, with the eating-out sector more impacted as consumers switch to eating at home to save money.
IGD predicts that by 2028 the real value of the industry will be “just shy” of pre-pandemic levels, showing the longer-term effects of the pandemic and the cost-of-living crisis on consumer spending appetite and habits out of the home.
Global Insight Leader at IGD, Bryan Roberts, said: “Discounters are playing a big role throughout the cost-of-living crisis as people continue to look for ways to save on their food costs, and this – plus their store opening programmes – is reflected in their projected growth over the next few years.
“During this period it’s going to be hard for the other channels to compete, however as costs start to level out and shoppers become more comfortable with discretionary spending over time, we will begin to see more multi-channel use. Shoppers will continue to maintain a mixed shopping repertoire, prioritising convenience and experience while continuing with some money-saving behaviours that will have become ingrained by this point. This creates opportunities for other channels, particularly as the timings will coincide with a slow-down in discounter expansion plans.”
