In its annual retail food and grocery market forecast, IGD predicts that the growth in 2020 will slow this year and the next, as shoppers economize and the foodservice industry reclaims sales.

The unprecedented 8.5 percent growth last year is predicted to drop to 1.7 percent in 2021 and then to 0.9 percent in 2022.

This sharp decline will be followed by a period of modest recovery, where the UK retail food and grocery market will grow by 8.1 percent to over £229 billion from 2021 to 2026.

Recovery will be fueled by rising employment levels, growing consumer confidence, economic recovery and new channels and opportunities created by the pandemic.

“The significant dip we’re forecasting in the short term is to be expected; many households will be under increased pressures, making shoppers more value-conscious," Simon Wainwright, Director of Global Insight at IGD said.

"The reopening of the hospitality sector, despite being from a very low base, will also divert some spend away from retail in the short term."

“Longer term, the grocery sector will remain bigger than our pre-pandemic forecasts, primarily driven by elevated levels of home-working benefitting stores in suburban areas, the adoption of digital technologies in-store which will alter how and where people shop and fewer out-of-home eateries operating," he said.

Online will slow after the 2020 growth, as some shoppers return to stores, however, new capacity and the new quick commerce channel will see online become the fastest-growing channel post-2024, the forecast said.

"Quick commerce has exploded as a result of the pandemic and is now a channel in its own right with a current estimated current value of £1.4 billion," Simon Mayhew, Head of Online Retail Insight at IGD said.

A combination of new stores, the need for many shoppers to economize and the increase of food and grocery within variety discounters will fuel this channel’s growth, but it will slow through the forecast period.

Over the next few years, a continued focus on neighborhood locations underpinned by the higher levels of working from home and suburban living will boost the convenience channel.  The reopening of city centers and transport locations will also add to short-term growth.

“The historic significance of ‘impulse’ has declined and now top-up shopping is more dominant for the convenience sector: basket sizes have become much larger with a wider range of goods,"  Patrick Mitchell-Fox, Senior Business Analyst at IGD said.

"We expect the convenience sector to maintain its position over the next five years and predict it will grow to 21.8 percent by 2026.”

Large stores to reposition as retail destinations

In the short term, hypermarkets are well-positioned to benefit from the K-shaped recovery, offering a wide range of value-oriented options whilst simultaneously offering the most extensive choice of products for shoppers looking to trade up.

“Shoppers will need to justify the time and travel to large stores as other, more convenient options become increasingly available to them," Nick Gladding, Senior Retail Analyst at IGD said.

"Operators will need to offer distinct benefits to attract customers. We’ll see more investment in this channel to position large stores as retail destinations.”