Food & Grocery in the UK | Verdict Sector Report

Use our market share & channels of distribution to find out which retailers and channels are set to grow or decline significantly in the next 5 years Assess your competitive strategies in the light of our grocery market data by retailer type, space and store number Discover our comprehensive analysis of the key issues set to impact the food & grocery market over the next five years Identify the market growth drivers and inhibitors and implement our strategies to improve sales growth potential

Scope

Both a driver and an inhibitor, the global trend for commodity price rises will limit the longevity of any price investment made by the Big Four supermarkets, as there is little room to dilute margin and only so far cost cutting can go.

Growth rates for the discounters will slow significantly in the coming years. New customers will be harder to come by as their acceptance among consumers has increased significantly. Fresh food will be a battleground for the discounters.

Reasons to buy

What is the food & grocery market size and how will it develop over the next five years

What is the direction of growth in food & grocery expenditure by category over the next five years

Which channels have performed the best over the last five years, and which channels have seen their share of the market decline

What are the key issues that will impede or maximize future growth opportunities

What strategies can I put in place to help drive sales and protect sales densities and profitability from falling

Table of Contents

1 Outlook

1.1 Overview

1.2 Main Conclusions

1.2.1 Superficial price cuts will have limited impact

1.2.2 Inflation will dictate the next five years

1.2.3 Competition facing Big Four will intensify

1.2.4 Space growth continues…

1.2.5 …but takes a different form

1.2.6 Grocers must not neglect their larger stores

1.2.7 Omnichannel not just online

1.2.8 Greater online synergy between food & non-food will emerge

1.2.9 Price war set to continue

1.2.10 Value players will continue to stake their claim

2 Recommendations

2.1 Overview

2.2 Key Take Outs

3 Market Size

3.1 Overview

3.2 Definitions

3.3 Expenditure

3.4 Grocers' and Food Specialists' Sales

4 Market Forecast

4.1 Overview

4.2 Definitions

4.3 Summary

4.3.1 Key findings

4.3.2 Strategies for success

4.4 Expenditure

4.4.1 Key findings

4.4.2 Expenditure growth supported by inflation

4.5 Grocers' and Food Specialists' Sales

4.5.1 Key findings

4.6 Quarterly Expenditure Forecasts

4.6.1 Food & grocery

5 Channel Shares

5.1 Overview

5.2 Food & Grocery Online

5.2.1 Outlook

5.2.2 Amazon threat a serious one for the grocers

5.2.3 Click & collect and PUDO remain insignificant…

5.2.4 Minimum spend increases are vital

5.2.5 Online grocery growth slows as market begins to mature

5.2.6 Food share of click & collect will decline

5.2.7 PUDO is insignificant, impractical and will remain so

5.2.8 Spend per head to rise as greater proportion goes online

5.2.9 Gender breakdown reflects the wider market

5.2.10 Significant growth in shopping population across the board

5.2.11 Tesco dominates online, as fledgling Morrisons overtakes Waitrose

6 Market Shares

6.1 Overview

6.2 Expenditure Share

6.2.1 Sainsbury’s set to overtake Asda by keeping out of price wars

7 Sector Trends

7.1 Overview

7.2 Price War will have Minimal Impact on the Sector

7.2.1 Cuts across essentials will help, but consumers still stretched

7.2.2 Price marketing isn’t working

7.3 The Discounters must Build on their Success During the Downturn

7.3.1 Changing shopping habits will help the discounters grow

7.3.2 The value players must adapt to survive

7.3.3 Store expansion must form the basis of growth

7.3.4 The online channel cannot be ignored, but must not become the focus

7.4 Larger Stores Cannot be Ignored Despite Underperforming Against Convenience

7.4.1 Convenience stores drive higher sales densities for grocers

7.4.2 Top-up shopping trend continues, keeping focus on convenience

7.4.3 Larger stores are being overhauled

7.4.4 Retailers must innovate to continue driving convenience growth

7.5 Grocers must React to Growth Opportunities in the Online Market

7.5.1 Younger, more affluent shoppers drive demand for online food & grocery shopping

7.5.2 Home delivery continues to dominate the online market

7.5.3 Integration makes success online more likely

7.5.4 Tesco ranks highest for customer conversion online

8 Major Competitors

8.1 Overview

8.2 Sales

8.2.1 Polarisation continues as discounters and Waitrose outperform

8.2.2 Only four of the top grocers are able to increase profits

