The food and drink industry is forecast to grow 12% to £195.4bn in 2021, taking it to 97% of its 2019 pre-Covid level. This will be driven by both the retail and foodservice sectors as the easing of restrictions benefits the overall market.
This is according to the latest ‘Eating In vs Dining Out’ report – produced by IGD, in collaboration with foodservice consultant Peter Backman. The increase is expected to result from strong retail growth in the first quarter of the year and foodservice sales which will strengthen over the coming months as pent-up demand for socialising boosts the sector.
The study is forecasting that the foodservice sector will grow by 54% (£18.6bn) this year vs 2020. Some of this growth is likely to impact retail, but elevated levels of home working, at-home social gatherings and financially stretched shoppers who are unable to divert spend to eating out, will see the retail sector continue to grow. The value of retail is expected to grow £1.8bn on 2020 and £14.5bn on 2019.
Nicola Knight, a Senior Retail Analyst at IGD, commented: “The latest industry growth forecasts, combined with the Office for Budget Responsibility predictions for a slightly quicker than expected economic recovery, are reassuring for both retailers and operators. The reopening of the eating out sector and lifting of social restrictions will increase social dining both in and out of home and will give the market as a whole a significant boost.”
On dining out, Peter Backman, Foodservice Consultant said: “Foodservice will see low levels of sales for almost half of 2021, due to a combination of lockdown restrictions and alfresco-only eating and drinking. But, as we move into the second half of the year, growth will set in, with pubs and restaurants leading the way. Hotels, leisure and travel-related hospitality will continue to be negatively affected, as will workplace dining, driven by working from home.”
The IGD report suggests that the key to unlocking opportunity for both retailers and operators is understanding the K-shaped recovery and its influences on shopper behaviour. The recovery will see higher income households who have accrued substantial savings – estimated to be a significant “pot” of over £100bn – contrast to lower income households who face financial challenge due to the ending of government support and rising unemployment, particularly amongst younger people.
Knight said: “Discount is likely to be the fastest-growing channel in retail as financially challenged shoppers look for value. Yet, on the flip side, more affluent shoppers, particularly amongst older age groups, will be looking to ‘trade-up’ on both every day and occasion products, to utilise their disposable income. Retailers will need to pay close attention to pricing strategy and product innovation to keep shoppers engaged and loyal.”
Backman added: “Affordability and accessibility will be the two watchwords for the eating out market. Those under financial pressure will be less likely to eat out, but when they do, QSR and food-to-go are the most likely options. On the whole, operators in these sectors have been in a much stronger position than most during the pandemic, thanks to takeaway and delivery and this continued demand will potentially enable them to prosper.
“In the medium term, people in robust financial positions are likely to benefit higher spend outlets, particularly whilst travel restrictions apply and other spending options are limited.”
Knight concluded: “The findings from the report show that behaviours and spend continue to shift, creating an ever-complex landscape.”
NAM Implications:
- Great news for many.
- Hopefully, hospitality (with some support) will be able to bridge the gap…
- …as “Hotels, leisure and travel-related hospitality will continue to be negatively affected…
- …as will workplace dining, driven by working from home.”
- Worth analysing the full IGD report.
