Retail and foodservice will grow in 2021, report finds

The latest Eating In vs Dining Out report, produced by IGD in collaboration with foodservice consultant Peter Backman, finds the forecasted increase is driven by strong retail growth from January to March and foodservice sales that will begin to strengthen from July onwards as ‘”pent-up demand for socialising” boosts the sector.

Foodservice will grow by 54% (£18.6bn) on last year’s figures, the report predicts. Some of this growth will impact retail, but elevated levels of homeworking, at-home social gatherings, and financially stretched consumers will see the retail sector continue to grow.

Nicola Knight, senior retail analyst at IGD, said: “The reopening of the eating out sector and lifting of social restrictions will increase social dining both in and out of home and will give the market as a whole a significant boost. The value of retail is up £1.8bn on 2020 and £14.5bn on 2019.”

Peter Backman, foodservice consultant said: “Foodservice will see low levels of sales for almost half of 2021, due to a combination of lockdown restrictions and alfresco-only eating and drinking. But, as we move into the second half of the year, growth will set in, with pubs and restaurants leading the way. Hotels, leisure and travel-related hospitality will continue to be negatively affected, as will workplace dining, driven by working from home.”

The report predicts the key to unlocking opportunity for retailers is understanding the K-shaped recovery and its influences on shopper behaviour. The recovery will see higher-income households who have accrued substantial savings – estimated to be a “significant pot” of more than £100bn – contrast to lower-income households who face financial challenge due to the ending of government support and rising unemployment.

Knight said: “Discount is likely to be the fastest-growing channel in retail as financially challenged shoppers look for value. Yet, on the flipside, more affluent shoppers, particularly amongst older age groups, will be looking to ‘trade-up’ on both everyday and occasion products, to utilise their disposable income. Retailers will need to pay close attention to pricing strategy and product innovation to keep shoppers engaged and loyal.”

Backman added: “Affordability and accessibility will be the two watchwords for the eating out market. Those under financial pressure will be less likely to eat out, but when they do, QSR and food-to-go are the most likely options. On the whole, operators in these sectors have been in a much stronger position than most during the pandemic, thanks to takeaway and delivery and this continued demand will potentially enable them to prosper.

“In the medium term, people in robust financial positions are likely to benefit higher spend outlets, particularly whilst travel restrictions apply and other spending options are limited.”