Convenience retail market forecast to grow 3.2 per cent in 2022

The UK convenience market is set to grow 3.2 per cent year on year to reach a value of £45.2 billion this year, a new report from Lumina Intelligence forecasts. 

According to the UK Convenience Market Report 2022 by the market researcher, the market is also expected to see positive, albeit modest, outlet growth at 0.6 per cent, with a post pandemic property boom creating greater prospects for operators to expand. 

The convenience market is expected to total £48.6bn in 2025, with a compound annual growth rate (CAGR) of 2.6 per cent forecast between 2022-2025. 

The predicted turnover growth this year follows a small decline in 2021 of -0.8 per cent, as market growth slowed as a result of hospitality reopening and coronavirus restrictions easing. 

“UK convenience retail remains in a strong position. Despite cost of living challenges, the market will benefit from a resurgence in on-the-go missions in 2022, as shoppers seek more accessibly priced options compared to foodservice channels,” Blonnie Whist, insight director at Lumina Intelligence, said. 

“Leveraging different store formats, including grocery-led, food to go-led, service-led and delivery will be key to growth across the next three years.” 

The report notes that the co-operatives and convenience multiples are set to outperform the market, with turnover growth predictions of 5.6 per cent and 3.8 per cent in 2022, respectively, underpinned by investment in store refits and physical expansion, as well as developments in delivery services. 

Forecourts (+1.6 per cent), symbol groups (+2.9 per cent) and unaffiliated independents (+1.7 per cent) are all also expected to see growth, but at a slower rate to the total convenience market. 

The report finds that the shoppers are reverting to pre-pandemic patterns, as the percentage of UK adults that have had a convenience occasion (delivery, in-store or click & collect) stabilised at 64 per cent in May 2022, with basket spend and basket size down 10.5 per cent to £7.18 and 15.6 per cent to 2.7 items year-on-year, respectively. 

Planned top up missions are down 7.9ppts year on year, stabilising following a pandemic driven boost. However, positively, younger consumers traditionally under-performing in convenience have been retained year on year. 

The pandemic-accelerated growth in delivered convenience store occasions have only declined by 1.6ppts year-on-year, despite restrictions easing, with delivery occasions now accounting for 6.8 per cent of total convenience occasions. 

The delivered route to market attracts valuable shoppers with higher frequency (+37 per cent), basket sizes (+48 per cent) and average spends (+134 per cent) versus in-store shoppers. 

“From a delivery perspective, retailers need to capitalise on events including the Women’s Euros and the FIFA World Cup through encouraging shoppers to use delivery for entertaining and nights in,” Whist added. 

HFSS restrictions impact

The report estimates that the proposed HFSS location restrictions will be impacting 47 per cent purchases in the convenience store.

Percentage of HFSS purchases made from locations set to be restricted by HFSS:

Confectionary is most at risk, over indexing in HFSS restricted locations, which accounts for 53 per cent of purchases.

The report suggests that signposting in store will be important to guide consumers in aisle to the products on the main shelf. Other recommendations include reformatting stores in order to place HFSS products near categories with a high footfall, such as bread, eggs or milk and moving these items to the back of store to force shoppers to walk through aisles with HFSS products.