8.2.3 The majority of the top grocers have seen their margins squeezed over time

8.3 Space

8.3.1 Aldi and Lidl are expanding aggressively

8.3.2 Discounters increasingly drive sales from smaller space

8.4 Space Allocation

8.4.1 Nearly one third of grocers’ space is occupied by non-food on average

8.4.2 Asda has the highest proportion of non-food in its sales mix

9 Methodology

9.1 Methodology: Outlook

9.1.1 Market size

9.1.2 Market shares

9.1.3 Sales density calculation

9.2 Methodology: Recommendations

9.2.1 Market size

9.2.2 Market shares

9.2.3 Sales density calculation

9.3 Methodology: Market Size

9.3.1 Market size

9.3.2 Market shares

9.4 Methodology: Market Forecast

9.5 Methodology: Market Shares

9.5.1 Market size

9.5.2 Market shares

9.5.3 Sales density calculation

9.6 Methodology: Sector Trends

9.6.1 Market size

9.6.2 Market shares

10 Appendix

10.1 Appendix: Market Size

10.2 Appendix: Market Forecast

10.3 About Verdict Retail

10.4 Disclaimer

List of Tables

Table 1: Food & grocery products definition, 2015

Table 2: Grocers and food specialists definitions, 2015

Table 3: Food & grocery expenditure, inflation, volume and value, 2010–15e

Table 4: Food expenditure, inflation, volume and value and share of sector, 2010–15

Table 5: Non-durable household goods expenditure, inflation, volume and value and share of sector, 2010–15e

Table 6: Soft drinks expenditure, inflation, volume and value and share of sector, 2010–15e

Table 7: Alcoholic drinks expenditure, inflation, volume and value and share of sector, 2010–15e

Table 8: Tobacco expenditure, inflation, volume and value and share of sector, 2010–15e

Table 9: Grocers' and food specialists' sales at current and constant prices, 2010–15e

Table 10: Channels of distribution (%), 2010–15e

Table 11: Grocery market size by retailer type continued, 2005–15e

Table 12: Grocery market size by retailer type continued, 2005–15e

Table 13: Grocery space by retailer type, 2005–15e

Table 14: Grocery space by retailer type continued, 2005–15e

Table 15: Grocery store numbers by retailer type, 2005–15e

Table 16: Grocery store numbers by retailer type continued, 2005–15e

Table 17: Grocers and food specialists definitions, 2015

Table 18: Food & grocery products definition, 2015

Table 19: Food & grocery expenditure, inflation, volume and value, 2015e–20e

Table 20: Food expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 21: Bakery and cereals expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 22: Dairy products expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 23: Fruit and veg expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 24: Hot drinks expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 25: Meat and fish expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 26: Oils and fats expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 27: Pets, petcare and petfood expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 28: Sugar and sweet products expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 29: Other foods expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 30: Non-durable household goods expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 31: Soft drinks expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 32: Alcoholic drinks expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 33: Wine expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 34: Spirits expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 35: Beer expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 36: Tobacco expenditure, inflation, volume and value and share of sector, 2015e–20e

Table 37: Sources of growth at food & grocery specialists (%), 2010–20e

Table 38: Grocers' and food specialists' sales at current and constant prices (£m), 2015e–20e

Table 39: Channels of distribution (%), 2015e–20e

Table 40: Grocery market size by retailer type, 2010–20e

Table 41: Grocery market size by retailer type (continued), 2010–20e

Table 42: Grocery space by retailer type, 2010–20e

Table 43: Grocery space by retailer type (continued), 2010–20e

Table 44: Grocery store numbers by retailer type, 2010–20e

Table 45: Grocery store numbers by retailer type (continued), 2010–20e

Table 46: Food & grocery expenditure (£m) and growth (%), quarterly, 2014–17e

Table 47: Food expenditure (£m) and growth (%), quarterly, 2014–17e

Table 48: Soft drinks expenditure (£m) and growth (%), quarterly, 2014–17e

Table 49: Alcoholic drinks expenditure (£m) and growth (%), quarterly, 2014–17e

Table 50: Tobacco expenditure (£m) and growth (%), quarterly, 2014–17e

Table 51: Non-durable household goods expenditure (£m) and growth (%), quarterly, 2014–17e

