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RESEARCH | Staff Reporter, UK
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Food and drink industry projected to grow 12% in 2021

This takes it to 97% of its 2019 pre-COVID level.

The UK food and drink market is forecast to grow 12% this year, according to the latest Eating In vs Dining Out report produced by insight and analysis providers IGD, in collaboration with foodservice consultant Peter Backman.

The projected increase is driven by strong retail growth from January to March and foodservice sales, which are expected to begin to strengthen from July onwards as pent-up demand for socialising boosts the sector.

Foodservice will grow by 54% to £18.6 billion compared to 2020 numbers. Some of this growth is said 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 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. The value of retail is up £1.8 billion on 2020 and £14.5 billion on 2019,” Nicola Knight, Senior Retail Analyst at IGD, 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,” added Backman.

According to the report, the key to unlocking opportunity for both retailers and operators is understanding the K-shaped recovery and its influences on shopper behaviour.

Recovery will see higher income households who have accrued substantial savings – estimated to be a significant “pot” of over £100 billion – contrast to lower income households who face financial challenges due to the ending of government support and rising unemployment, particularly amongst younger people.

“Discount is likely to be the fastest growing channel in retail as financially-challenged shoppers look for value. Yet, on the flipside, 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,” Knight 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,” Backman noted.

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