UK wholesaling performance 2020: hamstrung foodservice channel drives decline

Date : 17 February 2021

Patrick Mitchell-Fox

Senior Retail Analyst

The latest IGD review of the UK wholesaling sector shows that, despite an unprecedented spike of growth (+20.7%) in the retail channel sales of UK wholesaling in 2020, this was outweighed by the depth of the decline (-36.5%) in the foodservice channel; as its customer businesses faced repeated interruption and restriction in response to the successive waves of coronavirus infection. The net result for the UK wholesaling sector was an overall fall in sales of 2.3%, leaving its value for the year at £27,986m.

Retail channel sales up £3.2bn

With retail customer businesses benefiting both from a major shift amongst the UK population into shopping locally and the loss of competition from the out-of-home sector, wholesale sales into the retail channel leapt up to £18,955m (from £15,704m in 2019). While this growth was broad-based and across many categories, it was lead above all by sales in alcohol where an uplift of over 41% brought an incremental spend of £1.2bn, representing over a third of all the upside in the channel.
Moreover, this massive outperformance in alcohol shifted the balance of the channel category mix, with BWS (beers, wines & spirits) participation reaching 23% in the year.

Nevertheless, some categories did experience a relative underperformance, especially those with a significant ‘impulse’ component such as ambient food (which includes confectionery and snacks) and soft drinks.  While both grew at over 9%, their share in the mix fell back slightly as demand for eat/drink now products slackened in the face of lockdowns and significantly reduced population mobility.

Foodservice channel sales down by £4.1bn

While the first quarter of the year was less affected, sales in the foodservice channel had begun to fall before the UK’s first national lockdown was imposed in March, with consumers already nervous of eating and drinking out.  The lockdown maintained throughout the second quarter saw the deepest decline of any period with sales down 64%, and while quarter three saw a notable relative recovery, quarter four was then impacted by tougher restrictions and targeted lockdowns that pushed sales sharply down again to -41%.

While all core food categories suffered major declines, frozen food suffered slightly less badly, perhaps due to the attractions of long-life product in a stop-start business environment. Meanwhile the category showing most resilience was non-food consumables, including as it does both hygiene and cleaning products as well as takeaway packaging.

Cash & carry outperformed delivery

In recent years UK wholesaling has seen delivery become a more dominant model of customer service, with self-service (traditional cash & carry) losing ground as operators have developed hybrid models in which delivery has been the major driver of sales and ‘collect’ retains a mostly top-up role for many customers. However, 2020 has seen this trend interrupted as self-service grew well ahead of the market overall (+8.6% versus -2.3%), and as well as strongly amongst retail customers it also saw a less steep decline amongst foodservice customers than the channel average. While delivery still retains a substantial majority share in the sector, it seems that cash & carry benefited from the exceptional trading conditions of 2020; helping retailers sustain availability when deliveries were not frequent enough to match spiking shopper demand and helping caterers manage their rapidly changing commercial landscape when concern for costs and waste favoured little-and-often purchasing.

Sector value forecast to remain level in 2021

Though again representing another year of divergent channel fortunes, overall wholesaling sector performance is expected to be more or less flat in the 2021. With foodservice likely to rebound, despite the early months of continuing lockdown, the wholesale sales in this channel are forecast to increase by 22%.  However, ‘full’ recovery will still not be achieved for two more years, with sales in the current year remaining 23% lower than in 2019.

In contrast retail channel sales are expected to decline by 9% in 2021, dropping back to £17.3bn. Nevertheless, considered in the longer term this will still leave sales in this channel significantly elevated (+10%) versus 2019.

Subscribers to Retail Analysis can access the full wholesaling 2021 report.