Discount players and online ‘will spur grocery growth’

Discount retailers will be one of the key drivers of expansion in the UK food and grocery market over the next five years.

That is the prediction of new research published today by IGD Retail Analysis, which says that the market will be worth £184bn by 2016, compared to £156.8bn this year.

According to the study, discounters will grow at an average annual rate of 10.1%, and are forecast to be worth £11.4bn by 2016 – up from £7bn in 2011.

The research also says that the convenience sector will grow by 4.7% and is set to be worth £42.2bn by 2016 as against £33.6bn this year.

Online will be the fastest-growing channel, with an annual average growth rate of 13.7%. It is set to almost double in value in the next five years to reach £11.2bn, up from £5.9bn in 2011.

Joanne Denney-Finch, chief executive, IGD, said: “Despite the extraordinary economic climate and the ongoing uncertainty caused by the Eurozone crisis, there are a number of exceptional events in 2012 that could provide opportunities for growth: the Queen’s Jubilee celebrations, the Euro2012 football championship and the London Olympics.

“During this year’s royal wedding, for example, our ShopperTrack research found there was a spike in shoppers’ interest in food with a local or British theme.

“We still buy most of our groceries at supermarkets and hypermarkets but we’re also using different types of stores more often, such as online and convenience,” she went on. “And leading retailers are building their presence in these areas.

“Another growth area is discounters, and with people increasingly experiencing a squeeze in incomes this format will benefit – despite counting for a small share of the overall grocery market. Our ShopperTrack data shows a doubling in shoppers using food discounters for their main source of grocery shopping: 6% of them say they now use this outlet as their main grocery channel, compared to 3% last September.”

Denney-Finch added that technology would also be a key feature in driving growth in the food and grocery sectors. This includes “proximity marketing”, which allows customers who sign up to the service to receive a text when they are near their local store about specific offers, and virtual reality services allowing shoppers with an online camera to get a 3D view of a product without needing to be in a store.