Grocers in the UK must move beyond competing solely on price and prioritise innovation in their product offerings to attract a growing base of transient shoppers.
This is according to a new study by GlobalData, which notes that developing unique and diverse food ranges is essential to drive long-term growth and customer loyalty. The report – United Kingdom (UK) Food and Grocery Retailing Market Size, Trends, Consumer Attitudes and Key Players to 2028 – forecasts that the food market, representing 66% of the total UK food & grocery sales, will see a compound annual growth rate (CAGR) of 2.9% between 2023 and 2028, reaching £143.8bn. It will be the fastest-growing category within the food & grocery sector during this period.
Eleanor Simpson-Gould, senior retail analyst at GlobalData, commented: “A saturation of loyalty schemes and price matching promotions by UK grocers is fuelling consumer switching behaviour. The competition regarding pricing, product variety, and quality has intensified to a point where UK consumers are willing to visit several grocers for weekly food shops to get the best deals.
“Though discounts and promotions are a strong driver of food & grocery purchases for UK consumers, quality and range perceptions must underpin product development strategies as price concerns ease. These factors offer a more significant point of differentiation in this highly competitive market.”
GlobalData’s recent ‘How Britain Shops’ survey revealed that the proportion of consumers who stated that branded products are appealing to them in the food & grocery market is significantly lower (50.7%) than that compared to range and value (87.3%) for money (81.1%). The low priority of branded goods and high priority of range and value-for-money drivers is favourable for grocers and suggest a strong preference for private label ranges.
Simpson-Gould added: “Grocers must invest in private label ranges to secure a clear differentiation from competitors, improve impulse spending opportunities and bolster volume growth. A strong private label offer must include world food options, fresh bakery products, broad ready-meal ranges, snacking and food-to-go items. Tesco’s Finest range innovation in 2024, consisting of new summer picnic items and meal deal options, is an excellent example of successful private-label differentiation.”
While core categories, such as food, soft drinks and hot drinks, are expected to achieve robust growth over the next few years, alcoholic beverages and tobacco / e-cigarette markets are forecast to underperform significantly.
GlobalData estimates that the tobacco and e-cigarette market will decline at a CAGR of 0.4% up until 2028, lower than the alcohol market, which is set to achieve a moderate CAGR of 1.6% in the same period.
Ahead of the disposable vape ban in 2025, GlobalData suggests that grocers should ensure alternatives such as e-liquids and refillable tanks are available for consumers looking to switch smoking methods.
Meanwhile, to combat slowing alcohol sales, grocers are advised to reduce ranges of high-sugar, low-spirit level alco-pops, typically favoured by younger demographics, and expand their propositions of sugar-free alternative soft drinks, energy drinks and non-alcoholic mixer ranges.
Simpson-Gould concluded: “Heightened health concerns, changing social attitudes and government initiatives will inhibit growth in the tobacco / e-cigarette and alcohol markets. Both markets will account for a smaller proportion of the total UK food & grocery sector by 2028, making these categories undesirable areas for product development.”
NAM Implications:
- Cost of living pressures are causing consumers to shop around for value.
- In doing so, they are applying their new post-Lockdown ‘savvy’ thinking…
- …in demanding nothing less than demonstrable value for money.
- And are prepared to ‘tell their friends’ face-to-face and via social media multipliers.
- Innovation seems a productive way of optimising these changes…
