POLARITY GROWS BETWEEN VALUE AND PREMIUM, WELLNESS AND HOME COMFORTS

RECESSION, RESTAURANTS AND READY MEALS

With recession in the UK expected to continue into next Spring and the Food and Drink Federation warning that the Chancellor has not done enough to help the sector, food retailers and consumers are facing continued economic uncertainty.

As price continues to play a major role in purchase decisions, a growing polarity between the haves and havenots will see the value and premium businesses in the food and beverage market hold up well. However, those in the middle may face an uncertain future as consumers with reduced disposable income hunt for value. Retailers must respond with pricing strategies to hold market share and avoid a mass migration to discounters.

In the early stages of the pandemic, supermarkets halted promotions, average prices rose as the shift to private label accelerated. The ready meals market, in particular, benefited from the population spending more time at home, boosting businesses such as M&S supplier 2 Sisters, which is adding 200 employees to its ready meals factory in Carlisle to meet COVID demand.

Many restaurants are also connecting directly with at home diners in a bid to supplement their dwindling covers. Appealing to the new wave of home cooks that lockdown has inspired,  restaurants such as London Mexican brand TACA and Scottish restaurant Mac and Wild launched DIY meal-kits during lockdown, riding the meal-kit delivery sector wave that is forecast to hit $20bn globally by 2027.

An increase in restaurant delivery services is here to stay.

BRAND LOYALTY PUT TO THE TEST UNDER NEW SHOPPING CONDITIONS

Continuing changes in consumer habits will have a major impact on F&B businesses in the UK. While some consumer brand loyalties will be hard to break, the act of shopping for groceries has itself changed from an everyday “experience” to a weekly adventure in person. Along with the sharp rise in online grocery shopping—where customers are more likely to choose the same items each week—even those venturing into stores are doing so with a strict list that reduces the likelihood of impulse buying. Mask-wearing orders in stores are dampening food-on-the-go purchases too, hitting the snacking and grazing corner of the market. 

A preference for packaging has boomeranged, as consumers who had previously turned to low environmental-impact products are, for now, more likely to trust more heavily packaged products, perceived as more hygienic.

"Mask-wearing orders in stores are dampening food-on-the-go purchases too, hitting the snacking and grazing corner of the market."

- Andy Searle, Managing Director, London

WILL EATING WELL WIN OUT OVER FOOD COMFORTS AT HOME?

With more time spent at home during the pandemic and the virus perhaps attuning consumers to a keener sense of their own mortality, the desire for more health and wellness products—already increasing prior to COVID-19—continues to expand.

Back in May, Holland & Barrett, the UK’s leading health food retailer, instigated a cap on supplement purchases because of overwhelming demand. Organic food and drink sales also rose sharply during lockdown, with Nielsen reporting an 18.7% increase in organic sales in the 12 weeks to the end of May—which included 10 weeks of lockdown—and the Soil Association has reported that the sector is likely to hit £2.6bn by the end of the year, exceeding a projected £2.5bn. 

With warnings that obesity and diabetes can impact COVID-19 survival rates, eating well may remain a priority for consumers. In contrast though, comfort-eating and excessive drinking have increased during lockdown and this trend may roll on as the UK braces itself for a harsh winter and tough financial start to 2021.