Small and large stores to drive UK growth

The IGD's new study, Grocery Retailing 2004, predicts that sales this year will grow 2.7 per cent to £118.1 billion, helped by the expansion of many of the major multiples into the convenience sector, consumers trading up to premium ranges and by an increasing contribution of non-food, which will account for 10 per cent of total sales.

But growth is also being kept in check by low food price inflation, running 2 per cent below background inflation at 0.5 per cent, according to IGD. Food and grocery, however, is now the third biggest element of household expenditure, accounting for 13 per cent in 2003, and for 49p of every £1 of retail spending, suggesting that growth will come in spite of expected further pressure on prices.

Indeed, IGD believes that the market will continue to grow at an average rate of 2.5 per cent over the next five years, as the major operators further their expansion into the convenience sector and into non-food through hypermarkets. There are currently around 600 hypermarkets in the UK, and, planning permission notwithstanding, IGD believes this will increase by a third in the next five years. As for convenience stores, the report predicts that the sector will grow from £23 billion to £29 billion in the next four years.

"With food price inflation consistently below background inflation, food is cheaper than ever and consumers have never been offered better value in terms of quality, choice and price. Against this background the food industry has still achieved growth and this is a testament to the very strong retailing skills in our sector,"​ said David Gordon, IGD business manager.

"Over the next five years we will see both ends of the market driving this growth. At one end, the convenience market is outperforming the total market and will continue to do so. At the other end of the scale, the hypermarkets will continue to develop to satisfy consumers' desires for non-food and one-stop shopping."​