Striving for growth
With a general election looming this year, there is a significant focus on UK economic growth. Last week, the ONS reported that GDP increased by 0.4% in March and has increased by 0.6% for the three months to March 2024. The UK economy is therefore no longer in recession.
In our latest Viewpoint report, Striving for growth, we look at the impact of slow economic growth on the food and consumer goods industry. So why is the focus on economic growth so important?
The growth challenge
The UK economy has experienced slow economic growth in recent years. UK GDP was 1.7% above its pre-pandemic level of Q4 2019. This compares with Eurozone GDP being 3.4% higher.
Slow economic growth has been accompanied by lower real average wages, increased debts and lower job security. It has also led to consumers cutting back on their food and grocery and eating out spend.
Volumes have been declining in both food retail and out-of-home for quite a while. Over 2023, retail volumes were down about 3% versus 2019, with out-of-home down around 15%.
The food and drink supply chain relies on high volume to be efficient and profitable. Some volume has moved into the online space and limited-range, price-led stores. This places even more pressure on margins.
The food and drink market has endured a sort of slow-motion recession, with real sales shrinking and volumes compressed over a long period.
This recession has been cloaked by powerful inflation, allowing at least some businesses to maintain financial traction.
However, with inflation dissipating, the cloak has fallen away. Businesses across the food and drink system now share a common aim – they need to get volume moving.
Opportunities for growth
The good news is that there are opportunities to drive profitability and volume growth. Our latest Shopper Confidence Index (for ShopperVista subscribers) shows that shopper confidence is on the rise.
At IGD we believe that the food and drink recession is now ending and the latest data suggests that performance is picking up.
Businesses need to support this recovery, with larger players leading, helping to drive volumes and – just as important – rebuilding margins.
Leaders need to think beyond the commercial. They need to ensure that the industry not only bounces back but also evolves, coming back better.
However, looking ahead, we can identify further potential hazards. IGD has identified 10 major challenges to future resilience – our report is free to download.
Action now may help to reduce exposure, placing businesses in a proactive, rather than responsive, position and offering improved service to consumers.