Discounters forecast to be fastest-growing grocery channel over next five years

Discounters will be the fastest-growing retail channel over the next five years, according to new insight, though growing their store estates will become more of a challenge for them.

The UK grocery market as a whole will grow 11.3% to £241.3bn, according to analysis by IGD. The growth will be driven primarily by inflation this year, with a 3.5% value increase predicted, but this will moderate from 2023 onwards.

Discounters are forecast to grow 23.9% to £7.1bn, driven by more households looking to save money as well as variety discounters such as B&M and Home Bargains “sharpening their grocery offer”.

Discounter growth would be even sharper were it not for the mults becoming more competitive on price, along with increasing overlap between the discounters’ own stores as their estates grow, according to IGD.

“Our new forecast sees growth for all retail channels,” said Caroline Myers, IGD director of retail analysis.

“Though discounters will naturally benefit from shoppers’ desire to save money, growth will be held in check by increasing competitiveness from other channels.

Read more: Aldi and Lidl: the story behind the rise of a retail empire

“Many shoppers on tight budgets will adopt a ‘more for less’ mentality – managing their spend closely by trading down to cheaper ranges and pack sizes, switching brands for private label and seeking out the best promotions. Shopping will also be more planned, with many switching to more overtly value-focused retailers.”

Retailers’ sales would be helped by people eating out less, Myers added.

Maxime Delacour, IGD senior retail analyst and specialist in the discounter channel, said: “Physical expansion will remain key to growth for discounters, with both Aldi and Lidl looking to maintain their ambitious opening targets for 2025. However, with the possibility of the retailers missing these targets and openings likely to slow following this date, forecast growth is also slowing.

“Although like-for-like growth has been a challenge for the discounters, they are well-placed with the cost of living crisis to appeal to shoppers’ increasing savvy behaviour. Attracting new shoppers will be key, with Lidl in a strong position here to use its Lidl Plus app to encourage loyalty.”

Online is forecast to build momentum and eventually outpace the discounters for growth, but only from 2025.

Following a year of tough comparatives in 2021, convenience is forecast to return to more buoyant growth as shopping behaviour normalises, and should “modestly outperform the market”, according to the forecast.

IGD’s forecast channel values (£bn)