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How retailers are reacting to trends within the UK Food and Grocery sector

Full report: Structural Changes for UK Food & Grocery Sector

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This work forms part of a wider piece of research and is a downloadable in pdf format


Back to basics

Retailers have been working with fewer suppliers to simplify ranges, thus reducing the number of product lines, introducing clearer price architectures and cutting the end-to-end cost of goods. The pressure is on retailers to dedicate more shelf space to more popular items. 

Operating costs facing food retailers have risen faster than sales growth

Operating costs facing food retailers have risen faster than sales growth


Labour cuts

Refocusing on the core food business has led to more streamlined management structures, leading to fewer head office jobs. In essence, a simpler business model requires fewer people. 

Total employment costs facing food wholesalers and retailers have been closely aligned

Total employment costs facing food wholesalers and retailers have been closely aligned


Store wars

Retailers have kept cutting prices to close the gap with their competitors, while also investing in differentiating the brand and services to regain customer loyalty. It has led to decreasing margins, and when each retailer invests in lower prices to protect market share, profit margins go down for the whole sector.



Tesco’s £3.7 billion acquisition of Booker in 2017 set the tone for the scale of disruption facing the industry and has been a catalyst for further consolidation in the UK wholesale and symbol industry.

Comparisons of net store changes across discounters and supermarkets

Comparisons of net store changes across discounters and supermarkets


Behavioural shifts

The most disruptive industry change is consumer behaviour, and retailers are prioritising their investment in convenience stores and online capabilities. 


Moving online

The online food market grew by over 17% in 2017, and by 2022 online food sales are expected to rise by 48% as consumers are more comfortable with online food shopping. Technological innovation will also accelerate the transformative change in the sector. 


Own-labels the key to boosting margins

Strong own-label and focused premium brands not only stand out from the competition, they also have higher margins, so retailers have a need to promote their own-brand goods for the sake of profitability. 


Future trends to keep an eye on

The reactivity of the market has seen varied pace when addressing and adapting to the range of trends that the industry has witnessed in recent years. Nevertheless, as we move towards the future, an acceleration of technological input will rapidly see new ways of conducting old tasks, as well as retailers implementing more fundamental strategies to remain competitive… discover these trends here


Things to do now

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Found this short article interesting?

This work was conducted by Retail Economics in partnership with Barclays Corporate Banking as part of a wider piece of research that focusses on a new era for UK food supply chains and the impact of Brexit. Here, we include an overview of the food and grocery sector since the turn of the century in Part 1 and look at current trends in Part 2. Part 3 focuses on the different Brexit outcomes and what this is likely to mean for the industry when it comes to costs and tariffs over the five-year post-Brexit period. Case studies are included, together with a look at Brexit tariffs, and lastly various industry trends to watch out for. 

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