UK grocery & foodservice wholesaling 2017 - Sector performance & statistics - IGD.com
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UK grocery & foodservice
wholesaling 2017
Sector performance & statistics
February 17
© IGD 2017 Page 1
Introduction This insight report was prepared by:
Patrick Mitchell-Fox Patrick supports IGD UK’s research
Senior Business Analyst, IGD outputs across a wide range of
subjects. He has developed a
pmf@igd.com
particular focus on wholesaling,
helping to develop IGD expertise
and insight on ‘route to market’
channels globally.
The presence of major national
supermarkets as the leading players in the
UK grocery retail market means that the
largest part of FMCG volumes are purchased
directly from the supplier base, with no need
for intermediaries.
Nevertheless, wholesalers retain a critical
role in the UK, providing a route to market
both in smaller scale, and independent,
retail, but moreover in the foodservice
channel supplying the needs of all types of
out-of-home businesses.
This report presents our latest annual
statistical review of performance in the UK
grocery and foodservice wholesaling sector.
Providing data for the calendar year 2016,
the analysis splits the market both in terms of
the differentiated types of operators that
characterise the sector, and in terms of the
key customer groups served by them.
© IGD 2017 Source: IGD Research Page 2
Sector overview
2016 – the 2016
wholesaling
Total market value reached £29,975m, a marginal
increase on 2015, against a background of
uncertain economic outlook with ongoing price
deflation. However, within the market there were
headlines market growth
was +0.3%
notably divergent outcomes between retail and
foodservice focused business.
The delivered foodservice segment of operators
The foodservice performed strongest in 2016, with sales increasing
channel lead by 2.1%, reflecting the buoyancy of a dynamic out-
of-home customer base. However, cash & carry
growth, up by saw a recovery versus 2015, achieving an uplift of
1.9% 1.5%.
As well as facing headwinds from market-wide
Retail channel product price deflation, retail channel sales were
sales were impacted by falling tobacco sales in particular. As
weaker, falling the largest single sector category, decline here
continues to have a disproportionate effect.
by 0.6% Delivered operators fared better than cash & carry.
For most cash & carry operators non-trade
Growth in PBU customers are a tertiary group, but are a primary
sales is driven focus for Costco. With a unique mix of value and
by Costco quality, on non-food and food, Costco is rolling out
depots to new catchments, successfully growing
expanding customer numbers with each opening.
With many categories having mixed fortunes, and
Chilled & fresh some in general decline, chilled & fresh is a key
grew in both area of growth for wholesalers in both channels.
foodservice and With increased demand for fresh, healthy and
retail channels natural products in all areas, wholesalers are
focused on growing capability to serve this.
The market is Looking forward the outlook for the out-of-home
customer sector remains good, with consumer
forecast to grow demand for eating out growing, and creating
at +0.9% increased opportunities for wholesalers servicing
the foodservice channel. However, growth in the
annually to 2021 retail channel is expected to remain restrained
despite returning inflation.
© IGD 2017 Source: IGD Research Page 3
Sector overview
A £30bn market: Notes:
*Includes £80m supplied from delivered wholesalers to foodservice, catering and hospitality
wholesale and **Includes £108m supplied from delivered foodservice into retailers
***PBUs = professional business users
customer map,
2016 Routes to market
Delivered grocery Delivered foodservice
Primarily cash & carry
wholesalers wholesalers
£11,486m
£11,287m* £7,202m**
£2,878m £8,329m £6,876m £1,586m £3,024m £7,094m
Independent & Foodservice, catering and
Other retail PBUs***
convenience retail hospitality
£2,878m £1,586m
£15,313m** £10,198m*
Customer channels
© IGD 2017 Source: IGD Research & Horizons Page 4
Sector overview
Wholesaling Sector definitions
performance, The IGD wholesale market comprises operators servicing business customers, primarily in
retail and foodservice trade, with food and drink as a major component of the sales mix.
2016 The market is divided into segments defined by the wholesale operating format (i.e.
delivered or cash & carry), and /or the primary customer channel served.
Please note that all sales from cash & carry depots (including those delivered to
customers) are included in ‘primarily cash & carry’.
Total growth in the IGD wholesale market in Route to market 2015 2016 % Change
2016 was only marginally positive on +0.3%.
Across the routes to market, delivered
foodservice was the sole contributor to this Delivered grocery £11,298m £11,287m -0.1
uplift, significantly outperforming the average
on +2.1%.
Boosted by continued growth in the UK’s out- Primarily cash & £11,540m £11,486m -0.5
of-home eating market, delivered foodservice carry
operators are benefiting from a dynamic and
expanding corporate sector in areas like Delivered £7,051m £7,202m 2.1
casual dining, pub dining, coffee shops and
food-to-go. With a growing number of foodservice
customer sites and increased demand for
specialist food products, above all delivered Total sales £29,889m £29,975m 0.3
foodservice operators are able to provide the
key capabilities and expertise to support
these needs.
