Exclusive: Discounters and value retailers to be fastest growing grocers in next five years

New data shows the 13 retailers that make up the UK grocery sector will grow annual sales by an average of 5.2% over the next five years, according to an exclusive forecast by Retail Week Prospect.

By analysing the results of the 13 largest food retailers in the UK, Retail Week was able to forecast the grocer’s average compound annual growth rates (CAGRs) to 2027/28. Aldi is predicted to grow the fastest in this period, with a CAGR of 9.7%, followed by Lidl with growth of 7.3% and Poundland with 5.9%.

Of the traditional big four grocers, Tesco will continue to move ahead of its competitors over the next five years, with annual growth of 5.1%. Sainsbury’s will grow by 4.6%, while Asda will grow by 4.1%.

Supermarket giant Morrisons is predicted to be the slowest growing retailer in food retail over the next five years, with annual growth of 2.7% in that time. Convenience store specialist Co-op is forecast to be the second slowest growing grocer with just a 2.8% annual uptick forecast.

Marks & Spencer’s turnaround is also forecast to continue with a CAGR of 7.2% driven by its new food formats and ongoing innovations in the grocery space.

Retail Week data and insights Lisa Byfield-Green said: “As inflation begins to ease, we are entering a crucial period for the grocery retailers. While squeezed consumers will feel the pinch for a while longer, low prices will remain a key differentiator.

“For this year and the beginning of next year, we expect discounters Aldi and Lidl to grow fastest, and their five-year CAGRs of 9.7% and 7.3% respectively reflect some high levels of growth in 2023 and 2024. But after that, we anticipate some normalisation of behaviour to filter through.

“As consumer confidence improves next year, we anticipate that switching behaviour will begin to reverse to the benefit of mainstream and premium grocers. Tesco is currently the clear leader among the traditional supermarkets with a five-year CAGR forecast of 5.1%. M&S leads the premium grocers with a five-year CAGR forecast of 7.2%.

“Next-level loyalty initiatives and inspirational new food innovation will differentiate winning grocers from the rest of the pack.

“A focus on profitability is also to be expected, which means that grocers will need to be lean and efficient while monetising data across all channels.”