Uk Retail

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Food Retailing - UK - November 2004

November 2004

The UK Food Retail Sector

The UK food, drink and tobacco market

Market value and trends

The term 'food retailers' is becoming ever more inappropriate as the operators of the largest stores increase their non-food offer. But food remains the core of the offer and the main reason that people visit the stores.

Figure 12: UK: Consumer spending on food, drink and tobacco, 1999-2003

(Јm incl. sales tax)

1999

2000

2001

2002

2003

% change 1999-2003

Food & non-alcoholic beverages

57,025

58,563

59,974

61,170

63,082

10.6

Food

50,670

51,840

52,882

53,792

55,261

9.1

Non-alcoholic beverages

6,355

6,723

7,092

7,378

7,821

23.1

Alcoholic beverages & tobacco

24,458

24,617

25,158

25,960

27,342

11.8

Alcoholic beverages

10,166

10,395

10,700

11,338

12,051

18.5

Tobacco

14,292

14,222

14,458

14,622

15,291

7.0

Source: National Statistics/Mintel

Demand for food is mature. There is a little growth, particularly from the development of higher margin goods - more fresh foods, organic and ready prepared foods. But on the whole people have enough to eat and do not increase their consumption in good times.

Figure 13: UK: Consumer spending on food, drink and tobacco as % all retail sales, 1999-2003

Source: Mintel

Therefore the upswing in consumer spending on food, drink and tobacco in 2003 is a little unexpected. The year certainly saw much weaker retail sales growth than any other in the last five, but there was certainly no recession and consumer confidence remained high. We believe that the main reason for the slight relative improvement was that inflation in foods was above the average for retail sales in 2003. Spending on food would not have responded to that small relative difference and the proportion of food in the spending mix therefore increased.

For the food retailers, food is the core of the business and the principal traffic driver. Tesco and ASDA have both managed to become destination outlets for some non-foods, but that is very unusual in the context of UK food retailing.

Figure 14: UK: Spending on food and drink, 1999-2003

Јm, excl VAT

1999

2000

2001

2002

2003

% change 1999-2003

Bread and cereals

8,065

8,346

8,702

9,054

9,137

+13.3

Meat

11,883

12,265

12,384

12,628

13,369

+12.5

Fish

2,063

2,152

2,298

2,400

2,344

+13.6

Milk, cheese and eggs

7,263

7,412

7,480

7,435

7,721

+6.3

Oils and fats

1,223

1,219

1,221

1,184

1,188

-2.9

Fruit

3,961

4,068