The Future of Food Chains

CUSHMAN & WAKEFIELD

UNDERSTANDING THE CURRENT FOOD CHAIN IN THE UK

THE KEY PLAYERS

In the United Kingdom food is typically purchased through the traditional supermarket model, but consumers have begun to diversify spending patterns, resulting in the rise of subscription meal kit providers, a growing proportion of food purchased through the online e-grocery sector, and an increase in purchasing through wholesale convenience, and non-food specialist stores. During 2013 the UK had a three firm concentration ratio of 64%, which has been eroded over the last ten years and now stands at 56%, highlighting a diversification of power within the sector.

Most notably, discounters such as Aldi and Lidl have seen the largest gains in market share, with Aldi recently leapfrogging Morrisons in terms of market share. Owed to the strength of the supermarket sector in the United Kingdom, supermarket and food anchored retail have proved to be robust investments owed to inelastic demand for goods, and high levels of liquidity associated with the sector. From a consumer perspective the scale of the major incumbents within the sector has allowed consumers to benefit from relatively low pricing, owed to the economies of scale and purchasing power of the major retaillers. However, recent inflationary pressure has challenged consumer loyalty in the UK, up-rooting longstanding relationships with local supermarkets and intensifying the battle for market share. The latest evolution of the supermarkets battle for market share is naturally focusing on discounting and value. As a result, significant effort is being placed on price-match campaigns, exclusive discounts

FOOD & GROCERY SALES CHANNEL SHARE OF VALUE

80%

Supermarkets

60%

40%

Convenience Stores

20%

Food and Drinks Specialists

Other

Online

Value & Discounters

0%

2007

2012 2017 2022

Source: Kantar; 2023