UK convenience retail is set to grow by £6.3 billion over the next five years, but tobacco decline, tougher regulation and intensifying competition from discounters and online shopping will make growth increasingly difficult, according to new IGD analysis.
According to a report by IGD on Wednesday (Aug 19), the convenience channel is forecast to grow at a 2.5% CAGR between 2026 and 2031, slower than the wider grocery market's 3.3%, meaning it will gradually lose market share despite adding significant sales value.
IGD said changing shopper habits and the growing importance of online and discount channels would put further pressure on convenience retailers to capture more immediate, top-up and mission-based shopping trips.
The outlook is considerably stronger once tobacco and vaping are stripped out, with non-tobacco convenience sales forecast to grow at 3.4% over the period. IGD said this highlighted the growing importance of food-to-go, food for later, quick commerce and stronger local propositions as retailers look to replace declining tobacco revenues.
Growing, but losing share
The wider UK grocery market is forecast to grow at a CAGR of 3.3% to reach £308 billion by 2031. Convenience will grow at a slower rate of 2.5%, meaning it will gradually cede share to faster growing channels such as online and discount.
This reflects how consumers are increasingly spreading spend across multiple channels. Online shopping continues to attract more grocery spend as retailers improve availability, range and fulfilment.
At the same time, discounters remain highly relevant to shoppers seeking value. As both channels expand, convenience faces greater competition for trips that it may once have captured by default.
Despite this, convenience remains a significant growth opportunity. The channel is still forecast to add £6.3 billion in sales by 2031, supported by its ability to serve immediate needs, local shopping missions and top up purchases. The challenge for retailers is ensuring they capture enough of these missions to offset pressure elsewhere.
Tobacco is the biggest headwind
The biggest drag on convenience performance will come from tobacco and vaping. These categories remain an important source of sales and footfall for many operators, particularly symbols and independents, but both face a period of structural decline.
The introduction of the generational smoking ban will add further pressure, accelerating an existing trend of falling tobacco consumption.
Convenience retailers will also have to adapt to the introduction of the Deposit Return Scheme from 2027. Smaller stores are expected to feel the impact most acutely because of their limited space and the operational demands the scheme creates.
Combined with wider cost pressures, this will make growth harder to achieve in the early years of the forecast period.
However, the headline convenience forecast does not tell the whole story. When tobacco and vape sales are excluded, the channel's growth outlook improves significantly. Ex tobacco and vape sales, convenience is forecast to grow at a CAGR of 3.4%, just ahead of the wider grocery market, with momentum strengthening from 2027 onwards.
New growth drivers emerge
Future growth will increasingly come from areas where convenience can offer something distinctive. Food to go, food for later and quick commerce are becoming more important as retailers look to serve a wider range of shopper missions.
Continued investment in store estates, new formats and digital capabilities should also support growth across the period.
Performance within the channel will vary. Multiple retailers are expected to outperform many other operators, growing at 3.9%, because they are less dependent on tobacco sales and have greater resources to invest in evolving shopper needs.
Co-op's stronger performance in 2026 highlights how investment in value, own label, membership and local relevance can help drive growth despite wider market challenges. These operators are also better placed to develop foodservice offers, improve stores and expand quick commerce partnerships.
IGD adds, "Success will increasingly depend on giving shoppers a reason to visit beyond pure convenience. Retailers that build stronger local connections, tailor ranges to neighbourhood needs and create a more compelling proposition will be best placed to attract spending as consumer habits continue to evolve.
"The convenience channel is not facing decline, but it is entering a more challenging phase of growth. Tobacco and vape sales will continue to weigh on performance, while regulation and stronger competition from online and discount will put further pressure on operators."