UK food and drink market declined by 12% in 2020

Date : 21 January 2021

Joint research by IGD and foodservice insight specialist, Peter Backman, reveals that spend by UK consumers on food and drink declined by 12% in 2020 vs 2019 .  Differences in mark-up, consumer behaviour and product mix account for the reduced size of the market.

As lockdown restrictions caused UK consumers to eat more meals at home, spend shifted from foodservice to retail, reducing foodservice’s share of the market from 36% to 19%.


Source: IGD research, Peter Backman

In the first part of our two-part series Eating In vs Dining Out 2021 we review the impact the COVID-19 pandemic had on food and drink consumption patterns last year.  The report focusses specifically on the shift between in-home and out-of-home spend to give a unique view of the changes taking place in the total market.

Online grocery retail was the overall winner

Online sales expanded hugely during 2020.  Many shoppers switched to e-commerce following stay at home guidance and more people (mainly older age groups) shopped online for the first time.

In response to this increased demand, retailers extended hours, opened new sites and formed partnerships with third party providers to increase delivery availability.  Click & collect became widely used to reach more households as it required limited capital to get up and running.

However, the increase in online has diluted retailer margins.  Going into 2021, retailers are focussing on making this channel more profitable.

The QSR model proved most resilient in foodservice

The convenience, value and social distancing aspects of takeaway, drive thru and delivery, enabled QSRs to weather the challenges of COVID better than other foodservice channels.

Pubs, hotels, leisure and staff catering were hardest hit by restrictions and least able to pivot to new income streams.

The role of the Non-commercial sector (staff catering, healthcare, education and services) is understated by referencing sales as a measure of market size. In terms of meals, the sector accounted for 50% of the market in the last nine (COVID) months, versus 36% of the same period in 2019.

Many structural business changes (CVA’s, changes in ownership, restructuring and estate reduction) have already taken place amongst operators.  With the remaining businesses weakened by repeated lockdowns, further business failures and re-structures are likely.

How will the pandemic affect UK food and drink in 2021?

In part two of Eating In vs Dining Out 2021 we examine the factors that will affect the industry over the coming year and look at how businesses can prepare for what lies ahead.  The full report is available to Retail Analysis subscribers – non-subscribers can read a summary here.

Want to know more about the UK out-of-home market?

Eating In vs Dining Out 2021

In the first part of our two-part series, Eating In vs Dining Out 2021, we review the impact the COVID-19 pandemic had on food and drink consumption patterns last year, focussing specifically on the shift between in-home and out-of-home spend.

Read part I

In the second part of our two-part series, Eating In vs Dining Out 2021, we examine the factors that will affect the industry over the coming year and how businesses can prepare for what lies ahead.

Read part II