Can you read the future? The pollsters certainly can’t, as the stunning EU referendum result announced this morning makes plain. So it was quite a surprise to see the IGD sticking its neck out last week with its latest five-year forecast. And what a counterintuitive forecast it is!
It’s predicting 10% growth in the next five years. Which is extraordinary (and great news if it’s right) when you consider the deflationary market we are in, the impact of the living wage, and the continuing growth of the discounters.
IGD’s forecast is predicated on a number of big calls.
First: that larger stores will rally as they evolve to reflect the changing needs of shoppers. And looking at the continuing recovery at Tesco, the encouraging trials of in-store concessions at Tesco (particularly Arcadia) and Sainsbury’s (Argos), and the apparent willingness of both Tesco and Morrisons to take on staff from BHS and My Local and maybe the IGD has a point.
Second: the IGD believes online will grow by 68% over the next five years. This actually represents a correction on its previous estimates for sales to double. And that looks credible too. Even Amazon, the world’s most valuable retailer, while expected to inspire further use through the launch of Amazon Fresh, has yet to establish a proven business model to rival the old-fashioned supermarket.
Third: that growth in the convenience channel will slow. And you only need to look at the demise of My Local to see how hard the going is there.
Perhaps the most controversial assumption is that growth at the discounters will slow. It’s still predicting 39.5% growth over five years (and for one in every £8 to be spent at a discounter) but it believes, as well as a fightback by the big four supermarkets, the discounters will struggle to find good locations in the future. It doesn’t feel to me like there’s a shortage, not when you look at the number of planning applications from Aldi and Lidl in the pipeline. And the demise of high street chains like BHS will potentially add to that. But all of these forecasts must surely now be ripped up. Unless the IGD’s assumptions predicted Brexit, the UK market is set for higher food prices, a lower pound, a major correction in the housing market, a halt to the growth in the UK population, a recruitment crisis (particularly agriculture, manufacturing, distribution), huge uncertainty over trading agreements, political instability, to say nothing of the possibility of the so-called United Kingdom being rent asunder, with Scotland in particular likely to seek a second referendum for independence.
This morning (24th June), the IGD’s Joanne Denny-Finch acknowledged that “businesses will be facing a period of uncertainty”.
“The food and grocery industry will be going back to the boardroom, to revisit contingency plans and consider all the implications for staff and customers. IGD will be staying close to the relevant key issues and will be offering our information and support to our members.”
And presumably packing up its crystal ball for now.
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