There’s a chill in the air as we approach the beginning of October and wave goodbye to the longer days and warmth that we enjoyed in the latter days of the summer.
Autumn brings with it some trepidation around the economic outlook – not just for us as consumers, but the wider impact it will have on the Scottish food and drink sector. The cost challenges our industry is currently facing are unprecedented and come directly on the back of a challenging period with Brexit and the global pandemic.
Food price inflation has hit 12.4%. It’s a record high but there’s no sign it will go down any time soon. Food and drink prices are likely to continue to rise and the average household grocery bill is expected to increase by almost £600 over the next year*.
Anticipation of higher bills is clearly weighing on consumers’ minds, as 40% of Brits say inflation has surpassed climate change as the most important issue we face today.
Consumers are responding to this by seeking more value where they can: own-label products are up 33% versus last year and, for the first time ever, we are seeing Aldi break into the top four grocers in Great Britain. Similarly, Lidl has been growing the fastest of all the major supermarkets for four consecutive months*. To put this into perspective: ten years ago, Aldi and Lidl only commanded a combined 5.5% of the market. It’s clear the market is turning towards own-label products and consumers are embracing price savings wherever they can.
In the out-of-home market, where we were expecting a strong recovery to continue, penetration is sitting at just 49% – a 6% decrease from the highs we saw earlier this summer. This is likely linked to the higher prices and consumers moving to cut costs where they can in anticipation of increasing food and energy bills in the coming months. Wider economic concerns and the dip in consumer confidence are having an impact on spend in this channel, which has risen by only 8% in the last 4 weeks behind inflation despite opportunities for growth including the August Bank Holiday and sporting events.
It is important that we all take the time to examine the overall market and specific category drivers, both to reflect on the challenges and identify opportunities – this is particularly critical today given the state of the economy.
This was a driving force behind The Knowledge Bank’s creation, to help businesses in Scotland access insight on markets and understand what dynamics are impacting performance.
Over the next few months, we are planning a series of webinars looking at both the Scottish and wider British markets. In early November we will review the Scottish grocery market, which will provide an update on how both the Scottish and wider GB markets are performing as well as take a deep dive into Aldi’s and Lidl’s growing position in Scotland.
Our December review will take a closer look at the out-of-home market, and, in January, we’ll present an outlook for 2023.
*Source – Kantar