Table 52: Online food & grocery market, 2010–20e

Table 53: Click & collect food & grocery market, 2014–20e

Table 54: PUDO food & grocery market, 2014–20e

Table 55: Online food & grocery shopping population, 2014–20e

Table 56: Gender breakdown of online food & grocery market, 2014

Table 57: Grocers’ share of food & grocery products (%), 2010–15e

Table 58: Food & grocery store format definitions, 2014

Table 59: Sales density by store format (£/sq ft), 2009–14e

Table 60: Store portfolio change at Tesco and Sainsbury’s in their last three financial years, 2014

Table 61: Profile of food & grocery online shoppers and the total online market (%), 2014

Table 62: Online food & grocery market split by fulfilment method (£m), 2014 and 2019e

Table 63: Online food & grocery shoppers stating how they currently use, and will use in the future, alternatives to home delivery (%), 2014

Table 64: Device usage by online food & grocery shoppers, 2014

Table 65: Leading grocers' key operating statistics, 2015

Table 66: Leading grocers' store portfolios, 2015

Table 67: Leading grocers' food & grocery space, 2015

Table 68: Grocery space allocation of the Big Four supermarkets (%), 2015

Table 69: Grocery space allocation of the Big Four supermarkets (%), 2015

Table 70: Grocery space allocation of the other supermarkets (%), 2015

Table 71: Grocery space allocation of the other supermarkets (%), 2015

List of Figures

Figure 1: Food & grocery expenditure (£m) and year-on-year growth (%), 2010–15e

Figure 2: Food & grocery expenditure drivers of growth (%), 2005–15e

Figure 3: Change in food & grocery expenditure (%), 2010–15e

Figure 4: Change in food expenditure by category (%), 2010–15e

Figure 5: Change in alcoholic drinks expenditure by category (%), 2010–15e

Figure 6: Total grocers' and food specialists' sales (£m) and year-on-year growth (%), 2010–15e

Figure 7: Share of sales via grocers and food specialists (%), 2010–15e

Figure 8: Change in sales by retailer type (%), 2010 to 2015e

Figure 9: Change in space by retailer type (%), 2010 to 2015e

Figure 10: Change in sales density by retailer type (%), 2010 to 2015e

Figure 11: Change in store numbers by retailer type (%), 2010 to 2015e

Figure 12: Food & grocery expenditure as a proportion of total retail (%), 2015e and 2020e

Figure 13: Food & grocery expenditure (£m), 2015e and 2020e

Figure 14: Food & grocery expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 15: Food & grocery expenditure drivers of growth (%), 2010–20e

Figure 16: Change in food & grocery expenditure (%), 2015e–20e

Figure 17: Change in food expenditure by category (%), 2015e–20e

Figure 18: Food expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 19: Food sources of growth (%), 2010–20e

Figure 20: Bakery and cereals expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 21: Bakery and cereals sources of growth (%), 2010–20e

Figure 22: Bakery and cereals expenditure growth (%), 2015e–20e

Figure 23: Dairy products expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 24: Dairy products sources of growth (%), 2010–20e

Figure 25: Dairy products expenditure growth (%), 2015e–20e

Figure 26: Fruit and veg expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 27: Fruit and veg sources of growth (%), 2010–20e

Figure 28: Fruit and veg expenditure growth (%), 2015e–20e

Figure 29: Hot drinks expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 30: Hot drinks sources of growth (%), 2010–20e

Figure 31: Hot drinks expenditure growth (%), 2015e–20e

Figure 32: Meat and fish expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 33: Meat and fish sources of growth (%), 2010–20e

Figure 34: Meat and fish expenditure growth (%), 2015e–20e

Figure 35: Oils and fats expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 36: Oils and fats sources of growth (%), 2010–20e