In contrast, though elements of the
wholesale retail customer base remain
buoyant, overall it is declining in numbers.
Over 2016 sales into the channel were also
impacted by grocery sector-wide price
deflation and the ongoing decline of the
tobacco, which is a disproportionate element
of the wholesale sales mix.
© IGD 2017 Source: IGD Research & Horizons Page 5
Sector overview
Market outlook:
forecasts to 2021
Route to market 2016 2021 % CAGR
Over the next five years …
Overall market growth is expected to remain Delivered grocery £11,287m £11,588m 0.5
low in the coming years, in spite of the
potential return of inflation.
Primarily cash & £11,486m £11,531m 0.1
Above all this outlook is being restrained by
sales in the channel to independent and carry
convenience retail (key to delivered grocery
and primarily cash & carry) where, despite Delivered £7,202m £8,152m 2.5
some limited areas of growth, forecast foodservice
progression is expected to be only fractional
year-on-year. Increased regulation on Total sales £29,975m £31,271m 0.9
tobacco will notably impact this key category.
Against this background, driving
competitiveness and efficiency, while
focusing increasingly on customer loyalty
and retention, will become ever more
important keys to success for wholesalers.
In contrast more buoyant growth in the out-
of-home channel, will offer significantly
greater opportunity to delivered foodservice
operators able to meet the needs of a fast
evolving customer base.
© IGD 2017 Source: IGD Research & Horizons Page 6
Customer channels Retail
Independent & Customers comprise …
convenience Primarily independent retailers in convenience, CTN and off licence formats. This includes
both unaffiliated retailers but also significant numbers of symbol retailers, covering all the
retail summary, key symbol groups such as SPAR, Premier, Londis, Budgens, Costcutter and Nisa.
In addition delivered operators such as Palmer & Harvey and Nisa, also supply networks of
2016 multiple stores in both the convenience and forecourt retailing sectors.
2016 was another year of marginal decline Routes to market 2015 2016 % Change
for wholesale sales into the independent &
convenience retail customer segment.
As well as the grocery sector-wide factors Primarily cash & £6,996m £6,876m -1.7
slowing growth, such as deflation, and carry
increasing competition, wholesale has also
been impacted by the progressive decline in Delivered grocery £8,304m £8,329m 0.3
demand for tobacco. This has a
disproportionate impact on the channel
owing to the extensive exposure to the Total sales £15,299m £15,205m -0.6
category.
However, there was some element of
divergence in the fortunes between the two
routes to market, with cash & carry slowing
markedly, while delivered operators achieved
some marginal growth. This represents a
modest recovery over 2015, with a number of
delivered businesses returned to a more
stable state after a period of corporate
disruption and retrenchment.
The decline of cash & carry again reflects the
overall decline of the small store customer
base in the UK, with the unaffiliated
independents most susceptible.
© IGD 2017 Source: IGD Research Page 7
Customer channels Retail
Sales to retailers,
growth by category,
2016
Primarily cash & carry sales to retailers Delivered grocery sales to retailers
6 12 9.8
3.9
4 2.8 10
2 0.9 8 6.6
6 4.7
0
% % 4
-2 1.5
-1.4 -1.7 2 0.3
-4 -2.1 -2.2 -2.7 0
-6 -2
-6.4 -1.5 -1.7 -1.6
-8 -4 -2.8
The overall negative trend was driven by declining sales in While sales fell in a number of big categories for the segment,
tobacco, where -2.7% represents a fall of over £100m in cash including tobacco and ambient food, overall sales were kept
terms. Other significant categories, such as ambient food also marginally positive by growth primarily in BWS and chilled &
contributed to falling sales, however, this was offset in some fresh food. Growth in chilled & fresh remains an opportunity for
measure by a marginal uplift in BWS, and more notable gains in these wholesalers, and the category is the focus of ongoing
soft drinks. Both BWS, and especially soft drinks, benefited development to expand ranges and increase capability in this
from prolonged hot weather in the summer, helping to drive area, with investment in increased flexibility in service with
impulse demand in small stores. Frozen food (though only multi-temperature vehicles. Though growth was higher still in
small in cash terms) may also have benefited from good frozen food and non-food durables, this trend is off a notably
weather, boosting ice cream sales. lower base.
