Supermarket sweep: Here's how Britain's rapidly changing grocery sector will look in 2020

Jessica Morris
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Hypermarkets and superstore sales will shrink by 2.9 per cent over the next five years (Source: Getty)

Here's a slither of good news for Britain's embattled grocery sector - growth is likely to pick-up over the next five years, according to food and consumer goods researcher and charity IGD.

The grocery market will swell by 13 per cent to £200.6bn by 2020, as growth picks up from a low of 1.7 per cent in the year to April, rising to 2.7 per cent in five years' time.

IGD said it expects food price deflation, which has eaten away at the sector's profits in recent years, will start to slow. But this will come against a backdrop of weaker consumer spending power - as an eventual interest rate hike makes it more expensive to borrow.

March of the discounters continues

Discounters channels will see sales grow £10.5bn over the next five years amid new store openings, increasingly flexible formats and improvements in their ranges.

Additionally, high street discounters such as Aldi and Lidl will grow as they expand into new locations and explore online opportunities.

This would come on the back of stellar progress already made so far this year - a series of data releases by Kantar World Power have shown how German discounters Aldi and Lidl are clawing away market share from the big four supermarkets Tesco, Asda, Sainsbury's and Morrisons.

Online channels will continue to experience the fastest growth over the next five years, as sales jump 9.9 per cent to £17.2bn. Consumers will increasingly use smart devices to do their grocery shop, as well as the ubiquity of "click and collect" services grows and pricing becomes even more competitive.

But convenience channels, which have grown rapidly over the last few years, will slow somewhat. Sales will grow seven per cent in the next five years, a fraction of the 27.4 per cent it grew in the five years to 2015.

Bad news for supermarkets

Hypermarkets and superstore sales will decline 2.9 per cent to £69.6bn over the next five years. Nevertheless, the rate of decline will slow if retailers take steps to make large stores more convenient and relevant to customers.

"Key to moderating the decline will be initiatives to make big stores easier-to-shop, such as extended product ranges and more services," IGD said.

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