Consumers expected to continue switching to own-brand and discount options: IGD

Consumers are trading to private label and discount options as they continue to deal with the cost-of-living crisis, according to the latest forecast from the Institute of Grocery Distribution (IGD).

The total UK food and drink market is predicted to be worth £315.2bn by 2028, experiencing a growth of 19% from 2023 (£265bn) according to the IGD’s unique new forecast, which presents a combined outlook covering eating in and eating out.

It provides a total picture of the challenges and opportunities across the whole food and drink market over the next five years, including a comparison and breakdown of both sectors.

This year has seen a switch back from eating out to eating in as consumers are forced to cut back on spending. Retail has subsequently seen a switch from hypermarkets and supermarkets into discounters, convenience and online, as well as down-trading to cheaper products.

Foodservice is experiencing a bigger decline in the short-term compared to retail, as consumers reduce spending or drop out of the market completely. While the effects of lockdown showed a move from eating out to eating in, followed by a bounce back in dining out from 2022, retail has stolen some ‘share of the stomach’ back this year, 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.

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.

This year, the food and drink retail sector 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.

IGD forecast that 2024 will see a continuation of trading down to cheaper products, such as private label options, and shoppers switching to discount retailers, such as Lidl.

‘Shoppers will continue to maintain a mixed shopping repertoire, prioritising convenience and experience while continuing with some money-saving behaviours’

The multiples will look to compete using loyalty schemes, price matching and own-label price reductions, added IGD.

Commenting on the outlook for the UK food and drink retail landscape, Global Insight Leader at IGD Bryan Roberts said: “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.

“During this period, it’s going to be hard for the 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.

“While shoppers continue to look for ways to save money, a variety of initiatives such as strong value messaging and loyalty schemes is set to continue in the short-term.”