The coronavirus pandemic has reshaped the UK grocery-retail landscape at unprecedented speed and scale. 

Grocery Sector: Updated Snapshot

The sector key drivers in the years ahead

Consumer shifts around online, value and lifestyle agendas are creating an attractive opportunity for grocery retailers to capture market shares over the next two to three years.

Times Are Changing
Five major forces at the heart of this change came together and reinforced each other. For many UK grocery retailers, 2020 was the year that saw emerging consumer trends suddenly go into overdrive.

The News 2 - 3 years

With restaurants, offices, and schools largely closed in most countries during the first wave of the pandemic, consumers rushed to stock up on groceries, both in stores and online.Grocery sales during the onset of the first lockdown in March 2020 increased by about 20%, on average, over the same period in 2019. Retailers faceddifficulties to fulfill the sudden peaks in demand as fear of stock-outs led to hoarding, which, in turn, created further stock-outs—all leading to further stress for consumers. It wasn’t until after this major disruption that both consumers and grocers realised the pandemic was going to last for months, and adapted their business models and shopping behavior accordingly. Two fundamental drivers, however, continue to shape the way consumers shop for groceries.

Government restrictions. More safety regulations led to an increase in demand for both online and (especially in cases of harder lockdowns) local shopping, while the closure of restaurants and cafés combined with a rise in remote working led consumers to shift their food spending from foodservice to grocery retail.

Consumer focus on health. With growing insight into infection risks and prevention measures, consumers increasingly preferred to avoid crowded places—such as busy stores or public transportation—in an effort to protect themselves and others.

Together, both government restrictions and a focus on health led to massive changes in mobility patterns. UK consumers reduced their shopping frequencies by around 22% on average, while increasing basket sizes by approximately 16%. Overall, mobility of consumers has decreased and mobility patterns have been redistributed amongst different destinations. For instance, on average, the number of visitors to workplaces had decreased by 40%, while visits to residential areas had increased by 8% in 2020. The online channel, for example, grew by about 55% on average across UK, while hypermarkets only saw a growth of about 3%.

Where we are now

We expect that the unprecedented overall growth rate of 2020 will be hard to sustain. Some new habits, such as working from home or cooking more often, may stick a while longer even as the fundamental drivers, including the need to avoid infection transmission or the restrictions on restaurants and bars, have (at the time of writing) started to disappear. Grocery retail seems to be positioned well, even for the post-COVID-19 time, with consumer spend intentions clearly favouring grocers (positive intent) over takeout or seated restaurants (both with negative intent).

Can the growth be sustained -
How will the supply chain respond

UK grocery retailers saw their online share expand from 7.6% in 2019 to 11.2% in 2020 (reaching 13% market share at the highest point), corresponding to a revenue growth of 67% In markets that had proven less savvy on online shopping, many incumbents benefited from their recently established online presence.

Though impressive, online growth rates are likely to even be underrepresenting the market potential given that at least some players were unable to keep up with the exploding demand. This “growth pain” likely left customers with a
frustrating experience and may have been one driver of demand curves somewhat flattening again after the first peak. Full-year growth, albeit impressive, is likely to still be significantly below peak numbers.

Online options

Consumer survey data shows that users of online grocery retail channels are likely to largely continue their use in 2021— the spending intent after COVID-19 for online grocery is expected to drop by just 10%. Having learned to appreciate the convenience of shopping online, consumers will at least partly stick to this habit even after the pandemic abates—increasing the need for retailers to finally seek a path to profitability for their online offering.

Online becomes core
Following an exceptional take-up rate for online shopping in 2020, consumers are eager to make even more of their food purchases online in 2021. In particular, the 25% of consumers who already bought online at least occasionally want to increase their online purchasing even further. The more often consumers bought online in 2020, the more likely they seem to be to increase their share of online buying.Customer brand loyalty

The pandemic delivered a massive shock to customer loyalty across every dimension—providing a unique opportunity for grocers. More than 60% of consumers changed their shopping behaviours. With 31% of consumers saying they changed retailer for reasons of: availability, value (especially prices), inventory and convenience particularly easy access or delivery options.

Consequently, grocery retailers have a historic opportunity to attract new customers by better adapting to their changing needs and providing them with a superior value proposition. And, since more than 70% of customers say that they intend to stick to their new behaviours, there is a real chance to retain them in the longer term.

Value is king again
CEOs see downtrading, or increased price sensitivity, as the most influential trend for the grocery market, with 56% of CEOs listing it among their top-three priorities. The downtrading trend is amplified by an increased quality expectation of consumers at the entry level price tier as it puts pressure on grocery retailers regarding both price and quality.

In the UK, 34% of consumers indicated that they want to save money when shopping in 2021 compared with 2020, 27% plan to research promotions more actively, and 17% want to switch to less expensive products.

UK Grocery Releases:
This is a snapshot of the latest food, news and research for the grocery sector.
to read the full release.

Sept 2021:

Convenience stores to be ‘hard hit’ by business rates revaluation in 2023

UK supermarket prices ‘to rise by 5%’ as supply chain costs increase

Alternative tech ‘can help to avoid future CO2 shortages

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