UK grocers need to focus on product innovation to drive long-term growth and customer loyalty, a new study by GlobalData showed.
The UK food market, which accounts for 66% of the total UK food and grocery sales, will grow at a CAGR of 2.9% between 2023 and 2028, reaching £143.8 billion, according to GlobalData’s latest report titled United Kingdom (UK) Food and Grocery Retailing Market Size, Trends, Consumer Attitudes and Key Players to 2028.
The food market is expected to contribute £19.3 billion in sales to the UK food and grocery sector by 2028, and product differentiation will be key to survival in this competitive landscape.
'Consumer Switching Behaviour'
Eleanor Simpson-Gould, senior retail analyst at GlobalData, commented, “A saturation of loyalty schemes and price matching promotions by UK grocers is fuelling consumer switching behaviour. The competition regarding pricing, product variety, and quality has intensified to a point where UK consumers are willing to visit several grocers for weekly food shops to get the best deals.
“Though discounts and promotions are a strong driver of food and grocery purchases for UK consumers, quality and range perceptions must underpin product development strategies as price concerns ease. These factors offer a more significant point of differentiation in this highly competitive market.”
UK Food And Grocery Market
The proportion of UK consumers who stated that branded products are appealing to them in the food and grocery market is significantly lower (50.7%) than range (87.3%) and value for money (81.1%), GlobalData’s How Britain Shops Survey revealed.
This trend indicates a strong preference for private-label ranges and is favourable for grocers.
Simpson-Gould added, “Grocers must invest in private-label ranges to secure a clear differentiation from competitors, improve impulse spending opportunities and bolster volume growth. A strong private-label offer must include world food options, fresh bakery products, broad ready-meal ranges, snacking and food-to-go items.
“Tesco’s Finest range innovation in 2024, consisting of new summer picnic items and meal deal options, is an excellent example of successful private-label differentiation.”
Outlook
Between 2023 and 2028, core categories, food, soft drinks and hot drinks are expected to see robust growth, while alcoholic beverages and tobacco and e-cigarette markets are forecast to underperform significantly.
As per GlobalData's estimates, the tobacco and e-cigarette market will decline at a CAGR of 0.4% between 2023 and 2028, lower than the alcohol market, which is set to achieve a moderate CAGR of 1.6% in the same period.
Grocers need to ensure alternatives, such as e-liquids and refillable tanks, for consumers looking to switch smoking methods ahead of the disposable vape ban in 2025.
