The food and grocery market in the UK is set to grow by 10% or £19.1 billion (€21.3 billion) to £211 billion (€235.6 billion) between 2019 and 2022, a new report from the IGD has revealed.
The report examines the impact of COVID-19 pandemic on the overall market over the next three years and offers a breakdown of expected implications and performance on individual channels.
In 2020, the online channel will be the fastest-growing following a shift in shopper numbers and order sizes due to the pandemic, the study noted.
However, the discount channel is expected to emerge as the fastest-growing channel in 2021 and 2022 as shoppers will continue to economise on their purchases.
The online channel is set to grow by 59.2% or £7.0 billion (€7.8 billion) in value by 2022, increasing its market share to 8.9% in 2022 from 6.2% in 2019.
Director of global insight at IGD, Simon Wainwright, 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.”
The discount channel is projected to grow by 25.4% or £6.3 billion (€7.0 billion), with its market share increasing from 12.8% in 2019 to 14.6% in 2022.
Aldi and Lidl are expected to continue to expand rapidly, while variety discounters will see rapid growth as they scale up focus on groceries, the study found.
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 convenience segment is expected to grow by 13.2% or £5.4 billion (€6.0 billion) with its market share rising marginally to 22% in 2022 from 21.4% in 2019.
Growth in this channel, which has benefitted significantly from meeting local shoppers’ needs during the lockdown, is likely to slow down in the coming years.
Wainwright stated, “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.”
The study also forecasts that hypermarkets will see a 0.3% decline (£0.1billion) in value with market share dropping to 7.6% in 2022 from 8.4% in 2019.
Supermarkets are set to see market shares decline from 46.1% in 2019 to 42.3% in 2022, the report added.
Wainwright commented, “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."