Grocery changes challenge supply chains

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Over the next five years, the UK grocery market is to grow by 16.3 per cent to £203bn, according to a new five year forecast from the IGD. That sounds very healthy, but that basic figure conceals some trends that will be exercising minds all the way along grocery supply chains.

For a start, the institute notes that the growth is slower than over the past five years – and the key drivers are no longer the superstores that have been the at the heart of the major players’ strategies for so long.

The discounters are set to double their sales to £21.4bn over the next five years. And online growth will be faster – rising from £7.7bn to £16.9bn.

Convenience store sales will rise by more modest 31 per cent to £49bn – but it will then account for almost a quarter of the market.

IGD analyst Nick Gladding points out that these three fast growth channels will account for 110 per cent of the cash growth in the market, with shoppers increasingly using these channels in addition to or instead of larger format stores.

In fact, IGD predicts that superstore and hypermarket sales will be worth £70.8bn by 2019 accounting for 35 per cent of the total grocery market.

Grocery retailers are all too aware of the need to constantly realign their supply chains to changing market demands. But the IGD figures suggest that retailers, and their suppliers, will need to be increasingly innovative and agile to deal with these changes.

The growth of the discounters has already taken sales away from the big four, whose their growth areas are generally more expensive to service.

Reinvigorating large format stores has to be a key priority. But online sales are set to double their share of the market, so finding more efficient ways to service this sector is going to become increasingly critical.

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