A grocery retailer with sales exceeding those of Waitrose or Somerfield. That will be the size of the internet grocery market in the next five years as its value more than doubles, a new report seen exclusively by The Grocer reveals.

The value of the UK's online grocery market will grow from £2.4bn to £5bn by 2012, said IGD in its latest UK Grocery Outlook report.

On today's terms, that would make it bigger than Waitrose, which had annual sales of £3.7bn in the year to 27 January 2007, and Somerfield, which registered sales of £4.4bn in the 12 months to 30 April 2007.

It would also make online the sixth-biggest grocery retailing force behind the newly merged Co-operative Group/United Co-operatives society, which has combined sales of £9.4bn a year.

Online's growth will massively outstrip that for the whole grocery market, which is set to rise in value by 3.2% over the next five years to £156bn, according to IGD.

"The online grocery market is still only 2% of the total market but it is growing more than six times as fast," said Gavin Rothwell, senior business analyst at IGD.

"Online grocery sales have grown by nearly a third in the past year and IGD expects this growth to continue."

Rothwell attributed the surge to "rapid growth of fast broadband connections", stating that half of all adult Britons now had broadband at home, up from only 7% in 2002.

Leading retailers had also improved their online food offer, he said.

"Retailers have upped their game in a big way. Sainsbury's and Asda in particular have been increasing capability in their online food delivery operations, boosting capacity and the number of stores that offer the service."

More than 40% of shoppers surveyed by IGD for the report said they would do at least part of their grocery shopping online in five to 10 years time.

Nearly one in 10 respondents said they would shop solely online.

The figures will offer some cheer to the online grocer Ocado, which last week was forced to defend its business model after revealing it was still losing money in the year to 3 December (The Grocer, 6 October, p30).

"When we started, people doubted consumers would really want to shop this way," said Jason Gissing, chief financial officer of Ocado.

"Now everyone accepts it's part of the future of food retailing, and general retailing, too. With Sainsbury's, Tesco and Ocado all growing 25-30% year-on-year, I think the market will actually double in three years, rather than the five years in this forecast."

The IGD UK Grocery Outlook report, which is published next week, also identified the premium sector as another area set for strong growth.

By 2012 its value would have swelled from £14.6bn to £20bn.

The organic segment will increase in value by almost half over the next five years, from £2.3bn to £3.4bn, while retailers' premium own label will rise from £5.4bn to £7.9bn.

Fairtrade will enjoy growth of 54% by 2012, taking its value to £585m, and sales of regionally sourced products will increase by 33% to £5.7bn.

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