UK food and drink market declines in real terms in 2022

This year the UK’s total food and drink market will be worth £191.1bn (95% of 2019 values and +6.6% vs 2021). However, in real terms the market will shrink by -2% driven by trading down in retail.

This year eating in (retail) will account for 73% of the market with eating out (foodservice) at 27%. This is a recovery for eating out from the 21% share in 2020 but still some way below the pre-pandemic share of 37%.

With inflation set to reach 2008 levels in Q4, September has been a turning point for consumers as concerns over energy bills and mortgage payments sent confidence to a record low.

Consumers are already trading down in retail

Retail has already been experiencing the impact of the increased cost of living on shoppers.

In real terms, the UK retail market for food and drink will shrink this year and fall again slightly next year as consumers down-trade to cheaper products and switch channels to control their spend on food and drink.

Retailers are implementing a variety of initiatives to win and retain shoppers, mainly focussed on value messaging and loyalty schemes. These looks set to continue into 2023 as shoppers become increasingly price sensitive.

A challenging year ahead for eating out

The UK’s eating out market has had a buoyant first half of the year with 2022 being the first year since the pandemic that operators across all sectors were fully open.

However, even consumers in higher income groups are starting to make changes to spending as fears over increasing energy bills and mortgage repayments start to impact behaviour.

How the year finishes will depend on how consumers celebrate over the festive season. Next year the market is likely to see more spend switch to retail and recovery stall in many sectors.

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