Figure 37: Oils and fats expenditure growth (%), 2015e–20e

Figure 38: Pets, petcare and petfood expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 39: Pets, petcare and petfood sources of growth (%), 2010–20e

Figure 40: Pets, petcare and petfood expenditure growth (%), 2015e–20e

Figure 41: Sugar and sweet products expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 42: Sugar and sweet products sources of growth (%), 2010–20e

Figure 43: Sugar and sweet products expenditure growth (%), 2015e–20e

Figure 44: Other foods expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 45: Other foods sources of growth (%), 2010–20e

Figure 46: Other foods expenditure growth (%), 2015e–20e

Figure 47: Non-durable household goods expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 48: Non-durable household goods sources of growth (%), 2010–20e

Figure 49: Non-durable household goods expenditure growth (%), 2015e–20e

Figure 50: Soft drinks expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 51: Soft drinks sources of growth (%), 2010–20e

Figure 52: Soft drinks expenditure growth (%), 2015e–20e

Figure 53: Change in alcoholic drinks expenditure by category (%), 2015e–20e

Figure 54: Alcoholic drinks expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 55: Alcoholic drinks sources of growth (%), 2010–20e

Figure 56: Wine expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 57: Wine sources of growth (%), 2010–20e

Figure 58: Wine expenditure growth (%), 2015e–20e

Figure 59: Spirits expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 60: Spirits sources of growth (%), 2010–20e

Figure 61: Spirits expenditure growth (%), 2015e–20e

Figure 62: Beer expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 63: Beer sources of growth (%), 2010–20e

Figure 64: Beer expenditure growth (%), 2015e–20e

Figure 65: Tobacco expenditure (£m) and year-on-year growth (%), 2010–20e

Figure 66: Tobacco sources of growth (%), 2010–20e

Figure 67: Tobacco expenditure growth (%), 2015e–20e

Figure 68: Total grocers' and food specialists' sales (£m) and year-on-year growth (%), 2015e–20e

Figure 69: Share of sales via grocers and food specialists (%), 2015e–20e

Figure 70: Change in sales by retailer type (%), 2015e to 2020e

Figure 71: Change in space by retailer type (%), 2015e to 2020e

Figure 72: Change in sales density by retailer type (%), 2015e to 2020e

Figure 73: Change in store numbers by retailer type (%), 2013e on 2018e

Figure 74: Food & grocery sources of growth (%), quarterly, 2013–17e

Figure 75: Food sources of growth (%), quarterly, 2013–17e

Figure 76: Food versus food & grocery year-on-year growth (%), quarterly, 2013–17e

Figure 77: Soft drinks sources of growth (%), quarterly, 2013–17e

Figure 78: Soft drinks versus food & grocery year-on-year growth (%), quarterly, 2013–17e

Figure 79: Alcoholic drinks sources of growth (%), quarterly, 2013–17e

Figure 80: Alcoholic drinks versus food & grocery year-on-year growth (%), quarterly, 2013–17e

Figure 81: Tobacco sources of growth (%), quarterly, 2013–17e

Figure 82: Tobacco versus food & grocery year-on-year growth (%), quarterly, 2013–17e

Figure 83: Non-durable household goods sources of growth (%), quarterly, 2013–17e

Figure 84: Non-durable household goods versus food & grocery year-on-year growth (%), quarterly, 2013–17e

Figure 85: Online revenue of clothing & footwear, food & grocery and electricals sectors (£m), 2010–20e

Figure 86: AmazonFresh, 2015

Figure 87: AmazonFresh working with local shops and restaurants, 2015

Figure 88: Spend per head on food & grocery online (£) and year-on-year change (%), 2014–20e

Figure 89: Percentage of Internet shoppers who shop for food & grocery (%), 2014

Figure 90: Percentage of Internet shoppers who shop for food & grocery (%), 2013

Figure 91: Top 10 supermarket-delivered food & grocery websites where shoppers bought online via desktop/laptop (%), 2014

Figure 92: Top 10 supermarket-delivered food & grocery websites where shoppers bought online via tablet (%), 2014

Figure 93: Top 10 supermarket-delivered food & grocery websites where shoppers bought online via mobile (%), 2014

