Food inflation decelerated to 6.7% in December, the lowest level since June 2022. However, this was largely due to Christmas sales, and the January sales period can only go so far. Combine the existing inflationary and consumer spending challenges with the new border checks on EU goods entering the UK, which I expect to increase prices on UK shelves by 0.5% to cover government cost, importer cost, time delay costs, and the first half of 2024 looks set to be another challenging period for retailers.
For the grocery sector, loyalty card pricing will remain key to future success. So too will store assortment shifts, including physical store-friendly categories and stocking more wholesale and large pack sizes to fend off competition from Costco. On the flipside, convenience will also continue to gain momentum – smaller basket sizes and more regular shopping from consumers, particularly as food costs come down.
Most important of all will be online subscriptions, which could change UK retail grocery market share. This would allow more digitally minded consumers to receive monthly products and the latest deals seamlessly, helping cement customer loyalty even further.