What will UK food and drink look like post-COVID?

Date : 24 June 2020

Nicola Knight

Senior Analyst - Food-To -Go

COVID-19 has caused a monumental shift in consumers’ food and drink habits. Our new Eating In Vs Dining Out report, produced in collaboration with foodservice consultant Peter Backman, explores the impact of COVID-19 on the UK food and drink market and outlines four scenarios for the future.

During the pandemic, the boundaries between eating at home and out-of-home, already blurred, have broken down further resulting in dramatic changes to supply and demand of food and drink in the UK.  At a time of unprecedented change and uncertainty, the four hypothetical scenarios aim to help any company with an interest in the UK’s food retail or foodservice sectors plan for the future.

The UK food and drink market pre-COVID

In 2019, UK consumers spent almost £200bn on food and drink- one third (36%) in foodservice outlets and two thirds (64%) in retail.  With a growth rate of 1.8% since the previous year, foodservice was growing slightly faster than retail, which increased by 1.5%, however both sectors were under pressure resulting from several years of low consumer confidence.

Four scenarios for the future

In 2020, COVID-19 and the resulting lockdown measures and closure of all non-essential shops, pubs, restaurants and cafes, will have a dramatic impact on the balance of consumer spend in retail and foodservice.  Exactly how consumer behaviour will change and how businesses will be affected is still very difficult to predict, making a single view of the future impossible.

Our four scenarios take this into account by addressing the two main variable factors: the potential path of the virus (from a relatively manageable virus to multiple outbreaks) and performance of the economy (from an economic performance that quickly recovers to a hard-hit economy slow to rebuild). 

The four hypothetical scenarios are:

  1. The Great Reset: This least impactful scenario sees food and drink consumption largely shift to home. Retail sales remain high but flatten as lockdown restrictions gradually lift and people start to eat out again. Safety and hygiene in out-of-home settings have higher value for consumers and factor strongly when choosing where to eat and drink. Some changes in consumer behaviour become the norm fuelling further development of digital channels. Eating out returns to levels experienced in 2019 in two years.
  2. Decade of Drift: In this scenario, the virus is manageable, but the economy takes longer to recover and the financial impact on households and businesses is severe. Companies accelerate cost-cutting and efficiency programmes to demonstrate value to consumers, resulting in lower levels of new product development. Demand for eating out among consumers is high, but many are unable to afford it. 
  3. Technical Isolation: The path of the virus is driving a technical response by businesses and consumers, which is re-shaping the retail offer and online is seen as the safest way to shop. Businesses divert investment from stores and shopping is a functional activity. Eating out is also functional and severely constrained. Stores and foodservice sites that cannot be repurposed to increase online capability will close. 
  4. Globalisation Reversed: This is the most severe scenario, combining bad outcomes for both the virus and economic spheres. Globalisation regresses putting pressure on supply chains and businesses emphasise operational efficiency. Supply chains need extensive rebuilding; ranges change with some products becoming seasonal or disappearing completely. For commercial foodservice, deliveries and takeaway services are almost the only option due to increased costs and complexity. 

How the industry can prepare

It is crucial that food and drink businesses are able to respond successfully and quickly to events as they unfold. 

  • Retailers need to consider which changes in shopper behaviour will become permanent so they can identify the solutions that their business should nurture
  • Foodservice companies must re-write business plans with a start-up mentality.  They will need to balance customer focus with practical operational issues and work collaboratively with partners to achieve this

The model below demonstrates how the scenarios can be used by these businesses, and their suppliers, to support future planning:

As the situation develops, look out for further Retail Analysis reports examining changes in consumer behaviour, economic conditions and business responses as they happen.  This insight will enable you to monitor current activity against the hypothetical scenarios outlined and adjust your plans accordingly.

Next steps

Retail Analysis subscribers can view the full report here.  Please let us know if you have any questions or feedback on the report via AskIGD.

The report is also available to purchase by non-subscribers. Please contact us for further details.