The food and grocery market in the UK is set to grow by £2 billion by 2022, according to the latest channel forecast research from retail analysis company IGD.
The research suggests that the grocery market in the UK will grow by 10% between 2019 and 2022, which results in growth from £19.1bn to £211bn.
The new report highlights 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.
IGD also expects the growth of online shopping to continue, with the online market share increasing from 6.2% in 2019 to 8.9% 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.”
However, the fastest-growing channel will be discounts, according to the report. IGD forecasts suggest the discount market share will increase from 12.8% in 2019 to 14.6% in 2022, with Aldi and Lidl continuing to expand.
Simon Wainwright added: “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.”
The report says the convenience channel benefitted significantly from meeting local shoppers’ needs during lockdown, with the market expected to grow from 21.4% in 2019 to 22% in 2022.
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.”
According to the new report, after a boost to sales in 2020 from the pandemic, supermarket growth will turn negative by 2022, with the market decreasing from 46.1% in 2019 to 42.3%. Hypermarket market share will also decrease from 8.4% in 2019 to 7.6% in 2022.
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.”