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Consumer trends in the UK Food and Grocery market

Full report: Structural Changes for UK Food & Grocery Sector

Consumer trends in the UK Food and Grocery market

Societal shifts in how, when and where we shop

Since the early 2000s, the Big Four (Tesco, ASDA, Morrisons and Sainsbury’s) have dominated the retail grocery market, even expanding their non-food offerings to include products like clothing, electricals, banking and insurance. This growth was underpinned by substantial investment in new stores and regional distribution centres, convenience and shopping options. The wider implications of this were that retailers had to rethink how they served their customers. 

Many of the trends that emerged from 2004 to 2014 have since been reversed due to the financial crisis, and right when consumers started looking for cheaper alternatives, new technology has enabled them to be more transparent about pricing, service and quality. This has given discounters a much firmer foothold in the market. 

Some of the factors influencing the social shifts are:

1. Multiple choice
Consumers tend to buy food more often, from a wider range of outlets. Busier lifestyles, changing preferences of young shoppers, and the growing popularity of ‘en route’ shopping have seen a move away from supermarkets, with the Big Four seeing a drop in market share from 62.9% in 2014, to 55.4% in 2017.

2. Ease and convenience
People are increasingly going online to order their staple foods and ‘topping up’ their shopping from convenience stores. This has been behind the rapid growth of the online food market, which has increased by an average of 12% each year since 2010. It is by far the fastest growing channel for major supermarkets, valued at £10 billion. 

The move away from supermarkets has been fast

 

The move away from supermarkets has been fast

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3. More for less
Due to the pressure on household finances, consumers have prioritised value-for-money over choice, which in turn has reduced loyalty to retailers and allowed for the discounter to establish themselves in the market. The Big Four’s market share has declined to 68% in 2018 from just over 77% in 2011. In contrast, Aldi and Lidl have more than doubled their market share over the same period. 

4. Healthier lifestyles
Average calorie consumption has fallen by more than 8% over the last decade, and this trend towards consuming less calories is likely to have been driven by the popularity of healthy living. Consumers have a growing interest in the impact food has on our health and the environment, and the increased visibility of nutrition and ‘traffic light’ labelling has raised calorie consciousness. 

5. Shopping as an experience
The Retail Experience Economy touches all parts of the industry, from aesthetically pleasing supermarkets that invite consumers to relax and socialise, to omnichannel services that offer same-day delivery on products ordered on their phone or tablet. 

Broadly, the proportion of household income spent on recreation and culture, eating out, holidays and more general leisure pursuits has risen as consumers prioritise these activities. 
 

How retailers are reacting to consumer trends within the food and grocery market

With such diverse and impactful trends unfolding, the implications for retailers to adapt and consolidate are clear, if they are to remain relevant in this competitive industry. Store operation costs and pressures from wage policy (NLW and NMW) and Brexit continue to squeeze profit margins in an already precarious area. Find out what strategies retailers are adopting in order to remain competitive here
 

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This work was conducted by Retail Economics in partnership with Barclays Corporate Banking as part of a wider piece of research that focusses on a new era for UK food supply chains and the impact of Brexit. Here, we include an overview of the food and grocery sector since the turn of the century in Part 1 and look at current trends in Part 2. Part 3 focuses on the different Brexit outcomes and what this is likely to mean for the industry when it comes to costs and tariffs over the five-year post-Brexit period. Case studies are included, together with a look at Brexit tariffs, and lastly various industry trends to watch out for. 
 

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