The total UK food and drink market is expected to be worth £315.2 billion (€367.9 billion) by 2028, growing by 19% from 2023 (£265 billion), according to a new forecast from IGD that presents a combined outlook covering eating in and eating out.
The new outlook provides a total picture of the challenges and opportunities across the whole food and drink market over the next five years, IGD said.
Forecasted growth for the total market is driven largely by inflation, which IGD predicts peaked in March 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.
In retail, consumers are also trading down to private label and discount options, IGD noted. By 2025, the market will begin to stabilise as inflation lowers and household disposable incomes rise.
Short-Term View: 2023 To 2025
This year has seen a switch back from eating out to eating in as consumers are forced to cut back on spending.
Retail has seen a switch from hypermarkets and supermarkets into discounters, convenience and online, as well as down-trading to cheaper products.
In addition, retail has stolen some ‘share of stomach’ from foodservice, as consumers switch more routine and impulsive eating out occasions to eating in, using meal deals and ready meals to satisfy the demand for ease and speed on a lower budget.
Long-Term View: 2025 To 2028
In the longer term, the switch back to eating out will be counterbalanced by an increase in food-to-go options from retailers and additional space and range dedicated to food in larger format stores.
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.
Total Food And Drink Via The Retail Channel
This year, the food and drink retail sector in the UK will experience an annual growth rate of +15.1% driven by high inflation.
Removing inflation from 2023, the market will decline by 2% in real terms as shoppers reduce how much they’re purchasing to save money.
The year 2024, meanwhile, will see a continuation of trading down to cheaper products, such as private label options, and shoppers switching to discounters such as Aldi and Lidl. The multiples will look to compete using loyalty schemes, price matching, and own-label price reductions.
Discounters Lead The Way
“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," commented Bryan Roberts, global insight leader at IGD.
“During this period, it’s going to be hard for 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."
For IGD's complete picture of the UK market, click here for a free download.
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