Figure 94: Top 10 courier-delivered food & grocery websites where shoppers bought online via desktop/laptop (%), 2014

Figure 95: Top 10 courier-delivered food & grocery websites where shoppers bought online via tablet (%), 2014

Figure 96: Top 10 courier-delivered food & grocery websites where shoppers bought online via mobile (%), 2014

Figure 97: Share of the total food & grocery market, by grocer (%), 2015e

Figure 98: Share of the total food & grocery market, by grocer (%), 2010 and 2015e

Figure 99: Change in share of total food & grocery market, by grocer (percentage point), 2015e on 2010

Figure 100: Morrisons I’m Cheaper campaign, 2014

Figure 101: Food & grocery inflation before and after recent price cuts (%), 2011–16e

Figure 102: Food & grocery volume growth before and after recent price cuts (%), 2011–16e

Figure 103: Award success and endorsements have given shoppers more confidence in buying from the discounters and embracing unknown brands, 2014

Figure 104: Market shares for the value players, the Big Four and the remainder of the food & grocery market (%), 2009 and 2014e

Figure 105: Market share growth for the value players, 2014e–19e

Figure 106: Lidl Ireland promoting its range of fresh bread, 2014

Figure 107: Lidl has launched a range of French wines, 2014

Figure 108: Peter Andre is the latest face of Iceland in its advertising campaigns, 2014

Figure 109: Lidl’s latest television advert promotes quality and value, 2014

Figure 110: Continued store expansion will help drive growth for the discounters, 2014

Figure 111: Aldi opened its first convenience store in Kilburn, London in April 2013

Figure 112: Danish discounter Netto is partnering Sainsbury’s to make a return to the UK, 2014

Figure 113: Iceland home delivery van, 2014

Figure 114: Waitrose's trial of food & grocery click & collect lockers, 2014

Figure 115: Aldi smartphone and tablet app, 2014

Figure 116: Sales density by store format (£/sq ft), 2014e

Figure 117: The Co-op is offering too much choice for convenience shoppers, 2014

Figure 118: Sainsbury’s has stripped back its offer of tinned tomatoes to just two products in its convenience stores, 2014

Figure 119: Grocers should look to convert inefficient space into warehouse space to support online expansion, 2014

Figure 120: B&Q has sublet space to improve the performance of its larger stores, 2014

Figure 121: Tesco has added Harris + Hoole coffee shops to some of its larger stores, 2014

Figure 122: Tesco has leased space out to new tenants from its underperforming Extra stores, 2014

Figure 123: Asda has been expanding the number of collection points it offers, including at tube stations, 2014

Figure 124: Profile of online food & grocery shoppers (%), 2014

Figure 125: Profile of food & grocery shoppers (%), 2014

Figure 126: Morrisons has tried to ensure continuity across channels, with the ability to pick the thickness of your meat as you would instore, 2014

Figure 127: Iceland is a value player that offers home delivery for food & grocery shops, 2014

Figure 128: Online food & grocery shoppers' preferred fulfilment method if all options were available to them (%), 2014

Figure 129: Tesco offers cheaper home delivery through its Delivery Saver scheme, 2014

Figure 130: Online conversion rates for the eight most heavily used food & grocery retailers (%), 2014

Figure 131: Morrisons is still rolling out its home delivery service and lacks the extensive coverage of its rivals, 2014

Figure 132: Leading grocers' year-on-year change in operating profit (%), year ending 2015

Figure 133: Leading grocers' year-on-year change in operating margin (percentage points), 2015

Figure 134: Leading grocers' change in operating margin (percentage points), 2015 versus 2010

Figure 135: Leading grocers' year-on-year space growth (%), 2015

Figure 136: Leading grocers' year-on-year food & grocery space growth (%), 2015

Figure 137: Leading grocers' year-on-year food & grocery sales density growth (%), 2015

Figure 138: Grocers' average space allocation, by category (%), 2015

Figure 139: Grocers' space allocation to alcohol (%), 2015

Figure 140: Grocers' space allocation to groceries (%), 2015

Figure 141: Grocers' space allocation to perishables (%), 2015

Figure 142: Grocers' space allocation to household goods (%), 2015

Figure 143: Grocers' space allocation to non-food (%), 2015

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