April 4 (Bloomberg) -- The U.K. grocery market will overtake that of Germany by 2015 to reach 162 billion pounds ($259 billion) as online and convenience sales give Britain faster revenue growth than other European countries, according to the Institute of Grocery Distribution.
The U.K. will have the eighth-largest grocery market within four years, pushing Germany down one place to ninth, according to London-based IGD. The U.K. market will grow 13.2 percent in the four-year period, faster than Italy, Germany and France, according to the IGD forecast.
A push by grocers including Tesco Plc, the world’s third-largest retailer, into small, in-town convenience stores and enhanced online ranges such as non-food will raise U.K. sales. China, which overtook the U.S. as the largest market in 2011, will maintain its top position through 2015, driven by economic growth, increasing population and rising food inflation, according to the IGD.
“In the U.K., we expect the online sector to perform well, with Internet sales boosted by the increasing use of smartphones and tablet computers,” IGD Chief Executive Officer Joanne Denney-Finch said. “Convenience stores, with their increased focus” on fresh food and tailoring of outlets to local demand, will also be a “key performer.”
IGD’s definition of the grocery market includes modern retail formats, such as supermarkets and hypermarkets, and traditional retail formats, such as open-air markets and bakers. It excludes cash-and-carry operations, drugstores, pharmacies and sales tax.
The U.K. market will grow at a compound annual growth rate of 3.2 percent from 143 billion pounds last year. Germany’s grocery sales will increase by 4 billion pounds to 148 billion pounds by 2015, according to the forecast.
Differing levels of inflation across Europe are affecting growth rates, said Cecile Riverain, IGD’s head of international research. Germany is a “mature market,” she added. The forecasts don’t include drugstore sales, which are a key growth channel in the country, Riverain said.
“Germany has been more resilient economically, which is good news for retailers, but this will not necessarily translate into a marked increase in grocery retail spend per capita,” Riverain said. “Our current forecast assumes faster population growth in the U.K. than in Germany but, with the euro zone in crisis, it is possible that new migration trends will take place.”
In Germany, “where discount stores still play a dominant role, growth in the consumer goods market has been subdued,” Reverain said. “We anticipate this will remain the case, although some leading retailers in Germany are actively exploring opportunities offered by online and convenience.”
In 2010, the U.S. grocery sector was the largest in the world at $876.75 billion, beating China by $52.7 billion, according to the IGD. A growth rate of 18.4 percent last year pushed China into the top position at $975.51 billion, compared with the U.S.’s 4.8 percent growth.
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