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UK grocery market to grow 13%

News, 12 June 2015

LONDON: Convenience, online and discount are the three channels that will shape the UK grocery market over the coming five years, according to the Institute for Grocery Distribution which predicts 13% market growth over this period.

The organisation's five year market forecast said growth in the year to April 2015 was slow at 1.7% but would pick up to an annual rate of 2.7% by 2020. Overall, the market is expected to add some £23bn in sales and will be worth £200.6bn by then.

Nick Gladding, IGD senior retail analyst, cautioned that this growth trend "will be driven largely by an unwinding of the exceptional levels of deflation the market has experienced over the last year".

So the pressures on shoppers' budgets will continue and consumers will keep a tight rein on their purse strings. Accordingly, the discount channel will see the strongest monetary growth in coming years, with sales up by £10.5bn.

The IGD said this would be driven by store openings as well as "more impactful marketing".

Online will be the fastest growing channel, as sales almost double (+92.9%) to £17.2bn. IGD research suggests that 28% of shoppers already shop online for groceries every month and 47% would like to use it more over the next two to three years.

Increasing digital confidence and more convenient collection options will only increase the numbers shopping online, while low-cost delivery subscription schemes will also encourage regular spending and shopper loyalty.

Sales growth in convenience will be slower than in previous years as the sector matures. The IGD expected the rate of increase between 2015 and 2020 to be 17% compared to the 27.4% of the preceding five years.

Convenience continues to be the most used type of grocery format, it said, with people visiting them an average of 12 times a month. Suppliers should therefore ensure that their products, pack sizes and promotions are appropriate for these smaller format stores.

Sales through hypermarkets and superstores are predicted to decline 2.9% to £69.6bn over the next five years, but the IGD anticipated this would moderate through the period as retailers experimented with new formats to make large stores more convenient and relevant to shoppers.

Data sourced from IGD; additional content by Warc staff