© IGD 2017 Source: IGD Research Page 8Customer channels Retail
Estimated
operator shares,
retail customer
group, 2016
Others
Still a broad-based competitor set Costco 9%
2% Booker
Parfetts
3% 22%
Following its acquisition of the Musgrave GB
operation in September 2015, Booker has Conviviality
become the clear overall leader in the 3%
customer channel to independent and Blakemore W/S
convenience retail. With its significantly 4%
enhanced capability in delivered service and
expanded symbol group portfolio, it is now
able to provide an unrivalled multi-platform Dhamecha
offer to meet needs of widely varying types of 5%
retail customer, from sole trader CTNs to
growing multi-site operators.
P&H
The three largest operators in the channel 16%
Nisa
now account for some 53% of total sales.
9%
However, it remains a market with a
considerable number of smaller players that
are still able to compete effectively with the
national operators. While remaining
separate corporate entities, the collaboration SPAR
of these regional, and even local, businesses 12% Bestway
within a number of major buying and 15%
marketing groups is key to their viability.
© IGD 2017 Source: IGD Research Page 9Customer channels Foodservice, catering & hospitality
Foodservice, Customers comprise …
catering & All types of catering and hospitality business servicing the out-of-home market. This
includes both independent and corporate operators of all types from fast food, food-to-go
hospitality and pubs to casual and fine dining, as well as institutional and public sector catering
(schools and hospitals etc).
summary, 2016
The foodservice customer channel saw solid
growth across both the routes to market, Routes to market 2015 2016 % Change
though delivered foodservice operators saw
the strongest uplifts.
Delivered £6,946m £7,094m 2.1
With their expertise both in product and
service, and a focus on innovation to support foodservice
the leading trends in the out-of-home sector,
delivered foodservice operators have Primarily cash & £2,979m £3,024m 1.5
continued to benefit from the growing carry
demand for eating-out, and the expanding
sectors of business developing to serve it. Total sales £9,925m £10,118m 1.9
Cash & carry operators have also been
targeting this customer channel successfully,
building capability to meet more needs, more
effectively. However, its key customer base
amongst independent operators is facing
more mixed fortunes, such as the decline
experienced in the tenanted and ‘free trade’
pubs.
While deflation has been a restraining factor
for all, intensifying price competition,
delivered foodservice wholesalers have
continued to focus on narrowing the
price/value gap with cash & carry, helping
switch customers back to that segment.
© IGD 2017 Source: IGD Research & Horizons Page 10Customer channels Foodservice, catering & hospitality
Sales to FC&H,
growth by category,
2016
Delivered foodservice wholesale Primarily cash & carry, sales to caterers
5 8 7.1
3.9
4 3.0 6
3 3.7
1.8 2.1 4 2.7
1.7
2 1.5 1.1 1.5
0.6 0.8 2
% 1 0.0 %
0
0
-1 -2
-4 -2.0
-2 -3.3
-3 -6 -5.2
-2.6
Growth in this segment was supported by solid uplifts in all its The uplifts across all the food categories show that cash &
key categories, and in chilled & fresh food above all. As the carry wholesalers are successfully meeting a growing range of
biggest single category, the cash contribution of chilled & fresh needs for food in the out-of-home sector. The high growth in
to growth was over £80m, illustrating the growing importance to frozen, though off a lower base, shows the benefit of improving
foodservice customers of having fresh and natural products at and expanding ranges that offer a cost effective, low wastage,
the core of their menus. However, while processed products entry-level option for those aiming to extend their food menus.
have not seen the same level of growth, the steady uplifts
achieved by these categories indicates they remain critical to The key drag on performance came from falling BWS sales,
the out-of-home sector, providing important store cupboard where the declining number of pubs may be impacting on a
ingredients and convenient solutions for customers. major customer group for the segment.
© IGD 2017 Source: IGD Research & Horizons Page 11Customer channels Foodservice, catering & hospitality
Estimated
operator shares,
FC&H customer
group, 2016
Leaders consolidating share
Brakes
The merger with Fresh Direct in 2015, 18%
Others
consolidated Brakes’ position as the largest 31%
wholesaler in the foodservice channel. Now
part of the US giant Sysco, it will be expected
that further acquisition may add further scale
going forward, though its share remained
stable in 2016.
Meanwhile Bidvest (renamed Bidfood as of
April 2017) has been boosted by a number of Booker
strategic acquisitions to increase its regional 16%
presence. The latest (of Caterfood in south-
west England) helped push its share to an
estimated 15% in 2016, narrowing the gap to JJ
its larger competitors. 2%
Booker for its part continues to develop its Costco
unique multi-platform capability. This 2%
includes its specialist delivery service, Chef Bidvest
Direct, enabling it to target corporate Reynolds 15%
customers alongside its core cash & carry 2%
network, with its extensive customer base Caterforce Country Range Fairway
amongst independent operators. 4% 4% 6%
© IGD 2017 Source: IGD Research & Horizons Page 12Want to know more?
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