The entire UK foods and drinks market is predicted to be value £315.2 billion by 2028, experiencing a development of 19% from 2023 (£265 billion), in accordance with a singular new forecast from IGD that presents a mixed outlook masking consuming in and consuming out.
Merging IGD’s wanted UK retail channel and consuming out forecasts, the brand new outlook offers a complete image of the challenges and alternatives throughout the entire foods and drinks market over the following 5 years, together with a comparability and breakdown of each sectors.
Forecasted development for the full market is pushed largely by inflation, which IGD predicts peaked in March 2023. Nonetheless, development is down in actual phrases throughout the full panorama as a result of influence the cost-of-living disaster is having on shopper spending, with the consuming out sector extra impacted as customers change to consuming at dwelling to economize.
In retail, customers are additionally buying and selling down to non-public label and low cost choices. By 2025 the market will start to stabilise as inflation lowers and family disposable incomes rise.
Quick-term view: 2023 – 2025
This yr has seen a change again from consuming out to consuming in as customers are compelled to chop again on spending. Retail has seen a change from hypermarkets and supermarkets into discounters, comfort and on-line, in addition to down-trading to cheaper merchandise.
Foodservice is experiencing an even bigger decline within the short-term in comparison with retail as customers cut back spending or drop out of the market fully. In 2020 the impact of lockdowns confirmed a change from consuming out to consuming in adopted by a bounce again in eating out from 2022. However retail has stolen some ‘share of abdomen’ again in 2023 as customers change extra routine and impulsive consuming out events to consuming in, utilizing meal offers and prepared meals to fulfill the demand for ease and pace on a decrease finances.
Lengthy-term view: 2025 – 2028
In the long run the change again to consuming out might be counterbalanced by a rise in food-to-go choices from retailers and extra house and vary devoted to meals in bigger format shops. By 2028 the true worth of the trade might be simply shy of pre-pandemic ranges, displaying the longer-term results of the pandemic and the cost-of-living disaster on shopper spending urge for food and habits out of the house.
Whole foods and drinks through the retail channel
This yr the foods and drinks retail sector will expertise an annual development fee of +15.1% pushed by excessive inflation. Eradicating inflation from 2023, the market will decline by 2% in actual phrases as customers cut back how a lot they’re buying to economize. 2024 will see a continuation of buying and selling all the way down to cheaper merchandise, akin to non-public label choices, and customers switching to low cost retailers akin to Aldi and Lidl. The multiples will look to compete utilizing loyalty schemes, worth matching, and own-label worth reductions.
Commenting on the outlook for the UK foods and drinks retail panorama, International Perception Chief at IGD Bryan Roberts mentioned: “Discounters are taking part in an enormous position all through the cost-of-living disaster as individuals proceed to search for methods to avoid wasting on their meals prices, and this this – plus their retailer opening programmes – is mirrored of their projected development over the following few years.
“Throughout this era it’s going to be exhausting for the opposite channels to compete, nevertheless as prices begin to stage out and customers grow to be extra comfy with discretionary spending over time, we’ll start to see extra multi-channel use. Consumers will proceed to keep up a blended buying repertoire, prioritising comfort and expertise whereas persevering with with some money-saving behaviours that may have grow to be ingrained by this level. This creates alternatives for different channels, significantly because the timings will coincide with a slow-down in discounter growth plans.
“Whereas customers proceed to search for methods to economize, a wide range of initiatives akin to robust worth messaging and loyalty schemes is about to proceed within the short-term.”
Whole foods and drinks consumed by the UK consuming out channel
2024 is predicted to see modest development of 4.1% in consuming out, primarily pushed by worth will increase lagging behind commodity inflation charges. This can nevertheless be offset by a seamless discount in visits and down buying and selling throughout the sector. The longer-term view sees hospitality quantity development coming back from the start of 2025 as actual wage development and shopper confidence improves.
Trying on the challenges and alternatives for consuming out over the following 5 years, senior analyst and sector professional Nicola Knight mentioned: “Consuming out will return in keeping with family earnings rise within the mid-term, however there might be an expectation from customers for excellent experiences and a high-quality provide. Full service might be at a premium, making a polarisation out there between deal with events and on a regular basis QSR missions.
“The short-term view for eating places will contain customers utilizing techniques to handle their spending. They are going to commerce all the way down to fewer or smaller programs, dine out at cheaper alternate options, and search for offers and reductions. Eating places must work exhausting to draw clients again within the long-term, which can embody enhancements to worth and expertise, combating for loyalty, and inspiring individuals to trade-up on their meals and purchase extra programs.
“Operators will proceed to cut back prices by choosing cheaper substances and less complicated processes. Companies that may successfully utilise loyalty scheme information to retain clients will profit within the long-term, which can assist the sector preserve its share of the full consuming out market. Drive-thrus, gasoline station concessions and leisure places can even be standard location methods for QSRs.”
Whereas the long-term outlook for the general market is pretty optimistic because the nation strikes out of the cost-of-living disaster, customers will nonetheless be impacted by a lag in worth reductions the place meals is worried, on account of components akin to wages and the worth of commodities. Companies ought to due to this fact be conscious of how they’ll proceed to assist customers in saving cash, even because the trade strikes in direction of a state of restoration.
The total report is on the market to IGD Retail Evaluation subscribers: