UK Food & Drink Report Q4

Q4 2023
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Unit
United
ed Kingdom
Food & Drink R
Report
eport
Includes 5-year forecasts to 2027
United Kingdom Food & Drink Report | Q4 2023
Contents
Key View............................................................................................................................................................................................ 4
SWOT .................................................................................................................................................................................................. 7
Industry Forecast........................................................................................................................................................................... 8
Food ................................................................................................................................................................................................................................................... 8
Drink.................................................................................................................................................................................................................................................12
Industry Trends And Developments .....................................................................................................................................17

UK Dietary Spending Shift Analysis.....................................................................................................................................................................................17
Market Overview..........................................................................................................................................................................22
Food .................................................................................................................................................................................................................................................22
Drink.................................................................................................................................................................................................................................................26
Mass Grocery Retail....................................................................................................................................................................................................................30
Competitive Landscape.............................................................................................................................................................34
Company Profile...........................................................................................................................................................................38
Sainsbury's ...................................................................................................................................................................................................................................38
Tesco................................................................................................................................................................................................................................................42
Asda..................................................................................................................................................................................................................................................46
Associated British Foods..........................................................................................................................................................................................................50
Premier Foods..............................................................................................................................................................................................................................53
Unilever .........................................................................................................................................................................................................................................57
Diageo.............................................................................................................................................................................................................................................63
United Kingdom Demographic Outlook...............................................................................................................................67
Food & Drink Glossary ................................................................................................................................................................70
Food & Drink Methodology .......................................................................................................................................................71
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Key View
Key View: We hold a relatively dim outlook for real food and drinks spending in the UK over the short term (2023 and 2024) as a
weak economic environment, lingering Covid-19 impacts, and significantly high inflation in the food and drink sector weigh on
household purchasing patterns. Household spending on most food segments will contract in real terms as high prices force
households to cut back spending, even for essential items. Value spending will face pressure from consumers shifting to cheaper
alternatives, such as private label brands, as well as to cheaper retailers and discounters.
Large And Lucrative Food & Drinks Market, But Inflation A Risk
UK - Food & Drink Spending (2020-2027)
e/f = BMI estimate/forecast. Source: National sources, BMI
Latest Updates And Industry Developments
• We hold a dim outlook for the UK consumer over 2023, as households face several economic issues that will weigh on
household spending over the year. We forecast food spending to grow by a nominal rate of 7.0% over the year, to a total of
GBP120.4bn (USD146.8bn). However, with high inflation, especially during the first half of the year (food price inflation has
averaged 18% y-o-y over January-June 2023), it is likely that real food spending will continue on its downward trajectory. We
expect that these pressures will cause households to cut back spending on food over 2023, by removing non-essential items
from their baskets, moving down price points or by increasingly shopping at cheaper retailers or discounters. Additionally, risks
are to the downside, with the most prominent risks being higher tax burdens, inflation that remains elevated for longer and a
more rapid deterioration in the labour market over the year. All three risks will quickly sap disposable income and thus
discretionary spending.
• As a proportion of total household budgets, the average British household is forecast to spend 7.4% on food by 2027, a
proportion that has been relatively stable over the past 20 years.
• We forecast household spending on alcoholic drinks to grow just 3.1% over 2023, to a total of GBP62.7bn (USD76.5bn).
Inflationary pressures combined with long-term trends of consumers cutting back alcohol consumption will weigh on the sector.
However, the at-home alcoholic drinks segment will see strong growth in the short-term. The Covid-19 pandemic and the cost
of living crisis have led to consumers shifting their spending from restaurants, bars and pubs, into the mass grocery retail
segment.
• In August 2023, Pepsico UK announced that it would be investing GBP58mn (USD72.2mn) in its Walkers brand Leicester facility,
the largest UK investment in 25 years. The investment will support the installation of a new manufacturing line, updated
equipment to increase sustainability and improved employee facilities.
• From August 1 2023, the UK government increased the duty rates under the revised duty structure for alcohol
products produced in, or imported into, the UK. The tax will now also be levied according to a drink's strength. The duty will
increase overall, with most wines and spirits seeing rises, but will drop for lower-alcohol drinks and most sparkling wine.
• In July 2023, Waitrose & Partners partnered with Uber Eats to offer a grocery delivery service. The service will launch from five
locations across London before being rolled out to more than 200 locations across the UK by the end of Q323.
• In June 2023, Marks & Spencer announced that to reduce food waste it will replace 'use by' dates with 'best before' dates
across RSPCA Assured Select Farms British and organic fresh milk.
Inflation Outlook
Inflationary pressures are peaking in many markets, as central banks raise rates to rein in higher prices. Inflation, especially for food
items, remains elevated. These higher prices are eroding nominal wage gains, squeezing the purchasing power of households and
shifting consumer spending from discretionary spending. In many markets, a combination of higher wage inflation, localised supply
chain constraints and bottlenecks, and mismatches in demand and supply are adding upward pressure to prices. Global geopolitical
events and flashpoints will weigh on prices beyond the short term.
Inflationary pressures on food and drinks are a key risk to consumer spending in the UK over 2023 and a key element of the
country's cost of living crisis. With food and non-alcoholic drinks accounting for 8.1% of the average household's budget in 2023,
and alcoholic drinks accounting for a further 3.7%, inflation in these categories can quickly change purchasing patterns. We forecast
food price inflation to be relatively elevated in the UK over 2023. Food inflation tends to be stickier than other sub-components
because it tends to change more slowly than other types of inflation and can be more resistant to sudden fluctuations in the
market. We forecast it will average 13.7% y-o-y over the year, predominantly explained by high prices during the first half of the year
(food and non-alcoholic drinks price inflation has already averaged 18% y-o-y over the January-June 2023 period).
Nominal Spending Largely Being Driven By Higher Prices

UK - Consumer Price Inflation, % y-o-y (2016-2023)
Source: Office For National Statistics, BMI
The wider economic challenges facing households and consumers stem from the reopening of many economies. Inflationary
pressures are driven by demand-pull and cost-push inflation. In an attempt to rein in inflation, central banks have hiked their policy
rates at some of the quickest rates ever, making much of the debt issued during the historically low interest rate period less
valuable. This is combined with the tightening of quantitative easing, financial institutions facing liquidity issues and severe interest
rate risks. While this is a relatively new issue, ongoing factors, such as labour market dynamics and the Russia-Ukraine conflict,
continue to place downward pressure on our consumer outlook. The economic trajectory of many markets’ post-Covid recovery
highlight the risk of rising unemployment and its impact on consumer outlooks in the short term. The graphic below summarises
these risks to the outlook over 2023.
UK Households Are Still Exposed

Global - Risks To Outlook
Source: BMI
SWOT
Strengths Weaknesses
• The UK food industry is particularly dynamic and responsive to • The pound has taken a hit due to the Brexit outcome,
consumer trends. negatively affecting purchasing power and increasing retailers'
• Companies are constantly launching new products, especially costs.
value-added items such as organic, fair trade and functional • Household spending is under pressure, amid Brexit and
products. price increases following the depreciation of the pound sterling.
• Consumer interest in high-quality food has grown rapidly, • Food scares and concerns over genetically modified organisms
fuelling demand for premium products. have led consumers to question the origin of their food.
• The UK has a well-developed e-commerce environment, • The private label sector is strong and growing, putting pressure
including logistics, trust and brand awareness. on branded producers.
• The UK is home to some of the world's largest drinks firms, such • Many markets, including alcoholic and soft drinks, are
as Diageo. saturated, offering little in the way of high growth potential.
• Strong reputation for premium and gourmet products, such as • Many supermarkets have had to endure tighter margins owing
Scotch whisky and English cheeses. to intense price competition, which includes competition from
• High demand for UK-made food and drink products, both discount retailers.
domestically and abroad. • Dependence on seasonal produce and imports from other
markets.
Opportunities Threats
• The at-home alcoholic drinks segment will see strong growth in • Climate change and its impact on agriculture and food
the short-term. The Covid-19 pandemic and the cost of living production.
crisis has seen consumers shift their spending from restaurants, • The UK's economy is closely linked to that of the EU. Further
bars and pubs, into the mass grocery retail segment. difficulties in the eurozone could thus have an impact on the
• In the high inflationary environment, private-label brands have UK's economy and consumer confidence.
been seeing significantly high demand. • The increasing premiumisation of retailers' private label product
• Loyalty cards are becoming increasingly important to shoppers ranges, together with higher consumer acceptance of private-
as they seek out deals to make their money go further. label products, threatens to undermine brand-name products.
• UK consumers are receptive towards premium products, • A high degree of market consolidation has left few
including organic and speciality foods, allowing for value sales opportunities for new market entrants.
growth even in a mature market. • The prolonged price war in food retail will continue to put
• Both discount stores and high-end retailers are growing in pressure on food and drink manufacturers, especially medium-
popularity with UK consumers. sized domestic suppliers.
• The increasingly popular convenience store format offers
growth opportunities for mass grocery retailers struggling to
find suitable plots for supermarkets and hypermarkets.
• The UK is one of the most technologically advanced markets in
the world, which will help fuel online grocery store sales.
Industry Forecast
Food
Key View: We hold a bleak outlook for household spending on food in the UK over the short-to-medium term (2023-2027).
Although inflationary pressures will moderate slowly over 2023, we believe that it will remain sticky, meaning that real spending on
food will continue to contract over the medium term. This will happen with households either removing more non-essential items
from their baskets, moving down prices points or increasingly shopping at cheaper retailers or discounters.
Latest Updates
• We forecast household spending on food to grow 7.0% over 2023, to a total of GBP120.4bn (USD146.8bn). However, inflationary
pressures will continue to weigh on spending over the year, with food price inflation forecast to average 13.7% y-o-y and price
increases being extremely high over H123. We forecast that these pressures will cause households to cut spending on food over
2023, by removing non-essential items from their baskets, moving down price points and/or by doing more of their shopping at
cheaper retailers or discounters.
• Over the medium term (2023-2027), we forecast household spending on food to grow an average of 4.6% a year, taking
spending to GBP140.5bn (USD180.6bn) by 2027. Spending growth will largely be driven by the easing of inflation and
consumers returning to some level of pre-inflation spending patterns, as income growth slowly catches up.
Structural Trends
Short-Term Food Spending Outlook (2023-2024)
We forecast household spending on food in the UK to total GBP120.4bn (USD146.8bn) over 2023, growing 7.0% over the year.
However, this nominal growth is largely being driven by inflationary pressures. Since the beginning of 2022, food price inflation in
the UK has been on an upward trajectory. We expect this to moderate over 2023 but remain stubbornly high, at an expected
average of 13.7% over the year. As a result, real food spending will contract over 2023 as households move down price points or
shift spending to cheaper retailers. This will put downward pressure on the value spend in a number of segments.
Food Price Inflation Impacting Sales

UK - Food Sales (2020-2027)
Medium-Term Trends
We forecast household spending on food to grow an average of 4.6% a year over the medium term (2023-2027) to a total of
GBP140.5bn (USD180.6bn) by 2027. However, elevated inflation over 2023 and the first few months of 2024 will weigh on
households, with real household spending on food forecast to contract over this period. Food price inflation will ease towards the
latter years of our forecast period, coinciding with an economic recovery, where real food spending will again enter positive growth.
The depreciation of the pound sterling since mid-2016 led to a spike in inflation over 2017-2019. Though the UK is a major grower
and manufacturer in the food sector, about half of all food consumed is imported, of which 80% comes from the EU. The growth in
value in UK food sales projected over the coming years is largely as a result of inflation; it is mainly due to consumers having to
spend more on food, rather than an indication of consumers buying more food in volume terms.
Rising health consciousness among British consumers will benefit dairy products (especially value-added, high protein products
such as yoghurt). We project dairy spending to increase at an average annual rate of 4.8%, with spending in nominal terms rising
from GBP16.2bn in 2023 to GBP19.2bn in 2027. The UK dairy industry is experiencing a wave of investment on the back of
increased demand from the developing world. According to the UK's Milk Development Council, the country continues to import
large amounts of added-value dairy products, while exporting lower-value commodities, such as milk powders and bulk cream. For
example, Britain exports butterfat as low-value cream but imports expensive butter brands, such as Lurpak and Anchor. Evidence
suggests that Britain's dairy industry has struggled to keep up with other European markets in the shift from commodities to
branded products.
The fresh fruits and vegetables categories will perform well over the medium term, as the healthification trend will ensure that
households continue to spend on healthier produce. We forecast fruit spending to grow at an average rate of 5.9% y-o-y between
2023 and 2027, reaching GBP15bn, making this the fastest growing food category over this period. Fresh vegetable spending is set
to grow at an annual average of 4.5% y-o-y through to 2027, reaching GBP18.5bn.
The UK's snack food market is extremely mature and supported by the vast range of mass grocery retailers and general grocery
outlets. Novel products are well received, while the use of information technology has boosted marketing efforts by manufacturers,
which are also targeting specific groups. Cutting down on sugar content and focusing on healthier snacks are two major trends
transforming the industry. We project sugar and sugar products spending to contract by an average of 0.7% y-o-y over our
2023-2027 forecast period. UK consumers are becoming increasingly health conscious, meaning that they will gradually shift their
spending away from products that have a high sugar and fat content, such as cakes, puddings and sweets. This will weigh on
spending growth over the coming years. The UK confectionery market has reached maturity, and only modest volume sales growth
can be expected over the coming years. Despite near saturation in the segment, value sales over the past 10 years have increased
on the back of the trend towards premium products in the chocolate sector and the move towards functional products in the
chewing gum sector. However, the economic downturn has put the brakes on this, with mass-market brands likely to regain market
share.
The UK meat and poultry market is a significant industry, encompassing a wide range of products, including beef, pork, poultry and
lamb. The UK is a major importer of meat and poultry, with a significant amount coming from markets such as Ireland, the
Netherlands and Germany. The meat and poultry market in the UK is influenced by a variety of factors, including consumer trends,
health and wellness, and sustainability concerns. There has been a growing trend towards premium and sustainably sourced meat
and poultry products, driven by consumer concerns about environmental and animal welfare issues. The market is also being
shaped by changing consumer preferences, with a growing demand for high-quality, locally sourced and convenient meat and
poultry products. We forecast household spending on meat and poultry to grow by an average of 4.6% a year, taking spending from
GBP28.1bn in 2023 to GBP32.9bn by 2027.
FOOD SALES (UK 2020-2027)

Indicator 2020 2021e 2022e 2023f 2024f 2025f 2026f 2027f
Food, sales, GBPmn 106,577.4 108,841.4 112,475.6 120,363.5 124,360.7 130,393.7 135,347.8 140,524.1
Food, sales, GBPmn, % growth y-o-y 8.9 2.1 3.3 7.0 3.3 4.9 3.8 3.8
Bread, rice and cereals, sales, GBPmn 11,018.7 10,702.7 11,082.7 11,942.8 12,387.7 13,076.8 13,666.0 14,291.5
Bread, rice and cereals, sales, GBPmn, %

13.7 -2.9 3.6 7.8 3.7 5.6 4.5 4.6
growth y-o-y
Pasta products, sales, GBPmn 949.9 907.0 934.9 998.1 1,030.9 1,081.6 1,125.1 1,171.2
Pasta products, sales, GBPmn, % growth

37.3 -4.5 3.1 6.8 3.3 4.9 4.0 4.1
y-o-y
Baked goods, sales, GBPmn 9,688.9 9,432.9 9,765.9 10,519.6 10,909.5 11,513.4 12,029.7 12,578.0
Baked goods, sales, GBPmn, % growth y-

14.3 -2.6 3.5 7.7 3.7 5.5 4.5 4.6
o-y
Meat and Poultry, sales, GBPmn 24,507.1 25,577.7 26,357.8 28,129.5 29,045.7 30,466.5 31,684.1 32,976.1
Meat and Poultry, sales, GBPmn, %

11.6 4.4 3.0 6.7 3.3 4.9 4.0 4.1
growth y-o-y
Fish and fish products, sales, GBPmn 6,079.3 6,349.1 6,580.7 7,104.6 7,375.6 7,795.2 8,153.9 8,534.8
Fish and fish products, sales, GBPmn, %

17.1 4.4 3.6 8.0 3.8 5.7 4.6 4.7
growth y-o-y
Dairy, sales, GBPmn 15,008.2 14,693.6 15,171.2 16,254.2 16,814.4 17,682.6 18,425.8 19,214.7
Dairy, sales, GBPmn, % growth y-o-y 11.2 -2.1 3.3 7.1 3.4 5.2 4.2 4.3
Oils and Fats, sales, GBPmn 1,899.8 1,995.4 2,062.8 2,215.6 2,294.6 2,417.0 2,521.8 2,633.0
Oils and Fats, sales, GBPmn, % growth y-

9.8 5.0 3.4 7.4 3.6 5.3 4.3 4.4
o-y
Fresh and preserved fruit, sales, GBPmn 10,448.8 10,884.1 11,243.1 12,240.7 12,756.7 13,555.4 14,236.9 14,960.8
Fresh and preserved fruit, sales, GBPmn,

7.9 4.2 3.3 8.9 4.2 6.3 5.0 5.1
% growth y-o-y
Fresh vegetables, sales, GBPmn 13,298.4 14,512.2 14,844.0 15,709.0 16,179.7 16,962.0 17,660.3 18,478.6
Fresh vegetables, sales, GBPmn, %

-8.5 9.1 2.3 5.8 3.0 4.8 4.1 4.6
growth y-o-y
Sugar and sugar products, sales, GBPmn 8,549.0 7,981.7 8,440.5 8,832.8 8,930.1 8,866.9 8,576.7 8,108.6
Sugar and sugar products, sales, GBPmn,

12.3 -6.6 5.7 4.6 1.1 -0.7 -3.3 -5.5
% growth y-o-y
Other food products, sales, GBPmn 5,129.4 5,804.9 5,992.0 6,416.4 6,636.0 6,976.2 7,267.6 7,576.8
Other food products, sales, GBPmn, %

5.9 13.2 3.2 7.1 3.4 5.1 4.2 4.3
growth y-o-y
Drink
Key View: We hold a dim outlook for the UK's alcoholic drinks segment over 2023 and into the medium term as inflationary
pressures weigh significantly on the purchasing patterns of consumers. Many of the different drinks segments are not essential,
meaning that consumers will remove them from their shopping baskets in order to cut down on spending. Additionally, the wide
availability of cheaper alternatives will weigh on spending levels. Higher prices in the restaurant and bar segment will be a boon for
alcoholic drinks spending through the retail channel as relatively cheaper prices encourage more spending here and away from
pubs and restaurants.
Latest Updates
• We forecast household spending on alcoholic drinks to grow by 3.1% over 2023, to a total of GBP62.7bn (USD76.5bn).
Inflationary pressures combined with long-term trends of consumers cutting back alcohol consumption will weigh on the sector.
• The UK alcoholic drinks market is very dynamic. The Covid-19 pandemic and the cost of living crisis have accelerated significant
at-home trends in alcoholic drinks spending and consumption. Spirits will see robust growth out to 2027, driven by product
innovation targeting price-sensitive consumers at home.
• Household spending on non-alcoholic drinks will grow 9.6% over 2023, to a total of GBP17.3bn (USD21.1bn). However, as with
the food segment, inflationary pressures will weigh on nominal spending over the year.
Structural Trends
Alcoholic Drinks
Short-Term Alcoholic Drinks Outlook (2023-2024)
We forecast household spending on alcoholic drinks to grow by just 3.1% over 2023, to a total of GBP62.7bn (USD76.5bn). High
prices in the restaurant and bar segment will be a boon for alcoholic drinks spending through the retail channel, as relatively
cheaper prices encourage more spending in this channel and away from pubs and restaurants. However, the off-site alcoholic
drinks channel has largely had three years of above average demand, meaning that spending is growing from a high base. This is
further reflected in the consumption data, where growth will be 2.1% y-o-y in 2023. Over 2023, the average adult will consume
113.4 litres of alcohol, above the pre-Covid level of 108.5 litres in 2019.
Large And Mature Alcoholic Drinks Market

UK - Total alcohol consumption, litres mn (2020-2027)
e/f = BMI estimate/forecast. Source: WHO, BMI
Medium-Term Trends
Our 2023-2027 forecast for alcoholic drinks spending is for average growth of 1.9% a year. This will take spending to GBP67.01bn in
2027. We expect only moderate growth in alcoholic drinks consumption over the medium term, with consumption moderating over
the forecast period. Typically, alcohol consumption remains strong during times of economic hardship. However, even before the
pandemic, global alcoholic drink sales were experiencing a downward trend in developed markets, so the slowdown in consumer
spending in the UK will put pressure on consumption volumes. Although consumers are fairly resistant to downturns in their alcohol
consumption, the depreciation of the pound sterling, on the back of Brexit, is leading to higher prices for imported alcohol and lower
demand from consumers.
Alcohol volume growth in the UK will also decline as the country's consumers become more health conscious and as
premiumisation takes hold. This is leading drinkers to cut back on their alcohol consumption and trade up to higher price points,
paying more for quality but drinking less in quantity. Premiumisation in the alcohol segment will continue to be an important trend
for consumers, allowing the alcohol industry to remain resilient, even with a slowdown in household spending. Premiumisation is
playing the most significant role in the beer segment, as craft breweries are becoming increasingly popular. Cask ales and craft
beers represent two bright spots in the market, with sales currently growing at mid-single and low double-digit rates respectively.
This growth can be attributed to a rise in demand, especially from younger age groups, which has helped the sector to outperform
the overall beer market. Consumers are now drinking lower volumes than before, but of higher quality beers. While some
consumers may trade down price points in light of the uncertain economy, we believe that the general movement towards better
quality and ingredients will continue to play an important role in consumer taste preferences. We forecast beer volume sales to
grow by an average of 3.7% a year over the 2023-2027 period. This will take total beer consumption from 2.9bn litres in 2023 to
3.4bn litres in 2027.
TOTAL ALCOHOLIC DRINKS SPENDING AND CONSUMPTION (UK 2020-2027)

Alcoholic drinks spending, GBPbn 57.63 58.86 60.82 62.70 63.96 65.33 66.17 67.01
Alcoholic drinks spending, GBP % y-o-y 8.85 2.12 3.34 3.08 2.01 2.14 1.30 1.27
Alcoholic drinks spending, GBP per household 2,064.19 2,096.03 2,128.10 2,188.13 2,226.57 2,268.84 2,293.08 2,317.11
Alcoholic drinks spending, GBP per capita 859.45 874.82 900.98 925.60 941.07 958.12 967.54 976.86
Total alcohol consumption, litres mn 3,928.7 4,147.7 4,325.2 4,417.0 4,596.4 4,736.9 4,969.0 5,121.8
Total alcohol consumption, litres mn, % y-o-y -3.1 5.6 4.3 2.1 4.1 3.1 4.9 3.1
Total alcohol consumption, litres per capita 101.0 106.6 111.1 113.4 117.9 121.5 127.4 131.3
Beer, litres mn 2,666.8 2,813.5 2,923.2 2,978.8 3,124.7 3,206.0 3,395.1 3,497.0
Beer, litres mn, % y-o-y -2.6 5.5 3.9 1.9 4.9 2.6 5.9 3.0
Beer, litres per capita 68.6 72.3 75.1 76.5 80.2 82.2 87.0 89.6
Wine, litres mn 1,025.9 1,091.7 1,151.0 1,174.1 1,191.9 1,230.5 1,250.0 1,274.8
Wine, litres mn, % y-o-y -3.9 6.4 5.4 2.0 1.5 3.2 1.6 2.0
Wine, litres per capita 26.4 28.0 29.6 30.1 30.6 31.6 32.0 32.7
Spirits, litres mn 236.0 242.6 251.0 264.1 279.7 300.4 323.9 350.1
Spirits, litres mn, % y-o-y -4.2 2.8 3.5 5.2 5.9 7.4 7.8 8.1
Spirits, litres per capita 6.1 6.2 6.4 6.8 7.2 7.7 8.3 9.0
Non-Alcoholic Drinks
Short-Term Non-Alcoholic Drinks Outlook (2023-2024)
We forecast household spending on non-alcoholic drinks to grow by 9.6% over 2023, to a total of GBP17.3bn (USD21.1bn).
However, as with the food segment, inflationary pressures will weigh on nominal spending over the year. We forecast non-alcoholic
drinks price inflation to average 11% over 2023, eroding any gains in spending, as consumers cut out unnecessary purchases from
their shopping baskets. More essential non-alcoholic drinks segments will do well in this environment, with spending on bottled
water growing 16.9% over 2023, to a total of GBP1.1bn. The hot drinks segment will be worst impacted by this dynamic, with
consumers moving down price points across the different ranges of coffees and teas, while also cutting out the more expensive and
less essential products, like coffee pods and premium beans.
Inflationary Pressures Weighing On Spending

UK - Non-Alcoholic Drinks Sales (2020-2027)
Medium-Term Trends
Over the next five years to 2027, we forecast household spending on non-alcoholic drinks to grow by an average of 7% a year,
taking spending to GBP22.1bn (USD28.4bn) by 2027.
Given its size, coffee, tea and hot drinks category will grow at a rapid rate over our medium-term forecast period, at an average of
7.8% annually, taking spending on this category to GBP7.2bn by 2027. Strong growth in coffee will be driven by the rising disposable
incomes of young, affluent consumers and the increasing popularity of coffee chains in the UK market. Coffee chain sales have
served to make consumers more aware of the varieties of coffee available. More households will likely seek to buy coffee in
supermarkets rather than coffee shops in order to save money. However, we note that this segment is more exposed to inflationary
pressures, due to the number of cheaper options available, households can move down price points relatively easier.
Spending on carbonated soft drinks has been affected by the rise in health consciousness and concerns about obesity, a trend that
we have observed in the majority of developed markets. This has been exacerbated by the tax on sugary drinks; the overall share of
the non-alcoholic drinks market taken by carbonated drinks is declining and this trajectory is broadly consistent with declines that
have taken place in other markets where sugar taxes have been implemented. In the UK, the decline has been less pronounced
than in other markets, as consumers were already switching away from these products towards 'healthier' alternatives, and soft
drinks companies were quick to deploy a number of strategies, such as shrinkflation, in order to soften the blow of the tax.
NON-ALCOHOLIC DRINKS SALES (UNITED KINGDOM 2020-2027)

Non-alcoholic drinks, sales, GBPmn 13,513.6 13,800.6 15,761.7 17,278.4 18,276.6 19,608.5 20,815.5 22,091.3
Non-alcoholic drinks, sales, GBPmn, % growth y-o-y 8.9 2.1 14.2 9.6 5.8 7.3 6.2 6.1
Coffee, teas and other hot drinks, sales, GBPmn 4,254.3 4,283.0 4,919.2 5,461.5 5,810.5 6,283.8 6,710.7 7,163.1
Coffee, teas and other hot drinks, sales, GBPmn, %

15.7 0.7 14.9 11.0 6.4 8.1 6.8 6.7
growth y-o-y
Soft drinks, sales, GBPmn 9,259.3 9,517.7 10,842.5 11,816.9 12,466.2 13,324.7 14,104.9 14,928.2
Soft drinks, sales, GBPmn, % growth y-o-y 6.0 2.8 13.9 9.0 5.5 6.9 5.9 5.8
Fruit and vegetable juices, sales, GBPmn 2,752.8 2,855.3 3,216.9 3,416.0 3,559.9 3,739.3 3,905.5 4,079.0
Fruit and vegetable juices, sales, GBPmn, % growth

8.9 3.7 12.7 6.2 4.2 5.0 4.4 4.4
y-o-y
Mineral or spring waters, sales, GBPmn 1,001.0 713.8 843.1 993.7 1,084.8 1,214.3 1,329.3 1,452.3
Mineral or spring waters, sales, GBPmn, % growth y-

8.9 -28.7 18.1 17.9 9.2 11.9 9.5 9.3
o-y
Carbonated drinks, sales, GBPmn 5,505.5 5,948.6 6,782.6 7,407.1 7,821.5 8,371.1 8,870.0 9,396.9
Carbonated drinks, sales, GBPmn, % growth y-o-y 4.1 8.0 14.0 9.2 5.6 7.0 6.0 5.9
Industry Trends And Developments

UK Dietary Spending Shift Analysis
Key View
• As a proportion of total household budgets, the average UK household is forecast to spend 7.4% on food by 2027, a proportion
that has been relatively similar over the past 20 years.
• UK consumers are making more health-conscious decisions, by increasing spending on fresh fruits and dairy and decreasing
spending on food categories that are associated with unhealthy diets, including sugar and sugar products and red meat.
• The increasing number of vegetarians, vegans and flexitarians in the UK will put downward pressure on meat spending and
create significant growth opportunities for alternative meat companies.
• Government policies around unhealthy food combined with the aforementioned healthification trend has meant that household
spending on sugar and sugar products - chocolate and confectionery in particular - is largely plateauing in the short term. In the
long term, household spending in this category will slow and ultimately start contracting.
Dietary Spending Shift Overview
As a proportion of total household budgets, the average UK household is forecast to spend 7.4% on food by 2027, with this being a
slight increase from the 7.1% in 2007. This proportion is one of the lowest globally, driven by a large and developed restaurant and
food services sector, where the average household will spend 11.2% of the disposable income. However, at GBP140bn (USD180bn)
in 2027, the UK boasts one of the largest food spending markets globally. This works out to a per capita level of GBP2,040 per
person in 2027, increasing steadily from the GBP1,050 posted in 2007. However, when accounting for food price inflation over this
time, real growth is largely flat. Between 2007 and 2027, we estimate that food spending will grow at a real rate of approximately
0.9% a year, with significantly high rates of food price inflation over 2022 and 2023 (estimated at 10.9% and 13.7% respectively)
weighing heavily on consumer spending.
Inflationary Pressures Will Weigh Heavily On Real Food Spending

UK - Real Food Spending, GBP (2010-2027)
e/f = BMI estimate/forecast. Source: Office for National Statistics, BMI
Breaking down total food spending, the average British household will spend roughly 70% of their food budgets on five categories. a
proportion that has largely been stable over the 207-2027 period. Meat and poultry is the largest category, accounting for 23.5% of
food spending in 2027. This will be followed by dairy (at 13.7% of food spending in 2027), fresh vegetables (13.2%), fruits (10.6%)
and bread, rice and cereals (10.2%), highlight the relatively diverse nature of food spending patterns in the country. The main source
of protein in the UK remains meat and poultry, although we note that its share is declining driven by a rise in vegetarian, vegan and
flexitarian lifestyles in the UK, which is especially prevalent amongst young adults in urban areas. We also note that bread, rice and
cereals have gained some share over the past decade, driven by rice spending due to an increase in popularity of international,
especially (east) Asian, cuisines.
UK Households Consistently Spending On Five Categories

UK - Food Spending Breakdown, % of total (2008-2027)
f = BMI forecast. Source: Office for National Statistics, BMI
1. Rising Health-Consciousness Driving Shifts In Food Consumption
Healthification, the awareness about health benefits associated with certain types of food, has become a major global theme over
the last few years, and is one of the defining trends of the UK food sector. We expect the healthification trend to continue to play an
influential role in UK dietary patterns over the 2023-2027 period, as consumers pay greater attention to the food choices they
make through the help of social media platforms and government/public health awareness campaigns. In light of the Covid-19
pandemic, the UK government has placed greater attention to tackling obesity by setting out an Obesity Strategy in July 2020.
Under the plan, buy one get one free deals for 'junk food' (including confectionery, potato chips and soft drinks) will be banned from
October 2023. We expect to see more regulation to promote healthy eating and rise health awareness over the coming months and
years, including mandatory front-of-pack nutritional labelling and advertising ban of unhealthy food products.
Consumer spending on fresh fruit and dairy will continue to grow in importance, as they are considered to be healthier, with the
government advising greater intake of these products over other food groups. That said, higher spending on these food items is not
simply due to higher volumes consumed, but also the growing movement towards organic, fair-trade and fresh local produce, with
consumers prepared to pay a higher price for products that fit these criteria. Household spending on fruit will see the biggest
increase in allocation, increasing from 8.6% of food spending in 2013, to 10.6% by 2027. Proportional spending on vegetables have
declined slightly, but remain the third largest food spending category out to 2027. Fish and seafood's share of spending is also
growing, increasing by 1.1 percentage points over the 15 year period, hitting 6.1% of food spending in 2027.
Households Allocating More Spending To Fruits & Seafood

UK - Food Spending, change in % share (2013-2027)
f = BMI forecast. Source: Office for National Statistics, BMI
Meat and poultry will record the most significant drop, falling by 1.3 percentage points over the 2013-2027 period. This is a long-
term trend, where the consumption of pork has steadily declined and consumption of beef has been flat since at least 2008. Only
poultry will post strong growth in consumption over this period. However, poultry is typically cheaper than another meat categories,
putting downward pressure on actual spending, as households shift from more expensive meat consumption into poultry. Price is
the main factor for this shift in meat spending, but healthification is a small but significant trend in this shift, as more research comes
out around the negative impact red meat consumption has on health.
2. Meat-Free And Flexitarian Diets Playing Greater Role
Meat and poultry will see one of the largest spending allocation declines over our long term period. From 2013 onwards, this trend
has accelerated further, with the trajectory forecast to continue out to 2027. However, meat will remain a dominant part of the UK
consumer's diet, projected to account for 23.5% of total food spending in 2027, but rising health-consciousness and associated
socio-cultural trends, such as the increasing popularity of veganism/vegetarianism is having a significant impact on meat
consumption. This is reflected in our outlook for meat and poultry spending in the UK, which will average modest 3.9% annual
growth over our 2020-2027 forecast period, underperforming the headline rate of food spending (4.2%).
Looking at consumption patterns in the UK meat sector, there is a clear ongoing shift away from beef and pork towards poultry. We
forecast poultry consumption to reach 39.1kg per capita by 2027, up from an estimated 26.6kg in 2007. In contrast, pork
consumption is forecast to fall by 3.4kg per capita, while beef consumption will remain largely static. Among the most important
drivers of this trend away from red meat are the perceived health benefits for consumers. A landmark scientific study by the World
Health Organization in 2015 found a link between processed and red meats to cancer. We believe that this has had a significant
impact on consumption of beef and pork, with consumers starting to favour poultry and plant-based alternatives. We also note that
poultry is often associated with low fat but high protein levels, which makes it popular amongst gym-goers. As such, we see stronger
growth opportunities in poultry and plant-based food products in the UK over the coming years.
Poultry Now Dominates Meat Consumption In The UK

United Kingdom - Meat Consumption, Kg Per Capita (2005-2027)
e/f = BMI estimate/forecast. Source: Defra, BMI
We also note a growing trend towards vegetarian, vegan and flexitarian diets in the UK. A 2019 study by Ipsos Mori, commissioned
by the Vegan Society, suggests that there were roughly 600,000 vegans in the UK, a 300% increase from the 150,000 vegans in the
country in 2014. Not only do health concerns surrounding overconsumption of red meat, as well as ethics surrounding animal
welfare play important roles in British consumers becoming increasingly interested in vegetarian, vegan and flexitarian diets, we also
note that sustainability is becoming another salient driver. The media increasingly report on the relatively high carbon footprint of
animal-based protein, and suggest that meat-free diets are key in tackling climate change and global warming.
3. Household Spending On Chocolate And Confectionery Is Plateauing
We forecast household spending on chocolate and confectionery to have peaked and will now slowly contract year-on-year, as
consumers react to a myriad of developments in the category. As part of the abovementioned healthification trend, UK consumers
have already began reducing their consumption and spending on chocolate and confectionery products. Over the 2007-2027
period, we forecast household spending on chocolate, sweets and similar to grow at an average of 3.0% a year (compared to the
4.0% average on topline food spending). On a per capita level, the average UK consumer will spend GBP88.9 on chocolates and
sweets in 2027, down from the peak of GBP104 spent in 2023 and 2024.
Consumers Will Gradually Cut Back Their Spending

UK - Household Spending, GBP per capita (2006-2027)
e/f = BMI estimate/forecast. Source: Office for National Statistics, BMI
Over the past ten years, the UK government has been active in nudging consumers into making healthier purchasing decisions,
starting with front-of-package labeling (FOPL) in 2013 and more recently with legislation restricting the promotion of products high
in fat, sugar or salt. With chocolate and confectionery often bought as an impulsive purchase in supermarket, restrictions on
product placements and multibuy offers will limit the number of purchases, and thus their per capita spending, consumers will
make.
Similarly, the rising cost of sugar coupled with higher manufacturing costs over 2022 and 2023 has seen the price of chocolate and
sweets products grow at one of the highest rates on record. Over 2022, the price of sugar, jams, honey, chocolate and confectionery
increased 6.3% y-o-y. Over 2015-2019, average inflation in this category was only 0.5% y-o-y, highlighting how extreme this period
of inflation has been. Manufacturers have reacted to higher operating costs, as will as legislative requirements, by making products
smaller while keep prices the same. As a result, higher prices and smaller products has seen consumers cut back their spending on
these products.
Market Overview
Food
The UK food production industry is one of the most progressive and innovative in the world. New product developments are
influenced by the health and wellness trend, and by the discerning and innovation-hungry consumer base. There are significant
opportunities for premium foods and added-value industries, such as organic, fair trade and locally produced products.
Recent Developments
• In August 2023, the UK government abandoned plans to force manufacturers to label their products with an alternative to the
EU’s CE (Conformité Européenne) safety mark. It was also reported that checks on fresh farm produce coming to the UK from
the EU have been delayed for the fifth time. The delay is intended to give the government and exporters in the EU more time to
prepare for the checks.
• In August 2023, Pepsico UK announced that it would invest GBP58mn (USD72.2mn) in its Walkers brand Leicester facility, the
largest UK investment in 25 years. The investment will support the installation of a new manufacturing line, updated equipment
to increase sustainability and improved employee facilities.
• In June 2023, the head of Danone UK & Ireland called for higher taxes on salty, fatty and sugary foods, noting that 'the UK food
industry's efforts to improve the health profile of its products have not moved fast enough'. The UK introduced a sugar tax on
soft drinks in 2018, but has rejected more recent proposals to put extra taxes on other unhealthy products, relying instead on
manufacturers to engage with voluntary programmes to reduce salt, fat and sugar.
Market Drivers And Trends
The UK imports a significant amount of food and in recent years has become increasingly reliant on imports to meet the demands
of its diverse and rapidly changing food market. According to the Department for Environment, Food and Rural Affairs, about 30% of
the food consumed in the UK is imported, with the majority coming from the EU, followed by countries such as the US, Australia and
New Zealand. Brexit has had an impact on the amount of food the country imports. Since the UK left the EU, new trade
arrangements and border controls have been introduced, leading to increased costs and supply chain disruptions in the food
industry. This has resulted in some food shortages and price increases for certain products, particularly fresh produce with short
shelf lives such as fruits and vegetables. In response, the UK has been looking to diversify its sources of food imports and reduce its
reliance on the EU. The government has also encouraged businesses to increase domestic production and build new trade
relationships with countries outside of the EU.
Food Imports Spiked Over 2022, Driven By Higher Prices

UK - Food Imports, GBPbn (2014-2022)
Source: Trade Map, BMI
Prepared Food
Over recent years, the packaged food industry has benefited from rising disposable incomes and consumers' increasingly busy
lifestyles, which have led to excellent sales growth for higher-margin convenience food products. Growth has been strongest in the
bakery, dairy, ready-made meals and chilled processed food sectors.
The growing consolidation and intense competition in the mass grocery retail (MGR )sector, together with the growing popularity of
private label products, have led to increased pressure on suppliers. Suppliers face a particular challenge from the ever-increasing
bargaining power of the UK's leading MGR chains.
New product developments are heavily influenced by lifestyle trends, with the health and wellness trend being encouraged by
increased media publicity and government concerns about rising health costs and obesity levels. Product labelling and ingredients
have significantly increased in importance as a result, while manufacturer efforts have, over recent years, focused on improving the
health profile of their products, such as moves to reduce the levels of sugar, salt and fat in foods.
Following the horse meat scandal, British consumers have become more aware of food quality issues. As health consciousness rises,
healthy food consumption will grow.
The dynamic nature of the UK food market and the presence of a large, wealthy, discerning and innovation-hungry consumer base
make it incredibly attractive to added-value food and drink manufacturers. Initially, this attraction led to the rapid growth of premium
food and drink industries. In more recent years, however, it has led to the development of large added-value industries, such as
organic, fair trade and locally produced food products.
Plant-Based Foods
The plant-based foods market has seen significant growth in recent years, driven by increasing consumer interest in healthier and
more sustainable diets. Demand for meat-free alternatives such as plant-based burgers, sausages and milk has risen as a result of
health and environmental concerns. This has led to the introduction of a wide range of plant-based products in supermarkets and
restaurants. In addition, new entrants into the market and investment from major food companies have helped to boost the
popularity and availability of these products. The UK is now considered to be one of the largest and most mature plant-based food
markets in Europe, and this trend is expected to continue as consumers become more conscious of their food choices.
The proportion of UK consumers' food budget spent on meat and poultry is declining. Rising interest in veganism, flexitarianism and
vegetarianism, combined with a broader healthification trend, is driving consumers to cut back on the amount they spend on
animal products, especially red meat. This dietary shift will be fuelled by the weak economic outlook in the UK as inflation squeezes
disposable incomes, leading consumers to prioritise spending on food staples rather than higher-value products such as beef.
Research on behalf of Quorn Foods, reported in January 2021, revealed that as many as 17% of British adults eat meat with every
meal. 54% of the 3,000 respondents to the study admitted that meat featured in 'almost every meal' and that just 20% were actively
trying to incorporate plant-based dishes into their diet. The report suggests that there is the potential for strong growth in the
vegetarian/vegan foods segment, as 60% stated that they want to reduce their consumption of meat. Barriers to reducing meat
consumption were stated as: could never resist the taste of meat (34%); would miss the flavour/juiciness of meat (17%); too difficult
to avoid meat (14%); living with/being involved with a committed meat-eater (7%).
The UK plant-based foods market is highly competitive and features a mix of established food companies, start-ups and alternative
protein companies. Some of the main players include Beyond Meat, Quorn Foods, The Meatless Farm Co., Oatly, Alpro, and
Fry Family Foods. These companies offer a wide range of plant-based products, including meat alternatives, dairy alternatives and
snacks. Major food companies, such as Nestle and Unilever, have also entered the market with their own plant-based ranges,
reflecting the growing consumer demand for these products. In addition, retailers such as Tesco, Sainsbury's and Waitrose have
launched their own private label plant-based ranges, further increasing the availability and accessibility of these products.
Dairy
The UK boasts a very large dairy industry, with products being a staple in the British diet. The market is dominated by a few large
producers, such as Arla Foods, Müller and Dairy Crest. The UK is also a major importer of dairy products, with a significant
amount coming from markets such as Ireland, the Netherlands and Germany. In recent years, the dairy market has faced challenges
such as declining sales of traditional dairy products, increased competition from plant-based alternatives and changing consumer
preferences towards healthier and more sustainable options. However, the market has also seen growth in niche areas such as
specialty cheeses and premium dairy products, as consumers seek out unique and high-quality products. The dairy market is
expected to continue to evolve in response to consumer trends and demands.
Fish And Seafood
The UK has a rich tradition of fishing and seafood production. The market is diverse, with a range of products including fresh fish,
frozen fish, shellfish, and processed seafood products. The UK is a major importer of fish and seafood, with a significant amount
coming from markets such as Norway, Iceland and Mainland China. The country's fish and seafood market is influenced by a variety
of factors, including consumer trends, seasonal availability and sustainability concerns. In recent years, there has been a growing
trend towards premium and sustainably sourced fish and seafood, driven by consumer concerns about environmental and social
issues. The market is also being shaped by changing consumer preferences, with a growing demand for high-quality and
convenient seafood products. Despite some challenges, such as declining fish stocks and Brexit-related uncertainty, the UK fish and
seafood market will continue to grow in the coming years.
Chocolate And Confectionery
The chocolate market is large and well established, with a variety of domestic and international players vying for market share. Major
players in the UK chocolate market include Cadbury, Nestle and Mars, which offer a wide range of products from classic chocolate
bars to luxury chocolate gifts. In recent years, there has been a shift towards premium and artisanal chocolate, as consumers seek
out more unique and high-quality products. In addition, there has been a growing demand for sustainably sourced and
ethically produced chocolate, driven by consumer concerns about environmental and social issues. The market is influenced by
seasonal events such as Christmas, Easter and Valentine's Day, when sales of chocolate gifts and treats typically increase.
As with the chocolate market, the UK boasts an attractive confectionery market, offering a range of sweet treats and snacks. Major
players include Cadbury, Nestle, Mars and Haribo, which offer a range of products including sweets, gummies and candy. The
confectionery market is influenced by a variety of factors, including seasonal events such as Halloween, Christmas and Easter, when
sales of sweets and treats typically rise. There has also been a growing trend towards premium and healthier confectionery
products. Legislation has had a significant impact on the UK confectionery market. In recent years, there have been a number of
initiatives aimed at reducing sugar consumption and improving public health, such as the sugar tax, which was introduced in 2018.
This tax has increased the price of sugary drinks and has led to reformulations of some products, with companies looking to reduce
the sugar content of their confectionery products. Additionally, new labelling regulations and marketing restrictions have been
introduced, aimed at reducing the exposure of children to unhealthy foods and promoting healthier food choices. These regulations
have affected the marketing and advertising of confectionery products and have put pressure on companies to reformulate their
products and offer healthier options.
Drink
The UK's drinks market is highly competitive and features strong global players. In line with the developed market, sales are driven
by premium varieties, healthier alternatives and new, innovative products.
Recent Developments
• From August 1 2023, the UK government increased the duty rates under the revised duty structure for alcohol
products produced in, or imported into, the UK. The tax will now also be levied according to a drink's strength. The duty will
increase overall, with most wines and spirits seeing rises, but will drop for lower-alcohol drinks and most sparkling wine.
• In August 2023, Amber Beverage UK (ABUK) integrated with Indie Brands to create a combined business. The new company
will release a consolidated portfolio that will include ABUK brands such as Kah Tequila, Luxardo liqueurs, Familia Martínez
Zabala wines and the Stoli range, together with Don Papa, Arran Scotch whisky and Fortaleza from the Indie Brands
portfolio. Amber Beverage Group acquired a majority stake in Indie Brands in 2020.
• With the rise of popularity around the Prime energy drink, there have been calls for energy drinks to prominently display
caffeine content warnings on the front of the cans.
• In June 2023, Carlsberg Marston’s Brewing Company announced that it would sell its Ringwood Brewery in southern
England. The brewer also plans to close its logistics operations at Ringwood, relocating delivery services to nearby depots at
Tiverton, Farnborough and Cardiff.
Non-Alcoholic Drinks
Coffee & Tea
The coffee market in the UK is growing rapidly, with a significant portion of sales being made through the supermarket channel. In
the UK, supermarkets offer a wide range of coffee products, from basic instant coffee to specialty ground coffee, and increasingly,
specialty coffee beverages such as espresso-based drinks. Supermarkets in the UK have invested heavily in the coffee market,
offering their customers a range of products from well-known and trusted brands, as well as their own private label brands. This has
helped to increase the availability and quality of coffee products in the supermarket channel, and has made it easier for consumers
to purchase high-quality coffee at competitive prices. There has been a growing trend towards sustainability and ethical sourcing in
the UK coffee market, and supermarkets have responded by offering products that are produced in an environmentally friendly and
responsible way. This has helped to increase consumer confidence in the products available through the supermarket channel, and
has also helped to differentiate supermarket offerings from those of competitors.
The tea market is a mature and highly competitive industry, with a long history of tea consumption in the country. It is a staple drink,
with the majority of the population drinking tea on a daily basis. This has helped to make the tea market in the UK one of the largest
in the world, with a wide range of products. The market is dominated by a few well-known brands, such as Twinings, PG Tips and
Tetley, which have significant market share and customer loyalty. These brands offer a range of products, from basic tea bags to
specialty tea blends, and are available through a variety of channels, including supermarkets, specialty stores and online retailers.
In addition to traditional tea products, there has also been a growing trend towards health and wellness in the UK tea market, with
many consumers seeking out teas that promise specific health benefits, such as increased energy, improved sleep and reduced
stress. This has led to an increase in the number of teas that are marketed as being healthy and natural, and has helped to drive
growth in the market. There has also been a growing trend towards specialty teas in the UK, such as green teas, herbal teas and fruit
teas. This has helped to drive growth in the tea market, and has led to an increase in the number of specialty tea shops and cafes in
the country.
Soft Drinks
The carbonated drinks market is dominated by a few well-known brands, such as Coca-Cola, PepsiCo and Britvic, which have
significant market share and established customer loyalty. These brands offer a range of products, from traditional soft drinks to
specialty carbonated drinks, and are available through a variety of channels, including supermarkets, convenience stores and online
retailers. In addition to traditional carbonated drinks, there has also been a growing trend towards functional and energy drinks, with
many consumers seeking out products that offer specific health benefits, such as increased energy, improved mental clarity and
enhanced physical performance. This has led to an increase in the number of functional and energy drinks available in the market,
and has helped to drive growth in the industry. Consumers are also seeking out products that are lower in sugar and calories. This
has led to an increase in the number of low-sugar and no-sugar carbonated drinks available in the market, and has also helped to
drive growth in the market for sparkling water and other non-sweetened carbonated drinks.
The bottled water market is dominated by a few well-known brands, such as Evian, Volvic and San Pellegrino, which have
significant market share and customer loyalty. These brands offer a range of products, from still bottled water to flavored and
sparkling bottled waters. There has been a growing trend towards health and wellness in the UK bottled water market, with many
consumers seeking out products that are natural, pure and free from additives. This has led to an increase in the number of
premium bottled water brands available. There has also been a growing trend towards sustainability and environmental
responsibility, with many consumers seeking out products that are packaged in environmentally friendly materials and have a low
carbon footprint.
Alcoholic Drinks
August 2023 Duty Increase
From August 01 2023, the UK government increased the duty rates under the revised duty structure for alcohol products produced
in, or imported into, the UK. The tax will now also be levied according to a drink's strength. The duty will increase overall, with most
wines and spirits seeing rises, but will fall on lower-alcohol drinks and most sparkling wine.
Drinks with alcohol by volume (ABV) below 3.5% will be taxed at a lower rate, but tax on drinks with ABV higher than 8.5% will be
taxed at the same rate, whether wine, spirit or beer. As a result, sparkling wine, which was previously taxed at a higher rate than still
wine, will be GBPp19 cheaper, for a standard-strength bottle, if retailers pass on the tax changes by lowering prices. A can of pre-
mixed gin and tonic would be GBPp05 cheaper. Tax on a typical bottle of still wine with ABV of 12% will go up by GBPp44, but on
wine with 15% ABV, tax will rise by GBPp98. Tax on draught beer in pubs will be up to GBPp11 lower than tax on supermarket beer as
a result of the changes.
The overhaul of alcohol excise is being introduced in two stages, with a second adjustment coming in February 2025, which will
apply a full sliding scale of tax levels according to alcohol content.
Beer
In the UK off-trade beer market, there are a number of well-established brands, including Heineken, Carlsberg, and AB InBev,
which have significant market share and established customer loyalty. These brands offer a wide range of products, including lagers,
ales, stouts and pilsners, and are available through a variety of retail channels, such as supermarkets, convenience stores and online
retailers. There has also been strong growth in craft beer and specialty beers. Craft beer has become increasingly popular among UK
consumers, with many seeking out unique, high-quality and flavourful beer options that offer a different experience from traditional,
mass-produced beers. This has led to an increase in the number of craft beer brands.
There has also been a growing trend towards healthier and lower-alcohol beer options in the UK off-trade beer market. These
products are designed to offer a similar taste and experience to traditional beer, but with lower levels of alcohol and reduced calorie
content. Low-alcohol beers typically contain less than 2.8% ABV, while alcohol-free beers contain less than 0.5% ABV. These
products are often made using a similar brewing process to traditional beer, but with the alcohol content reduced or removed
through various methods. This trend has been driven by a number of factors, including health and wellness awareness, increased
concerns about responsible drinking and a desire for more convenient and accessible options for social and special occasions.
Wine
The UK wine market is mature and competitive, driven by demand from both domestic consumers and tourists. The country has a
strong culture of wine drinking and a high level of appreciation for wine, with consumers showing a willingness to pay premium
prices for high-quality wines. The wine market is dominated by a few major players, including multinational corporations and local
importers and distributors.
Red Wine Remains Dominant, Prosecco Biggest Winner

UK - Wine Imports, % Of Quantity Imported (2013-2022)
Source: Trade Map, BMI
The UK is the largest importer of wine in Europe and the fourth largest in the world. France is the largest import market, by value,
accounting for 36.4% of all wine imports in 2022 (latest available data). This is followed by Italy and Spain, accounting for a further
21.9% and 8.1% of imported wine over the year. Red wine is most popular, having accounted for between 45% and 50% of all wine
imported over the past 10 years. However, red wine and champagne have slowly been losing their share of imports to prosecco,
which grew from 0% of imports in 2016 to 8.7% by 2022. Prosecco has risen in popularity mainly as a result of its affordability,
especially when compared with other sparkling wines. The drink has also been heavily marketed in recent years, with many brands
and companies promoting its popularity and appeal.
Within the wine segment, we note the growth of natural and organic wines, which typically come at a higher price point and thus
attract more spending. These wines have seen growing interest by consumers as part of a heathification trend, as the wines are
made without the use of chemicals or preservatives. Natural wines are made with minimal intervention, using grapes that are grown
without the use of chemicals or pesticides, and fermented with wild yeast. These wines are often seen as a more authentic and
honest expression of the grape and the terroir in which it is grown. Organic wines, however, are made from grapes grown in
vineyards that are certified as organic, meaning they are grown without the use of synthetic fertilisers, pesticides or herbicides. The
goal of organic wine production is to reduce the environmental impact of wine production and promote the health of both the
vineyard and consumers. Both natural and organic wines have gained popularity in recent years as consumers become more aware
of the impact of their choices on the environment and their health. Many consumers are seeking out these wines as a way to make
a more conscious and responsible choice when it comes to their wine consumption. Demand for natural and organic wines is
expected to continue growing in the UK and around the world as consumers become more interested in the origin and quality of
their wine.
Spirits
The most popular spirits in the UK are whisky, gin and vodka, with each category having a range of sub-segments that cater to
different consumer tastes and preferences. Whisky continues to be a staple of the spirits market, with a long history of production
and a strong cultural heritage. The gin category has experienced significant growth in recent years, with a proliferation of new and
innovative brands entering the market. Vodka remains a popular choice for consumers, but its popularity has been challenged by
the growth of other categories such as gin and rum.
The spirits market in the UK is dominated by several large multinational companies. Diageo, one of the largest producers of spirits
in the world, is a leading player with a portfolio that includes popular brands such as Johnnie Walker whisky, Smirnoff vodka and
Baileys liqueur. Pernod Ricard, another leading player in the global spirits market, is also a major player in the UK, with a portfolio
that includes brands such as Absolut vodka, Malibu rum and Chivas Regal whisky. Bacardi, one of the largest producers of rum in
the world, is also a significant player, with a portfolio that includes Bacardi rum, Martini vermouth and Grey Goose vodka. William
Grant & Sons, a leading independent producer of spirits, is known for its portfolio of premium brands such as Glenfiddich whisky,
Hendricks gin and Tullamore D.E.W. Irish whiskey. Edrington is another independent producer of premium spirits, with a portfolio
that includes brands such as The Macallan whisky, Cutty Sark blended Scotch whisky and Brugal rum.
The spirits market has seen a shift towards premiumisation over the past few years, with consumers willing to pay more for high-
quality, unique and sustainable products. The gin category, in particular, has experienced significant growth, driving growth in the
number of craft and small-batch gin distilleries in the country. There has also been a trend towards alternative spirits, such as
flavoured vodka and tequila, as well as the rise of low and no-alcohol options. Another trend is the increasing popularity of cocktails
and the demand for premium mixers, syrups and bitters.
Mass Grocery Retail

The supermarket sector in the UK is highly competitive and well established, with a number of large and well-known grocery
retailers operating in the market. These retailers offer a range of food and household items, as well as clothing and non-food
products, and have a broad network of stores across the country. The supermarket sector is dominated by a few large players,
including Tesco, Sainsbury's and Asda. However, there is also a growing presence of discount retailers, such as Aldi and Lidl,
which have been able to gain a significant market share by offering low prices and a limited range of products.
The supermarket sector has undergone significant changes in recent years, with a growing emphasis on online and mobile
shopping, as well as food-to-go offerings. This has led to increased competition in the market, as retailers look to improve the
convenience and quality of their offerings to meet the evolving needs of consumers.
Recent Developments
• In August 2023, Asda added 47 new items to its food-to-go range, investing GBP1.2mn in quality improvement, including an
update to modernise packaging.
• In July 2023, Iceland Foods invested GBP26mn in reducing prices of about 500 items, as well as shifting a third of its entire
range into its 'mix and match' multibuy offering.
• In July 2023, Morrisons announced a partnership with a pod recycling service to introduce recycling points for coffee machine
pods. The move is being trialled in 29 stores.
• In July 2023, Waitrose & Partners partnered with Uber Eats to offer a grocery delivery service. The service will launch from five
locations across London before being rolled out to more than 200 locations across the UK by the end of Q323.
• In June 2023, Marks & Spencer announced it will reduce food waste by replacing 'use by' dates with 'best before' dates
across RSPCA Assured Select Farms British and organic fresh milk.
Major Players
Tesco is the leader in the UK's mass grocery retailer (MGR) market, generating GBP61.bn in revenues, across 2,800 stores across the
UK. The retailer covers several formats, including supermarkets, convenience stores, hypermarkets and neighbourhood
stores. Tesco Superstores are standard large supermarkets, stocking groceries and a much smaller range of non-food goods than
Extra hypermarkets. The shops have always been branded as 'Tesco'. Tesco Extra shops are larger, mainly out-of-
town hypermarkets that stock nearly all Tesco's product ranges, although some are in the heart of town centres and inner-city
locations. Tesco Express shops are neighbourhood convenience shops averaging 200sq metres, stocking mainly food with an
emphasis on higher-margin products such as sweets, crisps, chocolate, biscuits, fizzy drinks and processed food (due to small shop
size, and the necessity to maximise revenue per square foot) alongside everyday essentials. They are located in busy city-centre
districts, small shopping precincts in residential areas, small towns and villages, and on Esso petrol station forecourts.
Sainsbury's is the second largest chain of supermarkets in the UK, operating a similar amount of formats as Tesco. The holding
company is split into three divisions: Sainsbury's Supermarkets (including convenience shops), Sainsbury's Bank and Argos. Shops in
the 'supermarket' category all have similar layouts and operations but may vary in their offering to the customer. Most will have a
convenience kiosk, produce, meat, fish, groceries and frozen food, plus staffed and self-service checkouts. However depending on
the size of the shop, they may also have an in-shop bakery, pizza counter, a cafe or Fresh Kitchen, Tu clothing and offer general
merchandise. Some stores have an on-site Argos and/or Habitat and a petrol station, along with an online picking department.
Sainsbury's operates an internet shopping service branded as 'Sainsbury's Online'. To use this service, customers choose their
groceries online or by phone.
Asda owns and operates a chain of supermarkets that sell various products such as groceries, food products and drinks, clothing,
health and beauty products, household goods, electrical products, electronics, music and video products, toys, and baby products.
In addition, Asda sells products online. Besides its core supermarkets, the company also offers a number of other services, including
financial services and mobile phone services.
Morrisons is the final player making up the traditional MGR offering in the UK. Morrisons operates a number of larger
supermarkets, convenience stores and outlets at petrol stations.
At the upper end of the retail market, Waitrose and M&S targets wealthier households. Waitrose branches are largely concentrated
in the south-east of England and Greater London. Some Waitrose shops incorporate an in-house restaurant selling hot and cold
food, sourced in the main from the shop. In the MGR space, M&S runs its Foodhall fascia, which historically were all under the Marks
& Spencer brand. However, in 2006 the company began selling a limited range of other brands, such as Coca-Cola and Stella Artois,
without reducing the number of M&S goods that it sold.
Lidl and Aldi are relatively new entrants, entering the market in 1994 and 1900 respectively. However, both retailers have been very
aggressive in the past few years, rapidly opening stores and gaining significant market share through their discount offerings.
Other grocery retailers with a significant number of outlets throughout the UK include the grocery chains Spar and Costcutter, as
well as the Londis and Budgens convenience fascias, which were acquired in May 2015 by UK cash-and-carry operator Booker
Group from Ireland's Musgrave Group. In March 2018, Tesco completed its acquisition of Booker Group for GBP3.9bn.
MAJOR PLAYERS IN THE UK'S MGR MARKET

Company Total Revenue (Fiscal Year) Number Of Stores Approximate Approximate
Sales Per Sales Per
Store, Store,
Previous Current
(GBPmn) (GBPmn)
Tesco GBP65.8bn (2023) 2,834 21.9 23.2
Sainsbury's GBP31.5bn (2023) 1,407 21.3 22.4
Asda GBP20.5bn (2022) 633 37.2 32.4
Morrisons GBP18.4bn (2022) 1049 17.5 17.5
Aldi GBP13.7bn (2021) 993 14.3 13.8
Co-op GBP11.5bn (2022) 3,887 2.8 3.0
Waitrose GBP7.0bn (2022) 360 21.1 19.4
Lidl GBP7.7bn (2021) 967 8.3 8.0
Marks & Spencers Food Stores GBP6.6bn (2022) 316 20.9 20.9
Source: News reports, BMI
The defining trend surrounding the UK MGR sector is that the big four supermarkets have been facing declining market shares and
stagnant sales; however, premium food retailers such as Waitrose and M&S, and discounters such as Aldi and Lidl, have been
experiencing positive growth. We maintain our view that the two German discounters will continue to put pressure on the UK's big
four legacy retailers over the coming years.
Legacy retailers have adopted a defensive strategy over the last decade, cutting costs and disposing of overseas/non-core assets in
response to fierce competition from discounters, which continue to steal market share. Other measures taken to arrest the pace at
which the discounters have been taking market share include lowering prices, simplifying promotion systems and improving in-
store services. In our view, while the simplification of pricing systems has been essential, we now believe that a good strategy for
legacy retailers will be to differentiate their services, rather than trying to compete directly with discounters (for example, focusing
investment on improving the online and in-store experience, and expanding wholesale).
Cutting Down Costs
Amid tight competition in the country, retailers have been embarking on strategies to lure consumers by lowering market prices. To
enable this, retailers have been looking at cutting unproductive or unprofitable elements of their business. Some examples of this
include removing the pharmacy sections in stores, closing down delis and other counters, or doing restocking on day shifts instead
of night shifts, which are more expensive for an employer.
Cost Of Living Crisis
Since the beginning of 2022, food price inflation in the UK has been on an upward trajectory, forecast to average 13.7% y-o-y over
2023. The latest recording at the time of writing placed food price inflation at 19.1% y-o-y in March 2023. Combined with the cost of
utilities, higher food prices have put significant pressure on households in the UK, forcing many to reprioritise household spending
towards essentials. Within the food segment, many consumers are increasingly moving down price points, or switching to cheaper
supermarkets. The mass discounters, such as Lidl and Aldi, have been the main beneficiary of this. MGR players have responded in a
'race to the bottom', with both Tesco and Sainsbury's price-matching Aldi across a number of products. In October 2022, Tesco
announced that it would lock the price of several everyday products until 2023. In July 2022, Amazon Fresh announced it would
launch a price match with Tesco, in an attempt to drive customer numbers. In April 2023, Marks & Spencer reported that it was
extending its price lock campaign until the end of Q423 at least. These strategies will put downward pressure on profit margins,
which are already being impacted by higher raw material costs.
Discounters Continue To Gain Share
Discounters have been reaping the benefits of economic uncertainty surrounding Brexit and the cost of living crisis, with consumers
continuing to trade down to retailers such as Aldi and Lidl. Both retailers enjoyed record UK sales over the past few years. This has
come at the expense of the UK's big four retailers, which have been forced to cut prices to stay competitive. Aldi and Lidl have been
particularly successful in expanding their number of smaller store formats, as well as improving the perception of their product
quality to the point where consumers generally do not see a big difference between them and the 'big four' supermarkets and are
therefore happier to save by shopping at discounters.
Private Label Expansion
That said, consumers are still reliant on the big four supermarket chains for the majority of their shopping, with the expansion of
private label products at the likes of Tesco and Morrisons proving a hit in recent years. Private label goods are margin positive for
retailers and can add about 20%-30% more on a percentage basis compared with branded items. Perceptions of private label goods
have improved since the 2009 recession, as retailers have invested in improving the quality of ingredients and package labelling.
Households will cut back spending on restaurants and pubs as they seek to save money by eating at home. These trends will ensure
that the big four retailers remain resilient during our five-year forecast period, even as household spending conditions come under
pressure.
Competitive Landscape
KEY PLAYERS IN THE UK FOOD SECTOR
Company Ownership Sub-Sector
2 Sisters Food Parent company: Boparan Holdings Chilled, frozen and baked goods
Arla Foods UK Parent company: Arla Foods Dairy
Associated British Foods Public company: London Stock Exchange; Sugar and baked goods
Majority shareholder: Wittington
Investments (54.5%)
Cadbury Parent company: Mondelēz International Confectionery
Saputo Dairy UK Parent company: Saputo Dairy
Froneri Nestlé and Pai Partners Ice cream
Kraft Heinz UK Parent company: The Kraft Heinz Company Canned soup, canned vegetables,
condiments, baby food
Mars UK Parent company: Mars International Confectionery, ice cream, pasta, rice and
sauces
Nestlé UK Parent company: Nestlé Dairy, prepared food, confectionery
PepsiCo UK Parent company: PepsiCo Snack food, crisps
Premier Foods Public company: London Stock Exchange Condiments, baked goods, desserts and
other
Robert Wiseman Parent company: Müller Dairy
Tate & Lyle Public company: London Stock Exchange Sugar
Unilever Public company: Euronext Amsterdam and Condiments, frozen foods and other
London Stock Exchange
United Biscuits Parent company: Pladis (Yildiz Holdings) Biscuits, crisps, snacks
Source: BMI
KEY PLAYERS IN THE UK DRINK SECTOR

Company Ownership Sub-Sector
AG Barr Public company: London Stock Exchange Soft drinks
Britvic Public company: London Stock Exchange Soft drinks
Carlsberg Public company: Nordics Stock Exchange Beer
Coca-Cola Great Britain Parent company: Coca-Cola Enterprises Soft drinks
Coors Brewers Parent company: Molson Coors Beer
Diageo Public company: London Stock Exchange Wines and spirits
Asahi Public company: Tokyo Stock Exchange Beer
Greene King Parent company: CK Asset Holdings Beer
AB InBev Public company: Euronext Brussels Beer
Kraft Foods Parent company: The Kraft Heinz Company Coffee
Marston's Public company: London Stock Exchange Beer
Mitchells & Butlers Public company: London Stock Exchange Beer
Nestlé UK Parent company: Nestlé Coffee, bottled water
Pernod Ricard Public company: Euronext Paris Wines and spirits
Heineken Public company: Euronext Amsterdam Beer
Tetley Parent company: Tata Consumer Products Tea
The Edrington Group Private company Spirits
Unilever Public company: Euronext Amsterdam and London Stock Coffee, tea
Exchange
Wells and Young's Parent company: Charles Wells Beer
Whyte & Mackay Parent company: Emperador Spirits
William Grant & Sons Parent company: William Grant & Sons Holdings Spirits
Source: BMI
KEY PLAYERS IN THE UK MASS GROCERY RETAIL SECTOR

Parent Company Headquarters Fascia Format
Tesco UK
Tesco Supermarkets
Tesco Express Convenience stores
Tesco Extra Hypermarkets
Tesco Metro Neighbourhood stores
One Stop Convenience stores
Asda Group (EG Group) US
Asda Supermarkets
Asda Walmart Supercentre Hypermarkets
Asda On The Move Convenience stores
J. Sainsbury UK
Sainsbury's Supermarkets
Sainsbury's Local Convenience stores
SmartShop Pick & Go Convenience stores
Wm. Morrison Supermarkets UK
Morrisons Supermarkets
Marks & Spencer Group UK
Simply Foods Supermarkets
Simply Foods Franchise Convenience stores
John Lewis & Partners UK
Waitrose Supermarkets
The Co-operative Group UK
Co-op Supermarkets
Co-op Convenience stores
Spar Netherlands
Spar Supermarkets
Iceland UK
Iceland Supermarkets
Lidl Germany
Lidl Discount stores
Aldi Germany
Aldi Discount stores
Costcutter UK
Costcutter Convenience stores

Parent Company Headquarters Fascia Format
myCostcutter Supermarkets
Farmfoods UK
Farmfoods Supermarkets
Source: BMI
Company Profile
Sainsbury's
• It is one of the UK's largest mass grocery retailers in value sales • Sainsbury's has a much smaller network of retail outlets than
terms. market leader Tesco.
• The company's own label, online and convenience store sales • With growing competition in the retail space and the added risk
are growing. of online retailers, most retailers have lost volumes. To attract
customers, Sainsbury's has been trying to cut costs as well as
keep prices lower than the competition, which is no longer
sustainable.
• Sales at its larger supermarkets and hypermarkets continue to
underperform.
• The retailer's new Aldi price-match campaign should boost • The retailer has reported that post-Covid supply chain
customer perceptions of Sainsbury's value. challenges and labour shortages in the UK are harming its
• A drive towards innovation and new product launches should operations.
reap rewards. • The discount (for example, Aldi and Lidl) and premium formats
• Sainsbury's is experiencing strong demand for online grocery continue to steal market share in the grocery retail sector, and
shopping and its focus on home delivery should enable it to this could eventually have a material impact on the company's
reach new consumers. results.
• The company could look to expand in the north of the UK, • The depreciation of the pound sterling, which is pushing up the
where it is currently underrepresented. price of consumer goods, forces supermarkets to choose
• Sainsbury's could pursue further growth in the convenience between pushing unpopular price increases on to the customer
and online sectors, where the company is currently well placed. or absorbing the cost themselves.
The retailer is rolling out new store formats based on
convenience and food-to-go.
• Significant property assets could be used in 'sale-and-
leaseback' deals to fund expansion.
Company Overview
Sainsbury's is a British multinational retailer, founded in 1869. With headquarters in London, Sainsbury's is one of the largest grocery
retailers in the country, offering a range of food and household items, as well as clothing and non-food products. It operates a range
of retail formats, including large supermarkets, smaller convenience stores, and an online business. The company places a strong
emphasis on quality and customer service, and has invested heavily in initiatives to improve both.
Sainsbury's operates a number of distribution centres and has a strong supply chain, ensuring that products are efficiently and
effectively distributed to stores. The company has a growing presence in the food-to-go market, offering customers a range of
convenient, ready-to-eat meals and snacks.
Strategy
Sainsbury's was founded in London in 1869, with its supermarket operations weighted towards London and south-east England. In
the past, this has been to the firm's detriment in some respects, as its urban and suburban stores have been more difficult to
expand, leaving the firm with smaller outlets than its rivals Tesco and Asda. However, an increasing trend towards smaller stores and
convenience stores has put it in a strong position, while the value of its property portfolio has appreciated rapidly in line with the
advance of the property market over recent years. The firm had a market capitalisation of GBP5.6bn as of July 2019, but estimates
have suggested that its property portfolio alone could be worth up to GBP10bn.
On April 25 2019, the UK Competition and Markets Authority (CMA) blocked the proposed merger between Sainsbury's and
Walmart-owned Asda, two of the UK's 'Big Four' grocery chains. The merger between Sainsbury's and Asda would have created the
UK's largest grocery chain, surpassing Tesco, with more than 2,800 stores and combined revenues of GBP51.0bn. Increased
bargaining power was the main motivation for joining forces, putting both chains in a stronger position to deal with the threat posed
by discounters and online players such as Amazon. The enlarged business was expected to deliver cost synergies of GBP500mn,
and implement price cuts worth up to GBP1.0bn annually through to 2021.
The CMA's decision to block the deal is a major setback for both retailers but particularly Sainsbury's, which was funding the deal, as
it raises uncertainty around the company's long-term strategy amid mounting costs and competitive pressures in the UK grocery
market. The retailer is positioned in the squeezed middle ground, losing market share to discounters Aldi and Lidl, while
simultaneously struggling to compete at the premium end of the market. Signalling investor concerns, shares at Sainsbury's fell 6%
in response to the CMA's verdict, dropping to their lowest level in 16 years.
For Sainsbury's, the challenge will be to produce a new commercial strategy as a stand-alone company. Price cuts and investments
aimed at reinvigorating its stores (for example, expanding non-food offerings and online services) are urgently needed.
Recent Developments
2023
In July, Sainsbury's expanded its Nectar Prices scheme to include meat, fish and poultry for the first time, making around 3,500
products available on discount as a result of the promotion.
In May, Sainsbury's rebranded its value range to Stamford Street, named after the retailer's previous address in London Blackfriars,
covering 200 products.
In April, Sainsbury's introduced a fully electric delivery fleet for its superstore in Nine Elms, London. The new fleet will make more
than 2,000 deliveries each week on average, saving almost 57 tonnes of carbon each year.
In April, the retailer announced plans to transfer 3,000 logistic roles to three dedicated transport, food and general merchandise
partners by the end of 2024.
In February, Sainsbury announced it was removing traditional plastic tray packaging across its entire beef mince range and replacing
it with a vacuum-packed alternative. The packaging format, which uses a minimum of 55% less plastic, is the latest in a series of
initiatives from the retailer as it works towards its goal of halving its use of plastic packaging in Own Brand products by 2025.
In February, the retailer announced that it was planning to offer a four-day working week to thousands of staff. It allows staff to
choose how they work their hours - they can work four longer days, or use the weekend to complete their work and have more
time off in the week.
In January, Sainsbury's announced that it would lose all of its in-store pharmacies across the UK over 2023 after LloydsPharmacy,
which has 237 pharmacy sites within the supermarket chain, said it has cut the services following a strategic review 'in response to
changing market conditions'.
In January, Sainsbury's and Just Eat partnered for grocery delivery in the UK. Delivery will start with more than 175 Sainsbury’s sites
across the UK by the end of February 2023.
2022
In July, Sainsbury’s announced that it would invest a minimum of GBP5.0mn over the next four years into start-up businesses that
focus on sustainability.
In July, Sainsbury’s invested GBP1.0mn in the UK's retail first incubator programme for Black-led businesses.
In April, Sainsbury's warned that its profits this year will be hit by soaring inflation and a fall in customers' disposable incomes. The
company said its underlying profit before tax in FY2022/23 was expected to be between GBP630mn and GBP690mn, against the
GBP730mn underlying profit it has reported for the year to March 5 2022.
In January, the company released its Q3 trading statement for the 16 weeks to January 8. During the quarter, the retailer launched a
new campaign called Sainsbury’s Quality, Aldi Price Match, and it is now matching Aldi prices on 150 of its highest volume fresh food
products. Sainsbury's also launched more than 600 new products in Q3, of which 300 were new Christmas products. The 100 new
Taste the Difference products in party food, desserts, wines and spirits were very popular; the best selling new products included the
Taste the Difference Belgian Chocolate & Salted Caramel Star, Bucks Fizz Smoked Salmon and Lemongrass Skewer Prawn Pops.
Overall sales of the Taste the Difference brand were up 13% over the Christmas period versus 2019 levels; meat, fish and poultry
sales were up 25%, produce sales 16% and bakery sales 12%. The retailer also sold its biggest ever volume of Taste the Difference
mince pies. The firm also saw record sales of champagne and sparkling wines. Online grocery sales were up 92% on 2019. During
the quarter, Sainsbury's also opened three new supermarkets (in Colwick, Ludlow and Aylesbury) and five convenience stores.
2021
At the end of November, Sainsbury's became the first international, third-party retailer to use Amazon’s 'Just Walk Out' cashierless
technology. Amazon's contactless technology integrates with Sainsbury’s SmartShop mobile app, enabling customers to scan items
as they shop and pay without having to wait in a queue. Sainsbury's new Just Walk Out-powered convenience store format, called
SmartShop Pick & Go, has launched with an outlet in the Holborn Circus district of London. To enter the store, customers scan a QR
code via the SmartShop app, which is linked to a credit or debit card. Just Walk Out technology automatically adds items that
customers take off shelves to their virtual cart in the app and removes anything they put back. Shoppers exit the store by scanning
the QR code at the automatic gates, and their linked card is then charged for the items selected. Just Walk Out uses overhead
computer-vision cameras, weight sensors and deep-learning technology to detect merchandise that shoppers take from or return
to shelves and track the items selected in a virtual cart.
In November, Sainsbury’s reported that its revenue for the first half of FY2021 (ended September 18 2021) grew 5.3% y-o-y to
GBP15.7bn. The company further reported that its grocery sales grew 0.8% y-o-y and 9.1% compared with the first half of the 2019
financial year.
In September, Sainsbury’s relaunched its same-day online grocery delivery and click-and-collect services across 250 UK stores after
discontinuing them during the pandemic in the face of unprecedented demand. These services were then extended to a further
100 stores by the end of October. The retailer also announced that it was ramping up its one-hour delivery service Chop Chop,
making it available from 25 more stores, bringing the total to 75 stores in about 25 cities. Additionally, through partnerships with
third-party delivery firms such as Deliveroo and Uber Eats, Sainsbury’s will be able to offer 20-minute deliveries from 500 stores by
the end of the month. The company said that its online delivery capacity enabled it to fulfil 850,000 online orders each week.
In August, Sainsbury’s opened a new store at the Brunel Street Works development, next to Canning Town Station. Customers can
purchase groceries, household products and coffee from a self-service Costa coffee machine.
In April, the retailer entered a two-year deal with delivery service Deliveroo that will see the latter deliver groceries from about 100
Sainsbury’s stores.
Sainsbury’s opened six new stores in the 15 weeks to January 2, which included two new Neighbourhood Hub stores (in Bishop’s
Waltham, Hampshire, and Midhurst, West Sussex).
Financial Data
Fiscal year ending March 31
Total Revenue
• 2023: GBP31.5bn
• 2022: GBP29.9bn
• 2021: GBP29.0bn
• 2020: GBP29.0bn
• 2019: GBP29.0bn
Net Profit (Loss)
• 2023: GBP207mn
• 2022: GBP677mn
• 2021: GBP280mn
• 2020: GBP152mn
• 2019: GBP219mn
Tesco
• It is the UK's leading retailer by annual sales and market share, • Given its exposure to the UK, Tesco is finding it increasingly
and one of the largest globally. difficult to pursue growth in its core food retail business. With
• Compared with its rivals, Tesco is geographically well diversified about 75% of its annual sales accounted for by the UK, how
with more than 6,000 stores in 12 markets globally, including Tesco performs domestically largely determines its top- and
operations in Central and Eastern Europe. bottom-line trajectory.
• Tesco makes optimal use of technology to enhance the • Although Tesco is the price leader in the UK market, its low-cost
shopping experience of its customers. strategy can lead to reduced profit margins.
• With a simplified business model, reduced costs and efficient
waste management policies, Tesco has created a reliable and
efficient supply chain network. Tesco has profitable
relationships with suppliers.
• The shuttering of the Jack's discount fascia marks a pivot away • Increasing scrutiny of Tesco's practices with suppliers could
from cost-cutting to compete with discount rivals, and a limit its ability to bargain aggressively on suppliers' prices.
refocus on convenience and differentiated offerings, which we • The rise in the popularity of budget supermarkets, such as Aldi
believe is a much more sustainable strategy. and Lidl, and the subsequent price war in UK retail will continue
• The company's focus on grocery delivery, as marked by the to affect Tesco.
2021 launch of its Whoosh service and the tie-up with Gorillas, • Government regulations, legal and tax matters, credit
should prove profitable amid growing demand. crunches and economic upheavals can affect the operational
• Convenience stores in the UK are a fast-growth area, which efficiency and performance of Tesco stores in critical regions.
Tesco can continue to take advantage of. • The depreciation of the pound sterling, which is pushing up the
• The acquisition of wholesaler Booker has strengthened Tesco's price of consumer goods, forces supermarkets to choose
bargaining power with suppliers, while helping the company to between pushing unpopular price increases on to the customer
expand into 'out-of-home' food supply. or absorbing the cost themselves.
• Prominent shareholders of Tesco have criticised the Booker
acquisition as a distraction from the more important
turnaround strategy.
Company Overview
Tesco is a British multinational grocery and general merchandise retailer, founded in 1919. With headquarters in Welwyn Garden
City, UK, Tesco is the largest grocery retailer in the country, with a significant market share and a broad network of stores. In the UK,
Tesco operates a range of retail formats, including large supermarkets, smaller Express stores, and a growing online business. The
company offers a wide range of food and household items, including own-brand products, fresh produce, and a growing range of
clothing and non-food items.
In the UK, Tesco operates a number of distribution centers and has a strong supply chain, ensuring that products are efficiently and
effectively distributed to stores. The company also has a significant presence in the food-to-go market, offering customers a range
of convenient, ready-to-eat meals and snacks.
Strategy
The Tesco business strategy believes in expanding into a combination of acquisitions of new stores, retail services and adapting to
the needs of consumers.
Tesco has six strategic drivers:
1. A differentiated brand;
2. Reduced operating costs by GBP1.5bn;
3. Generate GBP9.0bn cash from operations;
4. Maximise the mix to achieve a 3.5-4.0% margin;
5. Maximise value from property; and
6. Innovation.
Recent Developments
2023
In August, the retailer rolled out signs directing consumers to its' reduced price products across about 300 stores. The discounted
range features products, including fresh produce, nearing their expiry date and end-of-season items.
Tesco reported that it removed more than 2.0bn pieces of plastic from its UK business over the last four years, with 500mn pieces of
unnecessary plastic removed in the last year alone.
In March, Tesco announced that it was cutting the value of its Clubcard rewards scheme. From June 2023, Clubcard points will be
worth twice their value when customers cash them in, rather than three times as they are now. The scheme enables shoppers to
collect points for money spent at Tesco and exchange them for vouchers which can be used in-store or for restaurant meals and
day trips.
In January, Tesco announced that it would be shutting counters and delis at all stores, as well as shutting a number of in-store
pharmacies across the UK. The grocer will cut 1,750 team manager roles in a bid to run its supermarkets more efficiently after
similar changes were implemented at Tesco’s smaller stores.
In January, Tesco bought the Paperchase brand and intellectual property from administration.
2022
In October, Tesco announced that it would lock the price of several everyday products until 2023.
Also in October, Tesco raised the price of its meal deal by GBPp40, with the meal deal now costing GBP3.90 for those who do not
have a Clubcard, up from GBP3.50. Meanwhile, Clubcard holders will pay GBP3.40 instead of the previous GBP3.0.
In July, Tesco announced that it would offer a click-and-collect membership plan for the first time with two new Delivery Saver
tiers. The three new Delivery Saver options include any-time delivery plan - same day delivery from GBP6.99 a month, a new click-
and-collect plan for GBP2.49 a month, and an off-peak delivery plan from GBP3.99 a month.
In April, Tesco warned of a drop in profits for the financial year as surging inflation piles pressure on the supermarket group and its
customers alike. The company reported retail adjusted operating profit of GBP2.65bn (USD3.45bn) for the year to February 28, up
36% and in line with guidance. It sees profit of between GBP2.4bn and GBP2.6bn for 2022/23.
At the end of January, the company announced that it planned to discontinue its Jack's discount stores and shut meat, fish and deli
counters in 315 Tesco stores amid changes in consumer demand. Seven Jack's outlets will close, while the remaining six will be
converted into Tesco superstores.
Over January ('Veganuary' and 'Dry January'), Tesco saw sales of its plant-based food and drink products, sparkling wine and no- and
low-alcohol beverages soar. Sales of its Wicked Kitchen plant-based range more than doubled during the month. Among the most
popular products in this segment were chilled dairy-alternative milk drinks (with sales up more than 100% y-o-y), vegan pasta and
vegetable soups (up nearly 140%), vegan cooked meat alternatives (up nearly 40%) and vegan chilled desserts (up more than 40%).
Additionally, customers bought 15% more low- or no-alcohol beer, cider, wine and spirits than they did in January 2021. Popular low-
and no-alcohol products were Nozeco Spumante Alcohol Free (with sales up more than 200% y-o-y), Gordon's 0.0% (sales
contributed to more than a third of all no- and low-alcohol spirit sales for the month) and Lucky Saint craft lager (up 100% y-o-y).
The retailer saw record demand for its low- and no-alcohol beers and ciders, with sales up nearly 30% y-o-y. Demand for sparkling
wine jumped more than 40% y-o-y.
2021
In November, Tesco Ireland announced the acquisition of Galway supermarket business Joyce’s. The chain of 10 stores will be
rebranded to Tesco outlets over 2022 if the deal is approved by the Competition and Consumer Protection Commission.
Also in November, Tesco announced that it has changed to an electric home delivery fleet in Glasgow, Scotland. The is part of the
retailer’s efforts to achieve net zero carbon emissions in its operations by 2035. Glasgow is the first city in Scotland where Tesco has
changed to an electric home delivery fleet. Tesco aims for 100% of its home delivery fleet of 5,500 vehicles to be electric by 2028.
In October, Tesco joined forces with German ‘dark store’ group Gorillas to test a first-of-its-kind 10-minute grocery delivery service
from a pilot site at the Thornton Heath store in south London. If successful, the service will then be expanded to four other locations
across the capital in the coming months. A range of more than 2,000 items will be delivered from mini warehouses set up in spare
space within the supermarkets.
In the same month, the retailer opened its first GetGo checkout-free store in central London. Customers visiting the store are able to
shop and pay without having to scan products at a checkout counter. The retailer previously trialled the GetGo concept store in
Welwyn Garden City in 2019, and the Tesco Express Holborn store has been cashless since it opened in 2018.
In May, Tesco launched its own fast-track delivery service, Whoosh, from its convenience stores. The service promises delivery in an
hour and offers a range of 1,700 products. As of January 2022, the service was available from 115 stores, with plans to expand it to at
least 600 by the end of 2022.
In March, Tesco completed the sale of its business in Poland to Salling Group.
Healthy eating trends and increased home cooking during the Covid-19 health crisis saw Tesco report on February 9 that British
consumers were creating the highest demand for fruit and vegetables seen by the company this century. The biggest sales
increases were for Maris Piper potatoes and limes (up 60% y-o-y), aubergines and butternut squash (up 50%), leeks (up 40%) and
red onions (up 30%). Green leaf vegetables including cabbage, broccoli, sprouts and kale were also seeing strong sales growth of
between 10% and 25%. Earlier in the month, Tesco reported that demand for plant-based foods grew by a strong 35% during
‘Veganuary’.
Financial Data
Fiscal year ending February 28
Total Revenue
• 2023: GBP65.8bn
• 2022: GBP61.3bn
• 2021: GBP57.9bn
• 2020: GBP63.9bn
• 2019: GBP57.5bn
Revenue By Business (2022)
• Retail: GBP60.42bn
• Tesco Bank: GBP922mn
Revenue By Region (2022)
• UK & Ireland: GBP56.4bn

• Central Europe: GBP4.1bn
Net Profit
• 2023: GBP745mn
• 2022: GBP1,481mn
• 2021: GBP6,143mn
• 2020: GBP970mn
Asda
• It is one of the UK's largest mass grocery retailers in value sales • The firm has a much smaller network of retail outlets than
terms. Tesco and Sainsbury's.
• Asda benefits from a strong reputation for low prices and value. • The hypermarket format, which Asda is highly exposed to, is
• Its stores are generally large, which has made diversification declining in popularity.
into non-food items relatively straightforward. • Asda has been underperforming in recent years, with revenues
and profitability under pressure.
• The company is significantly expanding its online grocery • Discounters (for example, Aldi and Lidl) are expanding rapidly in
express delivery options, which should see it benefit from the the UK grocery retail sector, and this will continue to threaten
ongoing move towards online shopping. Asda's market share.
• The retailer's move into the convenience sector should prove • The depreciation of the pound sterling, which is pushing up the
profitable. price of consumer goods, forces supermarkets to choose
• Asda's acquisition by Issa Brothers and TDR Capital presents an between pushing unpopular price increases on to the customer
opportunity for fresh thinking and new investment in the brand. or absorbing the cost themselves.
• There are opportunities to expand its non-food offerings
through more standalone stores.
• The company continues to expand its own brand range, with a
focus on the health and sustainability trend.
Company Overview
Asda operates supermarkets under the Asda fascia, hypermarkets under the Asda Supercentre banner and convenience stores
under the Asda On The Move banner. The company also operates stores selling its private label clothes range under the George
banner, and stores selling its other non-food items under the Asda Living banner. In 2021, US-based retailer Walmart sold Asda to
Issa Brothers (the UK-based owners of EG Group).
Strategy
The company lists its three core strategic objectives as the following:
• Strengthening its customer proposition;

• Developing a trusted online offer; and
• Delivering a low-cost operating model.
Recent Developments
2023
In August, Asda invested GBP1.2mn in its food-to-go range, adding 47 new items in the biggest transformation of the range in six
years.
From July, the retailer reduced prices on 226 own-label products by an average of 9%.
In June, Asda rolled out electric delivery fleets at three of its stores. The fleets will supply more than 345,000 households in total and
will save more than 400,000kg of carbon dioxide emissions every year.
The company froze prices on more than 500 branded and own-brand products until the end of August to support customers amid
cost-of-living pressures.
Asda opened its 150th On the Move convenience store in partnership with EG Group with the aim of opening 200 such stores by
the end of the year.
In April, Asda partnered with autonomous vehicle technology start-up Wayve to deliver groceries to customers using self-driving
vehicles. The Park Royal superstore in London will be the first to have grocery orders delivered by self-driving vehicles. The year-long
trial covers a catchment area of 72,000 households in London, making it the largest trial in the UK.
In March, the Competition and Markets Authority ruled that Asda’s takeover of Co-op petrol stations could lead to consumers and
businesses in those areas facing higher prices of lower quality services when shopping or buying fuel.
In January, the retailer reported that it was looking to cut costs across the board, with an overhaul of stores and shift plans. The
retailer has already announced plans to stop restocking frozen aisles in smaller superstores overnight and instead do this during the
day. Asda is also planning to cut its opening times for in-store Post Office branches and to close seven of its in-store pharmacies.
2022
In October, Asda opened its first Express format store, with plans to open 300 of these convenience stores over the next four
years. The stores will stock about 3,000 SKUs and try to get closer to consumers where there are no hypermarket stores
nearby. These proposed Asda Express stores are separate from the 132 convenience store sites Asda is acquiring from Co-op.
In May, the retailer launched its 'Just Essentials by Asda' value range, which comprises 300 products, 50% more than the 'Smart
Price' range it will eventually replace, spanning fresh meat, fish and poultry, bakery, frozen and cupboard staples as well as more than
20 household and toiletry products. Asda will stock the full range in all 581 food stores, as well as online.
In April, Asda said it would spend GBP73mn to cut or freeze prices on 100 products, as Britain’s supermarkets fight to keep
customers amid rising inflation. Increases in oil prices and global supply chain disruption caused by Covid-19 lockdowns and
Russia’s war on Ukraine have fuelled soaring inflation, putting a strain on household finances.
In February, the company confirmed that it would introduce the full Smart Price and Farm Stores value ranges in all 581 of its food
stores and online. The supermarket currently stocks 150 Smart Price and Farm Stores products in 300 stores and will introduce all
200 products in these ranges to all food stores by March 1. The range available online will expand from 87 to the full 200 by the end
of February.
In January, Asda launched a range of new vegan, plant-based products. These include a Beef Style Steak, Chinese Style Duckless
Pancakes, Steak & Gravy Slices, Two Sheese and Onion Bakes, Coleslaw, Chilli Non-Carne, Six Meat Free Sausages and Two Meat Free
Chicken Style Burgers. The plant-based range also expanded into the baked goods segment with the release of Choc Chip Cookies
and Double Choc Chip cookies.
In the same month, Asda became the first UK supermarket to enter into a partnership with Just Eat for on-demand grocery delivery.
The service will initially be available from five stores, with customers able to buy the supermarket’s goods via the Just Eat platform.
2021
In November, Asda became the first UK supermarket to launch a draught beer concept. Customers at the Milton Keynes store can
choose from a menu of 12 regularly changing brews, including low- and no-alcohol varieties. The selected beer is poured into a
refillable 1L or 2L glass container to be drunk at home. The retailer will focus on offering unusual beers from smaller and local
breweries that are not easily available from other retailers or pubs. or smaller can and bottle formats. The concept will be rolled out
to more stores in 2022, with an expanded range of brews available, if it proves popular.
In October, Asda opened the UK’s largest refill store in York. The store stocks more than 100 branded and own-brand products sold
in loose and unpackaged format in an 18-bay refill zone, all sold at the same price or cheaper than packaged equivalents.
Customers can use their own containers to buy unpackaged products or buy a reusable container in store. The York refill store is the
third opened by Asda, following the launch of its flagship store in Leeds in October 2020 and the September 2021 opening in
Toryglen, Glasgow. A fourth refill store will open in Milton Keynes by the end of the year.
In the same month, Asda announced that it was rolling out its one-hour express delivery service across 96 stores after a successful
trial.
In September, Asda announced plans to significantly expand in the convenience market by partnering with EG Group to launch 28
new Asda On The Move convenience stores on EG Group forecourt sites across the UK by the end of the year and up to 200 in
2022. Asda will supply the products on a wholesale agreement to EG Group, which will own and operate each site. Each site will
stock up to 2,500 products, including a more extensive range of fresh produce and chilled lines than is traditionally found in fuel
forecourts. They will also include food service offerings from EG Group and partner brands such as Greggs and Subway. Asda’s move
into the convenience segment is in an effort to substantially increase the number of new and existing customers who can access
the supermarket’s products in neighbourhood and roadside locations.
Also in September, the retailer announced that it was partnering with UK-based autonomous mobility start-up Wayve to trial
autonomous delivery vans as part of the retailer’s last-mile grocery delivery operations. The trial will begin in early 2022 and will
make use of Wayve’s expertise in deep learning to help navigate complex urban delivery routes in London and integrate autonomy
into the online grocery space. The autonomous vans will operate under the supervision of a Wayve Safety Driver throughout the
12-month trial.
In August, Asda announced that it had made an investment in Lean Kitchen Network (LKN), a digital food-for-now start-up, as part of
efforts to increase its food service offering. LKN establishes partnerships with owners of under-used kitchen space to license its
portfolio of food brands. Asda’s investment in LKN was made in partnership with hospitality investor Edition Capital. Asda plans to
trial food-for-now counters in four of its London stores, which will enable customers to order food while doing their grocery
shopping or arrange for home delivery through Uber Eats.
In June, Asda became the first supermarket to make its full online product range of more than 30,000 grocery products available for
express delivery within one hour from three Asda stores. Customers living within a three-mile radius of the Halifax, Rotherham and
Poole stores can order up to 70 items from Asda.com for express delivery and can track the progress of their order from the store to
their doorstep in real time. The retailer will roll out the service to more stores if it is successful. At the same time, Asda announced
that it was extending its partnership with Uber Eats from 200 to more than 300 stores, offering customers the opportunity to shop a
range of 500 products for rapid delivery.
In the same month, the Competition and Markets Authority approved the acquisition of Asda by Issa Brothers and TDR Capital. As
part of the transaction, the Asda forecourts business was be sold to EG Group (Issa Brothers’ convenience and forecourts retail
business) for GBP750mn.
In May, the retailer began trialling unattended deliveries to allow customers to have their groceries delivered to their doorstep while
they are away from home. Customers order through Asda.com and have their items delivered within a four-hour window in a secure,
locked box, accessible via a one-time password, which maintains the correct product temperature and is unaffected by hot or cold
weather.
In April, Asda said it would stop fresh baking at its supermarkets. It will no longer bake bread, croissants and buns from scratch in-
store, focusing instead on part-baked products such as speciality breads, wraps, bagels and pancakes. The decision was in response
to changing customer demands.
Asda announced on January 13 that it would become the first supermarket to provide an in-store Covid-19 vaccination programme.
Working with Public Health England and NHS England, the supermarket chain converted the George department in its Birmingham
store into a vaccination centre. Asda pharmacy staff members who were qualified to administer vaccinations would be able to
deliver up to 250 vaccinations per day. The company opened its second vaccination centre, located in its Watford store, on February
4.
Asda launched its first ‘Veelicious’ vegan butcher counter at its Watford store on January 5. The counter will operate on a six-month
trial basis, offering a range of meat-free produce including mock lamb, vegan black pudding, meatballs and burgers, vegan cheeses
and ready-to-eat vegan meal kits. The company stated that it had seen online searches for ‘vegan’ on its adsa.com website increase
by 175% y-o-y in 2020 and expected vegan food sales in January 2021 to increase 391% y-o-y.
Financial Data
Financial year ended December 31
Total Revenue
• 2022: GBP20.45bn
• 2021: GBP20.42bn
Adjusted EBITDA
• 2022: GBP886mn
• 2021: GBP1,171mn
Associated British Foods

• The company's diversification across sugar, grocery, ingredients • Primark's lack of an online presence meant it made no sales
and agriculture businesses is a significant strength. These under lockdown conditions.
businesses have continued to operate throughout the Covid-19 • There are limited synergies between its food and retail
pandemic. businesses.
• The company owns numerous strong and recognisable brands. • There is a pressing need to cut costs.
• ABF is a brand leader in the Australian bread sector and the • Profitability in the bakery division has been severely eroded,
leading bakery ingredients supplier in the US. and margins remain under severe pressure.
• ABF's review of all expenditure to mitigate the impact of the • The company has warned of further reductions in sugar profits.
pandemic resulted in a significant reduction in discretionary • The rising popularity of private label goods is a threat in several
spend and fixed costs. sectors.
• There is scope to capitalise on the nutritional and dietary
benefits of grain-based products.
• Further divestitures of non-strategic businesses could help
raise profitability.
Company Overview
ABF is one of the UK's leading food manufacturers and a market leader in the bread, sugar, speciality tea, bakery ingredients and
animal feed sectors. Well-known brands include Allinsons, Kingsmill, Silver Spoon, Ryvita and Twinings. The company is also active in
the UK retail sector via the Primark high-street clothing chain. Internationally, ABF is one of Europe's largest food groups and, further
afield, is a brand leader in the Australian bread sector and the leading bakery ingredients supplier in the US.
Strategy
Despite its diversity, ABF has in recent years focused on market segments where it can establish a leading position and has disposed
of businesses that are not in line with this strategic focus. It has pursued acquisitions suitable to deliver the kind of market presence
the company aims for. Acquisitions include 51% of Illovo, Africa's largest sugar producer, and the sugar operations of Ebro Puleva,
Spain's largest food company.
We believe that at some point ABF is likely to split its food division and Primark. ABF has relied on Primark for its outstanding revenue
growth across previous years and we believe that a break-up of the business will eventually prove too compelling to ignore. A spin-
off of the fashion unit could generate significant funds to plough back into expansion, while the sugar unit would be better
positioned to capitalise on consolidation in the sector if it were to operate as a distinct business.
Recent Developments
2023
In June, the company reported the acquisition of the dairy technology company National Milk Records for GBP48mn (USD59.7mn)
to boost its agri-food unit.
In March, the company pointed to the smaller UK pig herd as a driver of its reduced feed volumes. ABF stated that agriculture
'market conditions continue to remain challenging with high commodity and energy costs'.
In February, ABF raised its financial guidance for full year 2022/23, saying consumer spending had proven to be more resilient than
it expected. The company reported that its food businesses would continue to seek to recover inflation through cost mitigation and
price increases.
2022
Within the company's grocery business, Allied Bakeries sales were ahead of previous years, largely due to significant price increases,
but losses increased with significantly higher costs of wheat, energy and distribution.
In April, ABF reported a significant rise in adjusted operating profit for the first half of fiscal 2022, in line with views, and said that
Primark will rise prices to face inflationary pressures. The company posted an adjusted operating profit for the 24 weeks ended
March 5 of GBP706mn (USD899.5mn) compared with GBP368mn for the year-earlier period.
In its trading update for the 16 weeks to January 8 2022, ABF noted that group revenue from continuing operations came in 16%
higher than the same period in 2021. However, the company said all its businesses had experienced inflationary pressures in raw
materials, commodities, supply chain and energy. Margins in its grocery and ingredients businesses were affected by input cost
inflation. Grocery sales were 2% higher than the same period in 2021. Twinings Ovaltine performed particularly well, with strong
Ovaltine revenue growth and higher volumes sold in emerging markets. Twinings revenue growth was driven by new product
launches in Wellbeing teas. AB Sugar revenue was up 12% compared with 2021, while sales in the ingredients business were up
10%.
2021
In its December trading update, ABF noted that its business was being impacted by port congestion and road freight limitations, as
well as the rising costs of energy, logistics and commodities.
In its trading update for the 16-week period from February 28 to June 19, ABF noted that grocery revenues for the quarter were 3%
lower than in the same period of 2021. Twinings Ovaltine sales were well ahead, driven by growth in Mainland China, Switzerland
and Thailand. In France, Twinings continued to perform well, becoming the best-selling tea brand in the country during the quarter.
Although sales were behind at AB World Foods, significant growth was recorded in the quarter by Jordans and Dorset Cereals, Ryvita,
Silver Spoon and Acetum, Westmill and Sports Nutrition. At Allied Bakeries, there was a decline in volume sales following the exit
from the supply of bread to Co-op in April. Revenues in ACH Food Companies in North America and George Weston Foods in
Australia were lower, with the latter seeing a decline in Tip Top volumes and in the Don meat business, while Yumi’s strong growth
continued. At AB Sugar, revenues were up 21% on the same period in 2021, driven by high volumes in Illovo and China. Revenues in
the ingredients business were up 3%, driven by both higher demand from food service and craft channels in Europe and for yeast
and bakery ingredients in South America.
ABF issued a trading update covering group business for the 16 weeks to January 2 2021. Group revenue fell 13% y-o-y in constant
currency terms, a decrease driven exclusively by the closure of Primark stores during the Covid-19 lockdowns. The company’s food
segment delivered growth of 7% at GBP2.8bn (up from GBP2.6bn in 2019), with the strongest growth coming from its agriculture
sub-segment (up by 10% y-o-y to GBP507mn).
Financial Data
Fiscal year ending September 30
Total Revenue
• 2022: GBP17.0bn
• 2021: GBP13.8bn
• 2020: GBP13.9bn
• 2019: GBP15.8bn
Revenue Per Business (2022)
• Retail: GBP7.7bn
• Grocery: GBP3.7bn
• Sugar: GBP2.0bn
• Agriculture:GBP1.7bn
• Ingredients: GBP1.8bn
Revenue By Region (2022)
• UK: GBP6.4bn
• Europe & Africa: GBP4.8bn
• Australia: GBP1.2bn
• Spain: GBP1.5bn
• USs: GBP1.3bn
• Asia-Pacific: GBP1.1bn
• Americas: GBP713mn
Net Profit
• 2022: GBP700mn
• 2021: GBP498mn
• 2020: GBP465mn
• 2019: GBP878mn
Premier Foods
• Premier Foods owns many strong brands that are leaders in • It operates in many categories that are exposed to the threat of
their respective categories. private labels.
• Premier Foods and Japanese noodle-maker Nissin have entered • Dependence on a few key brands and markets for a significant
into a cooperation agreement that will allow them to share portion of revenue.
products, distribution and manufacturing arrangements, as well • Limited international presence and exposure to foreign
as technology and branding. currency fluctuations.
• A wide range of products gives the firm relatively strong • Many of Premier's products are in low-growth categories, such
bargaining power when negotiating with retailers. as pickles and jams.
• The company's partnership with The Gores Group over Hovis • The firm has a limited international presence.
adds significant financial backing. • The company has been struggling with high debt levels.
• The company continues to launch new and innovative products • Rising commodities prices threaten to cut margins at a time
that play on the premiumisation, convenience and health when retailers and consumers are unlikely to tolerate price
trends. increases.
• Premier's British brands could potentially have appeal in • Weak consumer sentiment due to fiscal austerity could
emerging markets with strong Commonwealth links. continue to push consumers towards private labels.
• The group is concentrating on certain overseas markets for • There is pressure from investors for the company to accelerate
future growth, with the aim of establishing local contract its turnaround and sell businesses to generate cash.
production.
Company Overview
Premier Foods is a British food manufacturer headquartered in St Albans, Hertfordshire. It is listed on the London Stock
Exchange. The group owns many well-known brands, including Mr Kipling, Ambrosia, Bird's Custard, Angel
Delight, Homepride cooking sauces, Sharwood's, Loyd Grossman sauces, Oxo, Bisto and Batchelors. Premier Foods also produces
cakes under the Cadbury's name, using the brand under licence.
The company operates primarily in the ambient food sector, the largest sector of the UK grocery market. The grocery business is
responsible for developing its portfolio of brands in four key categories: flavourings and seasonings, cooking sauces and
accompaniments, quick meals, snacks and soups and ambient desserts.
In addition, the group has a portfolio of other branded food products and a non-branded food business that manufactures products,
such as cakes and desserts, on behalf of many UK food retailers. The Knighton Foods business manufactures and sells branded
beverages and dessert products.
Strategy
The company's strategy is divided into three main pillars:
Sustainable And Profitable Revenue Growth
• Leading brand positions;

• Insight-driven innovation;
• Sustained marketing investment;
• Collaborative retail partnerships; and
• International markets expansion.
Cost Control And Efficiency
• Lean cost base;

• Operational excellence;
• Capital projects; and
• Agility, pace and energy.
Cash Generation
• Strong focus on capex;

• Disciplined management of working capital; and
• Options for cash deployment in the short and medium terms.
Recent Developments
2023
In July, the company reported that it would not raise prices for the rest of the year. The firm said it believed recent input cost inflation
was 'past its peak'.
In January, Premier Foods proposed the closing of its Knighton Foods powdered desserts and drinks factory in the UK. the company
noted that the plant 'is not aligned to the group’s branded growth model strategy and is marginally unprofitable at trading profit'.
2022
In November, the company noted a rise in revenue fuelled by growing demand for cheaper products as customers turned to home
cooking in the face of high inflation. Sales in Premier’s non-branded division rose 22.8% compared with the same period last year,
while branded food sales rose 4.3%.
In July, Premier Foods acquired the Indian and South Asian meal kits brand, the Spice Tailor, in a deal worth GBP43.8mn. The Spice
Tailor's largest markets are the UK and Australia, which account for 58% and 35% of FY2021 sales respectively.
In April, Premier Foods launched a range of healthier cakes and pies with 30% less sugar and increased natural fruit than previous
offerings, under the Mr Kipling brand. The move is designed to attract health-conscious consumers who are searching for healthy
indulgence.
2021
In December, Premier Foods expanded its flavourings and seasonings portfolio ahead of Christmas by launching Oxo Turkey stock
cubes and Paxo Low-Salt Stuffing.
In November, the company announced that it would launch its Mr Kipling brand in the US in January 2022 following a successful
trial in Canada (where more cakes will now be rolled out). Initially, chocolate and salted caramel cakes will be on offer in selected
supermarkets in the US. The brand will also widen its range to incorporate biscuits and ice cream for the first time. Premier Foods is
planning Angel Delight and Ambrosia custard-flavoured ice cream.
In the same month, the company's Angel Delight brand entered the food-to-go category with the launch of two ready-to-eat
dessert pots in chocolate & salted caramel and butterscotch & chocolate varieties. The products are suitable for vegetarians and
come with a significant shelf-life benefit over existing to-go chiller desserts. Also in November, the firm launched Bird’s Custard Pods,
bringing convenience to the ambient desserts market. The new wet pod format allows consumers to simply add milk (or a milk
alternative to create a vegan custard) to make a smooth custard.
In October, Premier Foods announced that it planned to triple its sales of plant-based foods to GBP250mn by 2030 with a new
range of products. The firm said it would launch meat-free meal pots through its Batchelors brand by the end of the year. It also
plans to offer meat-free noodle pots.
In the same month, the company expanded its Mr Kipling range ahead of Halloween with the launch of Toffee Apple pies. The firm
also added Swedish Style Meatball Gravy Granules to its Bisto range. The product targets mid-week meatball meal occasions in light
of the fact that meatballs are a highly popular choice for UK consumers. Additionally, a new Paxo Veggie Fillers range was launched
to help consumers easily create stuffed vegetables such as peppers and mushrooms. The brand highlighted that more than a third
of British consumers now follow a meat-free or flexitarian diet, and the new product aims to provide vegetarian dishes with more
flavour and texture. The blend of focaccia breadcrumbs, flavourings and seasonings is available in two varieties: sundried tomato &
oregano, and spicy Mediterranean. The products are suitable for vegans and each portion contains fewer than 100 calories. Finally,
the Batchelors brand introduced a new pasta range for children - Batchelors Pasta ’n Sauce Shapes. These easy-to-make pasta
dishes aim to provide a convenient alternative that is ready in five minutes, is low in sugar and fat and has no artificial colours or
preservatives. The two new products are the unicorn-inspired cheese & tomato and the football-themed creamy chicken.
In September, the firm launched Saxa salt spray and Saxa salt and vinegar spray in 100ml bottles. Premier Foods said the convenient
new product with its innovative format was the first of its kind in the flavourings and seasonings category, and aimed to help
consumers reduce their salt intake.
Premier Foods reported stronger-than-expected sales in the three months to early July, with sales up 6.3% compared with the same
period in 2019. The company attributed this to high demand for its Mr Kipling range, Cadbury baking mixes, Cape Herb & Spice
range and Oxo rubs and marinades. Sales of the Mr Kipling range grew 3.2% y-o-y, boosted by the introduction of low-sugar options
and a 'signature collection' of premium-range cakes and fancies. There was also greater demand for Sharwood’s low-fat cooking
sauces, sales of which have grown at more than twice the rate of Premier’s branded portfolio: 25% over the last two years. Sales of
Nissin noodles have increased more than 160% since 2019.
In June, the company expanded its Angel Delight kit range with the launch of the Space Dessert Kit in butterscotch flavour. Each kit
serves four and contains Butterscotch Angel Delight whips in both blue and purple, a creamy topping and space-themed sprinkles
for decoration. This followed the launch of the Unicorn Strawberry (April 2020) and Dinosaur Chocolate Dessert (October 2020) kits.
In May, it was announced that Premier Foods was exploring its options for making some bolt-on acquisitions, both in the UK and
abroad, in a bid to expand inorganically. The goal is to enter new categories in the UK and grow its international business.
In April, Premier Foods added to its Mr Kipling range with the introduction of Chocolate Tarts, targeting younger consumers.
In January, Mr Kipling launched 30% Less Sugar Viennese Whirls. This follows the success of its 30% Less Sugar Angel, Chocolate
and Lemon slices, which first launched in February 2019.
In the same month, the company announced additions to its Mr Kipling and Cadbury Cakes ranges for Easter 2021. Cadbury would
launch Crème Egg Cakes and Crème Egg Gateau, and Mr Kipling would add Lemon & Raspberry Mini Batts and Chocolate & Orange
Easter Bunny Slices.
Financial Data
Fiscal year ending March
Total R
Reevenue
• 2023: GBP1,006mn
• 2022: GBP901mn
• 2021: GBP947mn
• 2020: GBP847mn
• 2019: GBP824mn
• Grocery: GBP746mn
• Sweet Treats: GBP259.6mn
Revenue Per Region (2023)
• UK: GBP943.1mn
• Rest Of World: GBP28.1mn
• Other Europe: GBP35.2mn
Net Profit (Loss)
• 2023: GBP91.6mn
• 2022: GBP77.5mn
• 2021: GBP122.8mn
• 2020: GBP53.6mn
• 2019: (GBP42.7mn)
Unilever
• Unilever owns many of the world's most famous food brands, • Unilever remains underexposed to the healthy eating,
with particular strength in the ice cream market. functional and 'neutraceutical' sectors, especially considering
• Diversified portfolio including personal care, home care and the growing public awareness of these areas.
food products. Strong brand portfolio with well-known labels • There are limited synergies between its food, cleaning and
such as Dove, Lipton and Hellmann's. personal care divisions.
• Global presence with operations in more than 190 markets. • Dependence on a few key markets and regions for a significant
• The company has been continuously successful in launching portion of revenue.
products in new markets. • Complex organisational structure with multiple subsidiaries and
• It has reduced its exposure to markets particularly threatened partnerships.
by private labels, especially in healthcare and beauty. • Unilever is overexposed to sectors with limited growth
potential, including categories where private labels are a
significant threat.
• Sales of the company's washing powder brands continue to
decline.
• Intense competition from both established players and new
entrants.
• Growing demand for sustainable and environmentally friendly • Increasing popularity of private label brands, with big
products. retail stores coming up with their own house brands.
• Expansion into emerging markets with increasing disposable • The rise in health consciousness could be a threat to Unilever's
income. flagship ice cream business.
• Growing interest in health and wellness products. • Key products can easily be imitated.
• Unilever's focus on the plant-based meat market should prove • Competition from discount brands.
profitable as trends towards vegetarianism and flexitarianism • Volatility in commodity and raw material prices.
develop. • Regulatory challenges and compliance issues with
• The divestment of its tea businesses will provide funding that environmental and labour laws.
can be channelled into higher-growth segments.
• The unification of the company under a single parent is
expected to create a simpler company with more strategic
flexibility that is better positioned for success.
• The company has decided to focus more on personal care and
general fast-moving consumer goods and less on core food and
drink brands, where it is generally less well positioned.
• The growing popularity of ice cream in emerging markets,
owing to greater availability of cold storage facilities within
stores and homes, represents an enticing sales opportunity.
• Low per capita household expenditures, rapidly expanding
populations and dynamic economic growth translate into
substantial scope for growth in emerging markets.
Company Overview
Unilever is a British-Dutch multinational consumer goods company founded in 1929. It is one of the largest FMCG companies in the
world, with a portfolio of well-known brands in personal care, home care, and food and drinks.
In the food and drinks space, Unilever has a strong portfolio of well-known brands including Knorr, Hellmann's, Lipton and Ben &
Jerry's. The company offers a wide range of products including soups, sauces, dressings, ice creams, tea and more. Unilever food and
drinks products are in more than 190 markets, with a strong focus on quality, taste and nutrition. The offerings are designed to meet
the changing needs and preferences of consumers, with a focus on health and wellness, sustainability and convenience. The
company invests heavily in R&D to innovate and bring new products to market that meet these evolving consumer needs.
Unilever's strong distribution network and supply chain management ensure that its products are widely available and accessible
globally. The company is committed to sustainability and has set ambitious targets for reducing its carbon footprint, improving
waste management and promoting sustainable sourcing of raw materials.
Strategy
In January 2022, Unilever announced a new strategic direction following the unification of its dual-headed structure, with the aim of
accelerating growth and repositioning the portfolio into higher-growth categories. The firm will now focus on expanding its
presence in health, beauty and hygiene, which offer higher rates of sustainable market growth. Unilever stated that an ongoing
focus on strategic acquisitions would be accompanied by the accelerated divestment of intrinsically lower-growth brands and
businesses.
In addition, following a comprehensive review of its organisational structure, the firm said it would move away from its existing
matrix to an operating model that should drive greater agility, improve category focus, strengthen accountability and lead to a
simpler, more category-focused business. Unilever will henceforth be organised around five distinct business groups, compared
with three previously: beauty and well-being, personal care, home care, nutrition and ice cream. Each group will be fully responsible
and accountable for its strategy, growth and profit delivery globally. The company stated that this was part of efforts to become
more responsive to consumer and channel trends.
Unilever has a broad exposure in growth markets, generating close to 60% of its sales from emerging markets. The company
already enjoys a sizeable presence in India and Brazil, and has a fast-growing presence across the emerging markets of Argentina,
Mainland China, Russia, Bangladesh, Pakistan, the Philippines, Vietnam, Thailand, Egypt and Nigeria. This enviable spread means
Unilever is already in a strong position to exploit the dynamic opportunities available in the developing world. Low per capita
household expenditures, rapidly expanding populations and dynamic economic growth translate into significant scope for growth in
emerging markets, and Unilever says it intends to continue to push into the developing world to reap the rewards on offer.
ESG Commitments
Sustainable and regenerative sourcing
• Sustainably sourcing to the highest standards from its network of suppliers.

• Driving change through the continuous improvement of policies with suppliers.
• Playing a leading role in the transformation of agricultural sectors relevant to its business.
• Communicating to consumers about sustainable sourcing.
Unilever Sustainable Agriculture Code (SAC)
• Produce crops with high yield and nutritional quality to meet existing and future needs, while keeping resource inputs as low as
possible.
• Ensure that any adverse effects on biodiversity, soil fertility and water and air quality from agricultural activities are minimised,
and positive contributions are made where possible.
• Optimise the use of renewable resources while minimising the use of non-renewable resources.
• Enable local communities to protect and improve their wellbeing and environment.
Unilever Regenerative Agriculture Principles (RAPs)
• Have positive impacts from agricultural practices on soil health, water and air quality, carbon capture and biodiversity.
• Enable local communities to protect and improve their environment and wellbeing.
• Produce crops with sufficient yield and nutritional quality to meet existing and future needs, while keeping resource inputs as low
as possible.
• Optimise the use of renewable resources while minimising the use of non-renewable resources.
Recent Developments
2023
In July, Unilever defended its decision to stay in Russia, reporting that exiting was 'not straightforward' as its operations would be
taken over by the Russian state if it abandoned them. This came after a campaign group, The Moral Rating Agency, estimated the
firm is contributing GBP579mn to the Russian economy annually.
In July, the Unilever noodle brand, Pot Noodle, announced the trial of a recyclable paper pot made with FSC-certified paper. The new
paper pot has launched exclusively in retailer Tesco, with an initial stock of 500,000 of the brand’s most popular flavour, chicken &
mushroom.
In May, 58% of participating shareholders voted against its pay report for 2022. Outgoing boss Alan Jope, who took over as CEO in
January 2019, was paid EUR4.8mn in 2022, including a base salary of GBP1.37mn.
In April, Unilever announced that it had completed a cloud migration with Accenture and Microsoft. With Azure as its primary cloud
platform, Unilever will be able to accelerate product launches, enhance customer service and improve operational efficiency.
In March, Unilever announced a EUR20mn investment in a new production facility in the Kyiv region of Ukraine. the new factory will
manufacture personal care products including shampoos and shower gels for brands such as Dove, Axe, TRESemmé and Clear. The
hub will mainly supply the local Ukrainian market.
2022
In October, the company noted that it expected prices to remain high into 2023, because inflation would take time to come down.
In the company's Q322 financial report, prices of its products grew 12.5% on average, affecting sales volumes, which dipped 1.6%.
In August, the UK's Advertising Standards Authority banned an advertisement over 'misleading' environmental claims for Unilever's
laundry detergent brand Persil. The regulator said the television advert, which claimed Persil was 'kinder to our planet', had failed to
demonstrate environmental benefits.
In July, Jope commented that pricing in the UK had not kept up with inflation, while customers were trading down from Unilever
brands to supermarket own-brand products. The consumer goods company saw revenue grow 8.1% in H122, to GBP25.0bn, but
profit margins dropped 180bp to 17%. A fall in the volume of goods sold was offset by 9.8% product price growth.
In June, Unilever and Genomatica, a biotech company, launched a USD120mn venture to scale and commercialise alternatives to
palm oil and fossil fuel-derived cleansing ingredients.
In April, Unilever announced that it would stop marketing food and beverages to children under the age of 16 across both
traditional media and social media.
In March, Unilever released a statement condemning Russia's war on Ukraine, committing to donate EUR5mn of essential products
to humanitarian relief efforts. The company suspended all imports and exports of products to and from Russia, as well as media and
advertising spending.
On January 5, Unilever launched a partnership with Holobiome to identify food and drink ingredients that could have a positive
impact on mental well-being by targeting the gut-brain axis. The long-term goal of the tie-up is to enhance these ingredients in
certain food and drink products across Unilever’s portfolio to naturally boost levels of certain calming neurotransmitters. The
research findings were expected by the end of 2022.
2021
In November, Unilever entered into an agreement to sell ekaterra, the leading global tea business, to CVC Capital Partners Fund VIII
for EUR4.5bn. Ekaterra has 11 production factories across four continents and tea estates in three countries, as well as a portfolio of
34 brands including Lipton, PG tips, Pukka, T2 and TAZO. Completion of the transaction is subject to the completion of works council
consultation processes and the receipt of certain regulatory approvals and is expected in H222. The transaction excludes Unilever’s
tea business in India, Nepal and Indonesia, as well as Unilever’s interests in the Pepsi Lipton ready-to-drink tea joint ventures and
associated distribution businesses.
In May, Unilever announced a partnership with food-tech company ENOUGH (formerly 3F BIO) to bring new plant-based meat
products to market. ENOUGH’s technology uses a fermentation process to grow high-quality protein. Natural fungi are fed with
feedstock such as wheat and corn. This produces ABUNDA mycoprotein, a complete food ingredient that contains all the essential
amino acids and is high in dietary fibre. Unilever stated that the protein was an excellent fit for its fast-growing, meat-alternative
brand, The Vegetarian Butcher, which grew more than 70% in 2020. The Vegetarian Butcher's plant-based protein products are now
available in 45 countries across four continents. The brand recently launched the vegan Raw Burger, and its partnership with Burger
King (involving products such as the Plant-Based Whopper, Plant-Based Nuggets and Vegan Royale) now extends across more than
35 countries. The tie-up with ENOUGH should contribute to Unilever achieving its annual global sales target of EUR1bn from plant-
based meat and dairy alternatives by 2025-2027.
On January 21, Unilever announced a set of commitments and actions designed to raise living standards across its value chain,
create greater inclusivity and upskill people to maximise their employment potential. In a media notice, the company stated it would
ensure that everyone who directly provides goods and services to it was earning at least a living wage by 2030; spend EUR2bn
annually with suppliers owned and managed by people from under-represented groups by 2025; pioneer new employment models
for its staff; and, by 2020, equip 10mn young people with essential work skills to prepare them for job opportunities.
2020
In its Q3 results released on October 22, Unilever reported underlying sales growth of 4.4%, with 3.9% and 0.5% growth in volume
and price respectively.
On October 20, Asda's Middleton store in Leeds relaunched as a pioneering flagship sustainability store with a Refill Zone supported
by Unilever. The refill trial forms part of Unilever’s commitment to halve its use of virgin plastic by reducing its absolute use of plastic
packaging and to ensure that all its plastic packaging is fully reusable, recyclable or compostable by 2025.
In early October, more than 99% of shareholders in the UK arm of Unilever voted in favour of unifying the company's headquarters
in the UK. This came after a decision in September by Dutch shareholders to support the consolidation plans. The unification was
slated to take effect by the end of November 2020.
On September 18, Unilever launched the Uni-Excubator, a digitally driven incubator designed to collaborate with entrepreneurs,
innovators and technology startups, in Mainland China. The startups can gain access to Unilever's insights, expertise in sustainability,
technology, products, factories and distribution networks, as well as to Tmall’s retail opportunities and marketing support.
Unilever announced on September 1 that it had signed an agreement to acquire Liquid IV, a US-based health-science nutrition and
wellness company. While the terms of the deal were not disclosed, the acquisition was subject to regulatory approvals and
customary closing conditions.
On July 23, Unilever announced its H120 results, which revealed that overall underlying sales had declined 0.1% and turnover had
decreased 1.6%. The company noted that the spread of Covid-19, combined with the lockdowns and restrictions implemented in
many countries, had led to significant changes in the operating environment. Consumer demand patterns were impacted by
channel closures, more time spent at home and the importance of hygiene. This had a negative impact on Unilever’s food service
(-40%), out-of-home ice cream (-30%), Prestige and personal care businesses. However, there was growth in home consumption of
foods, ice cream and tea, as well as increased demand for its hand and home hygiene products, which each grew by double digits. In
addition, as shoppers moved from offline to online channels, e-commerce growth rose 49%.
Also in July, Unilever announced a partnership with biotech startup Algenuity to explore the use of microalgae protein in Unilever’s
plant-based portfolio. Algenuity, which specialises in developing microalgae for use in consumer products, will work with the R&D
team within Unilever’s Foods and Refreshment division to explore ways of bringing foods made with microalgae to the market.
In June, Unilever announced the sale of its ice cream business in Chile to Carozzi, including the sale of local brands Bresler and
Melevi and the licence for the global ice cream brands that it retailed in Chile: Magnum, Calippo, Fruttare, Carte D'or, Vienetta and
Cornetto. Unilever aims to focus on the categories and brands in which it can develop a sustainable and competitive business in
Chile.
Also in June, Unilever announced its plans to unify its group legal structure under a single parent company – Unilever PLC. Unilever
has been owned through two separately listed companies, a Dutch NV and a UK PLC, since its formation in 1930. Following the
move to a single-parent legal structure, Unilever’s presence in both The Netherlands and the UK will remain unchanged: there will
be no change to the manufacture and supply of Unilever products, operations, locations, activities or staffing levels. Foods &
Refreshment will continue to be headquartered in Rotterdam, alongside the new EUR85mn R&D centre in Wageningen, while
Beauty & Personal Care and Home Care will continue to be headquartered in London. Unilever PLC will continue to have a premium
listing on the London Stock Exchange and will apply for an additional listing of Unilever PLC shares on Euronext Amsterdam, where
Unilever PLC shares will be traded and quoted in euros. Unilever PLC ADSs will continue to be listed on the New York Stock
Exchange. Unilever PLC will continue to be incorporated in the UK and will remain UK tax resident. This will result in a single parent
company, having one class of shares, one market capitalisation, and a single global pool of liquidity. The proposed unification is
subject to certain conditions, including the approvals of shareholders in Unilever NV and Unilever PLC, consultations with employee
representative bodies and applicable regulatory consent. Implementation is expected towards the end of 2020.
In mid-May, Unilever International announced that it would partner with Uber to provide hygiene kits for Uber drivers and couriers in
the UK, and later in more countries across Europe, the Middle East and Africa. Kits will include products such as Cif (Jif) antibacterial
multipurpose spray and Lifebuoy hand gel. The partnership will also provide education materials and training to drivers and couriers.
In April, Unilever completed the acquisition of the health food drinks portfolio of GlaxoSmithKline in India, Bangladesh and 20 other
predominantly Asian markets. Acquiring the brands Horlicks and Boost is part of Unilever’s strategy to enhance its presence in
healthy nutrition. Unilever also entered into agreements to buy out the minority shareholders of its Malaysian subsidiary.
Financial Data
Fiscal year ending December 31
Group Total Revenue
• 2022: GBP60.1bn
• 2021: GBP52.4bn
• 2020: GBP50.7bn
• 2019: GBP52.0bn
• 2018: GBP51.0bn
• Nutrition: GBP11.9bn
• Personal Care: GBP11.6bn
• Home Care: GBP10.6bn
• Beauty & Wellbeing: GBP10.5bn
• Ice Cream: GBP6.7bn
Revenue Per Region (2022)
• Asia Pacific & Africa: GBP17.6bn

• United States: GBP10.3bn
• Europe: GBP7.8bn
• Americas: GBP7.5bn
• India: GBP5.9bn
• UK: GBP2.1bn
Group Net Profit
• 2022: GBP7.6bn
• 2021: GBP6.6bn
• 2020: GBP5.6bn
• 2019: GBP6.0bn
• 2018: GBP9.8bn
Diageo
• It owns world-famous premium spirits brands, such as Johnnie • It is highly exposed to Western Europe, where the consumer
Walker and Smirnoff. outlook remains weak.
• The company is well-diversified geographically and is present in • The firm has a limited presence in the outperforming bourbon
all high-growth emerging markets. category in the US.
• Diageo enjoys a high operating margin compared with its
competitors, owing to operational efficiency and its strategy of
positioning its brands as premium products.
• The company is focusing on the high-growth ready-to-drink • Increased health consciousness among consumers could lead
(RTD) spirits category. in the coming years to reduced purchases of alcoholic
• Diageo continues to make strategic international acquisitions products, including those of Diageo.
and investments in new production facilities. • The government crackdown in Mainland China on alcohol
• Bolting on higher-value brands to existing labels is opening up consumption or premium-spirit gifts will limit sales of premium
new growth routes in developed markets. spirits.
• The company is significantly exposed to African markets, where • A delay in channelling traditional premium brands and an
there is strong potential for growth in the beer and spirits ongoing emphasis on volumes and low-value segments will
categories. threaten margins.
• Diageo stands to benefit from a weaker sterling given that more • Changing social attitudes towards alcohol consumption and
than 90% of its revenue comes from abroad. growing concern about responsible drinking.
• Growing interest in health and wellness products. • Competition from private label and discount brands.
Company Overview
Diageo is a British multinational alcoholic beverages company, founded in 1997. The company is one of the largest producers of
spirits and beers globally, with a portfolio of well-known brands such as Johnnie Walker, Smirnoff, Guinness and Baileys.
In the UK, Diageo is a leading player in the alcoholic beverages market, with a strong portfolio of brands and a broad distribution
network. The company offers a range of products including spirits, beer and wine with a focus on quality, taste and innovation.
Diageo invests heavily in marketing and advertising to build brand awareness and loyalty in the UK market. The company has also
been at the forefront of responsible drinking initiatives, working closely with government and industry bodies to promote
responsible marketing and responsible drinking.
In the UK, Diageo operates a number of production facilities and has a strong supply chain, enabling it to efficiently distribute its
products. The company also has a significant presence in the on-trade (bars, restaurants and clubs) and off-trade (retail) sectors,
ensuring that its products are widely available and accessible.
Strategy
Diageo's strategy is to support premiumisation in developed and emerging markets. Its broad portfolio of brands gives the company
access to a range of consumer occasions, across price points. In developed markets, the company supports premiumisation
through its premium core and reserve brands. These enable consumers to trade up to luxury categories. In emerging markets,
Diageo aims to grow consumption of premium spirits. To support this, it offers a range of mainstream spirits at affordable price
points. This also enables Diageo to shape responsible drinking trends in markets where international premium spirits is an emerging
category. Diageo has a global beer business, led by its premium brand Guinness. Beer is the company's second largest category
after Scotch. The company also has a large beer business in Africa, with a portfolio that reaches across price points.
Brexit offers a potential silver lining for Diageo, given that 90% of its revenue comes from abroad. Diageo was one of only a few listed
companies whose share price surged after the vote to leave the EU, as investors acted on the belief that a weaker sterling would
translate into strong export growth globally. We caution that, in the long run, the benefits of a lower pound may be outweighed by
uncertainty regarding the UK's access to the single market. This is particularly a concern for Scotch, Diageo's largest export, which
relies heavily on sales in major European markets.
Recent Developments
2023
In July, Diageo invested EUR25mn to boost production of its non-alcoholic Guinness brand. The new facility will feature six
processing units with a total capacity of 500,000 hectolitres.
In April, the company announced that it would be delisting shares from the Euronext Paris and Euronext Dublin exchanges. The
decision was made after an evaluation of its trading volumes, costs and administrative obligations associated with the listings. The
delisting process from both exchanges was completed at the end of May.
In March, Diageo, through its wholly owned indirect subsidiary Diageo Kenya, announced that it had completed the partial tender
offer to increase its aggregate equity stake in East African Breweries from 50.03% to 65%.
In January, Diageo reached an agreement to buy the high-end Philippine rum brand Don Papa, for about EUR400mn.
2022
In December, Diageo announced a partnership with Encirc, a glass manufacturer and co-packer, to create the world’s first net-zero
glass bottles at scale by 2030. The plan is to have the furnace powered by zero-carbon electricity and hydrogen and to be fully
operational by 2027. It will produce about 200mn Smirnoff, Captain Morgan, Gordon’s and Tanqueray bottles annually by 2030.
In September, Diageo sold its peach schnapps brand Archers to the Dutch producer De Kuyper Royal Distillers, for an undisclosed
sum. As part of the sale, Diageo entered a 24-month manufacturing supply agreement with De Kuyper.
In September, Diageo acquired Australian cold-brew coffee liqueur brand Mr Black for an undisclosed sum. Diageo initially acquired
a minority stake in Mr Black in 2015 through its accelerator programme Distill Ventures. The coffee liqueur brand is available in 22
markets, including Australia, the UK and the US, its biggest market.
In July, the company reported net sales of GBP15.5bn, up 21.4% y-o-y, primarily driven by strong organic net sales growth, up 21.4%
y-o-y, with strong double-digit growth across all regions. Growth was broad-based across categories, and particularly strong for
Scotch, tequila and beer. Diageo’s 'premium-plus' brands contributed 57% of reported net sales and drove 71% of organic net sales
growth. The company noted that its growth reflected 'continued recovery of the on-trade, resilient consumer demand in the off-
trade and market share gains, and was underpinned by favourable industry trends of spirits taking share of total beverage alcohol
and premiumisation'.
In April, Diageo began a global roll-out of Guinness Cold Brew Coffee Beer, following a successful launch in the US in 2021. The
beverage contains about 2mg of caffeine per can, the same as a decaf coffee.
In January, Diageo announced that it would build a GBP73mn Guinness microbrewery and culture hub in London. ‘Guinness at Old
Brewer’s Yard’ is set to open in Covent Garden in Autumn 2023. The investment builds on the success of the Guinness Storehouse
in Dublin and the opening of Johnnie Walker Princes Street in Edinburgh in 2021. The company reported that Guinness sales in
Britain had grown more than 30% over H221 and that one in every 10 pints sold in London was a Guinness.
2021
In November, the company announced that it would build a USD75mn distillery in China to make its first single-malt whisky of
Chinese origin amid rising demand for the beverage in the market.
In October, Diageo said it would invest USD500mn in building a tequila distillery in the town of La Barca in the southwest Mexican
state of Jalisco. The company stated that its tequila sales had risen 79% in the past financial year, driven by demand in the US.
In September, Diageo Australia launched Reeftip Drinks Co, a spiced rum RTD brand. The brand initially hit shelves with a full-
strength spiced rum and three RTD varieties: ginger, lime and soda; pineapple, lime and soda; and mango, coconut and soda. New
products would be added to the range.
In August, Diageo announced that it had reached an agreement to acquire Mexico-based Mezcal Unión through the acquisition of
Casa UM. Diageo has had a partnership with Mezcal Unión since 2016, providing the brand with expertise and supporting the
growth of its distribution network in Mexico, the US and other markets.
In July, Diageo reported that net sales for the financial year ended June 30 2021 grew 8.3% to GBP12.7bn (EUR14.9bn). The
company said sales growth was boosted by the reopening of bars and restaurants in some markets and strong retail demand across
all its regions.
In the same month, Diageo’s tequila brand Don Julio launched a new product in the US called Primavera, which is the brand’s
'reposado' tequila finished in orange wine casks. This followed a 62% increase in sales of Don Julio in the US over the 2021 fiscal
year.
In April, Diageo acquired RTD vodka cocktail brand Loyal 9 from Sons of Liberty Spirits. The cocktails are 9% ABV, gluten free, made
with 100% real fruit and come in four lemonade varieties, cranberry lime and apple cider.
In March, the company acquired a majority stake in US-based Far West Spirits, maker of the popular hard seltzer brand Lone River
Ranch Water.
In the same month, the firm said it planned to spend USD80mn to install two can-filling lines at a new plant in Illinois, to boost its
production of RTD beverages. The new facility in Plainfield, Illinois will make more than 25mn cases of RTD beverages a year,
including Smirnoff seltzers and spirits-based cocktails from Crown Royal and Ketel One Botanicals.
Also in March, Diageo's Crown Royal whisky brand launched new RTD cocktails in three flavours: Washington apple, whisky and cola,
and peach tea. In addition, the Haig Club grain whisky brand launched its first flavoured product: Mediterranean orange.
Diageo completed the acquisition of Chase Distillery - an independently owned, British, field-to-bottle distillery - in March. The deal
expanded Diageo’s portfolio with the addition of Chase Original Potato Vodka, as well as seven premium-plus gins, including Chase
GB Gin, Pink Grapefruit and Pomelo Gin, and Rhubarb and Bramley Apple Gin.
In February, Diageo introduced Baileys Deliciously Light in the US. The product, a blend of Irish cream and whiskey, is made with 40%
less sugar and calories than the Original Irish Cream.
Financial Data
Fiscal year ending June 30
Total Revenue (Net)
• 2023: GBP17.1bn
• 2022: GBP15.5bn
• 2021: GBP12.7bn
• 2020: GBP11.8bn
• 2019: GBP12.9bn
• Spirits: GBP19bn
• Beers: GBP3.36bn
• RTD: GBP899mn
• Other: GBP257mn
Total Revenue (United Kingdom)
• 2023: GBP1,043mn
• 2022: GBP907mn
• 2021: GBP804mn
Net Profit
• 2023: GBP3.7bn
• 2022: GBP3.3bn
• 2021: GBP2.7bn
• 2020: GBP1.4bn
• 2019: GBP3.2bn
United Kingdom Demographic Outlook

Demographic analysis is a key pillar of our macroeconomic and industry forecasting model. The total population and demographic
profile of a market are key variables in consumer demand and are essential to understanding issues ranging from future population
trends to productivity growth and government spending requirements.
The accompanying charts detail the population pyramid for 2022, the change in the structure of the population between 2022 and
2050 and the total population between 1990 and 2050. The tables show indicators from all of these charts, in addition to key
metrics such as population ratios, the urban/rural split and life expectancy.
Population
United Kingdom - Population, mn (1990-2050)
f = BMI forecast. Source: World Bank, UN, BMI
Population Pyramid
United Kingdom – 2022 Male vs Female Population, '000 (LHC) & 2022 vs 2050 Population, '000 (RHC)
Source: World Bank, UN, BMI
POPULATION HEADLINE INDICATORS (UNITED KINGDOM 1990-2025)

Indicator 1990 2000 2005 2010 2015 2020 2025f
Population, total, '000 57,210.4 58,850.0 60,383.7 62,760.0 65,224.4 67,059.5 68,180.6
Population, % y-o-y 0.37 0.65 0.83 0.70 0.42 0.32
Population, total, male, '000 27,798.7 28,674.5 29,525.3 30,802.8 32,128.1 33,122.4 33,728.1
Population, total, female, '000 29,411.7 30,175.5 30,858.5 31,957.3 33,096.3 33,937.1 34,452.5
KEY POPULATION RATIOS (UNITED KINGDOM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020 2025f
Active population, total, '000 37,332.9 38,383.9 39,905.8 41,439.9 42,056.7 42,575.5 43,106.6
Active population, % of total population 65.3 65.2 66.1 66.0 64.5 63.5 63.2
Dependent population, total, '000 19,877.5 20,466.1 20,478.0 21,320.1 23,167.6 24,484.0 25,074.0
Dependent ratio, % of total working age 53.2 53.3 51.3 51.4 55.1 57.5 58.2
Youth population, total, '000 10,886.5 11,215.5 10,914.8 11,063.3 11,558.6 11,928.8 11,379.1
Youth population, % of total working age 29.2 29.2 27.4 26.7 27.5 28.0 26.4
Pensionable population, '000 8,991.0 9,250.6 9,563.2 10,256.8 11,609.1 12,555.2 13,694.8
Pensionable population, % of total working age 24.1 24.1 24.0 24.8 27.6 29.5 31.8
URBAN/RURAL POPULATION AND LIFE EXPECTANCY (UNITED KINGDOM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020 2025f
Urban population, '000 44,704.2 46,286.1 48,255.7 51,025.2 53,892.3 56,264.9 58,038.1
Urban population, % of total 78.1 78.7 79.9 81.3 82.6 83.9 85.1
Rural population, '000 12,506.2 12,563.9 12,128.1 11,734.9 11,332.1 10,794.6 10,142.5
Rural population, % of total 21.9 21.3 20.1 18.7 17.4 16.1 14.9
Life expectancy at birth, male, years 72.8 75.4 76.9 78.4 79.1 78.4 81.0
Life expectancy at birth, female, years 78.5 80.2 81.2 82.3 82.7 82.4 84.2
Life expectancy at birth, average, years 75.7 77.9 79.1 80.4 80.9 80.4 82.6
POPULATION BY AGE GROUP (UNITED KINGDOM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020 2025f
Population, 0-4 yrs, total, '000 3,828.6 3,550.9 3,440.8 3,870.9 4,026.0 3,757.3 3,410.0
Indicator 1990 2000 2005 2010 2015 2020 2025f
Population, 85-89 yrs, total, '000 599.3 749.1 731.3 923.6 981.9 1,056.7 1,173.3
Population, 90-94 yrs, total, '000 192.3 286.6 320.2 336.2 439.7 481.1 533.8
Population, 95-99 yrs, total, '000 37.8 61.2 74.4 89.1 98.7 136.7 154.5
Population, 100+ yrs, total, '000 4.2 6.7 8.6 11.2 13.8 17.5 24.9
POPULATION BY AGE GROUP, % (UNITED KINGDOM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020 2025f
Population, 0-4 yrs, % total 6.69 6.03 5.70 6.17 6.17 5.60 5.00
Population, 100+ yrs, % total 0.01 0.01 0.01 0.02 0.02 0.03 0.04
Food & Drink Glossary

Food & Drink
Food Consumption: All four food consumption indicators (food consumption in local currency, food consumption in US dollar
terms, per capita food consumption and food consumption as a percentage of GDP) relate to off-trade food and non-alcoholic
drinks consumption, unless stated in the relevant table/section.
Off-trade: Relates to an item consumed away from the premises on which it was purchased. For example, a bottle of water bought
in a supermarket would count as off-trade, while a bottle of water purchased as part of a meal in a restaurant would count as on-
trade.
Canned Food: Relates to the sale of food products preserved by canning. This is inclusive of canned meat and fish, canned ready
meals, canned desserts and canned fruits and vegetables. Volume sales are measured in tonnes as opposed to on a unit basis to
allow for cross-market comparisons.
Confectionery: Refers to retail sales of chocolate, sugar confectionery and gum products. Chocolate sales include chocolate bars
and boxed chocolates; gum sales incorporate both bubble gum and chewing gum; and sugar confectionery sales include hard-
boiled sweets, mints, jellies and medicated sweets.
Trade: In the majority of BMI's Food & Drink reports, we use the UN Standard International Trade Classification, using categories
Food and Live Animals, Beverages and Tobacco, Animal and Vegetable Oils, Fats and Waxes and Oil-seeds and Oleaginous Fruits.
Where an alternative classification is used due to data availability, this is clearly stated.
Drinks Sales: Soft drinks sales (including carbonates, fruit juices, energy drinks, bottled water, functional beverages and ready-to-
drink tea and coffee), alcoholic drinks sales (including beer, wine and spirits) and tea and coffee sales (excluding ready-to-drink tea
and coffee products that are incorporated under our soft drinks banner) are all off-trade only, unless stated.
Mass Grocery Retail
Mass Grocery Retail: We classify mass grocery retail (MGR) as organised retail, performed by companies with a network of modern
grocery retail stores and modern distribution networks. MGR differs from independent or traditional retail, which relates to informal,
independent-owned grocery stores or traditional market retailing. MGR incorporates hypermarket, supermarket, convenience and
discount retailing, and in unique cases cooperative retailing. Where supermarkets are independently owned and not classified as
MGR, we will state so clearly within the relevant report.
Hypermarket: We classify hypermarkets as retail outlets selling both groceries and a large range of general merchandise goods
(non-food items) and typically more than 2,500sq m in size. Traditionally only found on the outskirts of towns, hypermarkets are
increasingly appearing in urban locations.
Supermarket: Supermarkets are the original and still most globally prevalent form of self-service grocery retail outlet. We classify
supermarkets as more than 300sq m, up to the size of a hypermarket. The typical supermarket carries both fresh and processed
food and will stock a range of non-food items, most commonly household and beauty goods. The average supermarket will
increasingly offer some added-value services, such as dry cleaning or in-store ATMs.
Discount Stores: Although most commonly between 500sq m and 1,500sq m in size, similar to supermarkets, discount stores will
typically have a smaller floor space than their supermarket counterparts. Other distinguishing features include the prevalence of
low-priced and private label goods, an absence of added-value services, often called a no-frills environment, and a high product
turnover rate.
Convenience Stores: Our classification of convenience stores includes small outlets typically less than 300sq m in size, with long
opening hours and located in high footfall areas. These stores mainly sell fast-moving food and drink products (such as
confectionery, beverages and snack foods) and non-food items, typically stocking only two or three brand choices per item and
often carrying higher prices than other forms of grocery store.
Cooperatives: We classify cooperatives as retail stores that are independently owned but club together to form buying groups
under a cooperative arrangement, trading under the same banner, although each is privately owned. The arrangement is similar to a
franchise system, although all profits are returned to members. The term is becoming more archaic, with fewer cooperatives
remaining that conform to this model. Most cooperative groups now have a more centralised management structure, operate more
like normal supermarkets, and are thus classified as such in our reports.
Food & Drink Methodology

Connected Thinking
BMI employs a unique methodology known as 'Connected Thinking'. This means that our analysis captures the inter-relatedness of
the global economy, and takes into account all of the relevant political, macroeconomic, financial market and industry factors that
underpin a forecast and view. We then integrate them so as to explain how they interact and affect each other. Our Connected
Thinking approach provides our customers with unique and valuable insight on all relevant macroeconomic, political and industry
risk factors that will impact their operations and revenue-generating potential in the industry/industries within which they operate.
We use a transparent forecasting model as a base for our industry forecasts, but rely heavily on our analysts' expert judgement to
ensure our forecasts capture all of the insights we derive using our unique Connected Thinking approach. We believe analyst
expertise and judgement are the best ways to provide the most accurate, up-to-date and comprehensive insight to our customers.
Food & Drink Methodology
BMI's Food & Drink Forecasting And Sourcing
For the Food & Drink industry we have historical data and five-year forecasts for 101 market-level core industry variables.
We use household spending figures that show spending on food and drink, for consumption at home via retail purchases. We divide
food and drink into two categories: (i) spending on food & non-alcoholic drinks, and (ii) alcoholic drinks.
For the alcoholic drinks sub-categories, we use volume (in litres) consumption by household and per capita in each market; this is
measured via both on and off trade.
Our forecasts are a combination of regression modelling, time series analysis and analyst expert judgement.
Our Food & Drink analysts interact with other analytical teams in BMI, including Country Risk, Agribusiness and Consumer & Retail.
This is to ensure they have a comprehensive understanding of external factors that may impact the food and drink industry outlook
either on a market, regional or global level.
There is a constant rolling cycle of data monitoring, with databases being updated on a quarterly basis. Analysts will use their expert
judgement outside of these cycles to implement forecasts changes when necessary.
Our global currency (US dollar and euro) values are calculated using prevailing and forecast exchange rates to allow for consistency
and comparability across different markets. Markets that are experiencing instability or high rates of inflation with low levels of
international trade can be so exposed to this that official or market exchange rates do not reflect the real exchange rate on the
ground. Similarly, this can also be the case in markets with high rates of self-sufficiency in a certain commodity, where little or no
trade is taking place and thus no demand and supply of its currency affects its conversion price. This can overinflate global currency
conversions for a certain period of time.
Food & Non-Alcoholic Drinks
Spending on food & non-alcoholic drinks is expressed in nominal terms.
We define spending on food & non-alcoholic drinks as the amount households spend on food for domestic consumption only. This
reflects items bought through retail sales channels, based on the UN classification of individual consumption by purpose (COICOP).
Historical figures for spending on food & non-alcoholic drinks are based on household survey data, following the UN COICOP
classifications.
Where spending data is not readily allocated into the COICOP format, we apply a rigorous and logical approach in allocating data to
align with these categories, and if needed, apply aggregation methods or other techniques to achieve category level data.
Our food & non-alcoholic drinks forecasts are based on regression model and other time series analysis models, using a market’s
own historical time series and key macroeconomic explanatory variables from our Country Risk and Consumer & Retail services. In
addition, we also apply analyst expert judgement to refine and finalise the food & non-alcoholic drinks spending forecast based on
exogenous and endogenous variables or events, not captured by our regression model.
Alcoholic Drinks
Spending on alcoholic drinks is expressed in nominal terms and volume terms.
We define spending on alcoholic drinks as the amount households spend on alcohol for domestic consumption only. This reflects
items bought through all sales channels, based on the UN classification of individual consumption by purpose (COICOP).
Historical figures for spending on alcoholic drinks are based on household survey data, following the UN COICOP classification.
Alcoholic drink consumption is defined as the total recorded volume of alcohol drinks consumed in a market. Data is presented in
volumes consumed as opposed to pure alcoholic volume. It refers to consumption by people aged 15 and older and all sales
channels of consumption, including out-of-home consumption, such as bars, restaurants etc.
We divide the alcoholic drinks category into beer, wine and spirits, as well as further breakdowns, where data is available, into sub-
categories of these segments.
Our alcoholic drinks forecasts are based on a regression model, using a market's own historical time series. In addition, we also apply
analyst expert judgement to refine and finalise the alcoholic drinks spending forecast based on exogenous and endogenous
variables or events, not captured by our regression model.
Food & Drink (Non-Alcoholic Drinks) Risk/Reward Index
Our Food & Drink (Non-Alcoholic Drinks) Risk/Reward Index (RRI) quantifies and ranks a market's attractiveness within the context of
the food & non-alcoholic drinks industry, based on the balance between the Risks and Rewards of entering and operating in
different markets.
We combine industry-specific characteristics with broader economic, political and operational market characteristics. We weight
these inputs in terms of their importance to investor decision-making in a given industry. The result is a nuanced and accurate
reflection of the realities facing investors in terms of first the balance between opportunities and risk and second between industry-
specific and broader market traits. This enables users of the index to assess a market's attractiveness in a regional and global
context.
The index uses a combination of our proprietary forecasts and analyst assessments of the regulatory climate. As regulations evolve
and forecasts change, so the index scores change providing a highly dynamic and forward-looking result.
The Food & Drink (Non-Alcoholic Drinks) RRI universe comprises 106 markets.
Benefits Of Using Our Food & Drink (Non-Alcoholic Drinks) RRI
• Global Rankings: One global table, ranking all the markets in our universe for food & drink (non-alcoholic drinks) from least
(closest to zero) to most attractive (closest to 100).
• Accessibility: Easily accessible, top-down view of the global, regional or sub-regional risk/reward profiles.
• Comparability: Identical methodology across 106 markets for food & drink (non-alcoholic drinks) allows users to build lists of
markets they wish to compare, beyond the confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
favourable the profile.
• Quantifiable: Quantifies the rewards and risks of doing business in the food & drink (non-alcoholic drinks) industry in different
markets around the world and helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic
and operating risks.
• Entry Point: A starting point to assess the outlook for the food & drink (non-alcoholic drinks) industry, from which users can
dive into more granular forecasts and analyses to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
• Methodology: The index is a combination of proprietary BMI forecasts, analyst insights and globally acceptable benchmark
indicators.
Weightings Of Categories And Indicators

Food & Drink (Non-Alcoholic Drinks) Risk/Reward Index
Source: BMI
The RRI matrix is divided into two distinct categories:
Rewards: Evaluation of an industry's size and growth potential (Industry Rewards), and macro industry and/or market
characteristics that directly impact the size of business opportunities in a specific industry (Country Rewards).
Risks: Evaluation of micro, industry-specific characteristics, crucial for an industry to develop to its potential (Industry Risks) and a
quantifiable assessment of the political, economic and operational profile (Country Risks).
Assessing Our Weightings
Our matrix is deliberately overweight on Rewards (60% of the final RRI score for a market) and within that, the Industry Rewards
segment (60% of the final Rewards score). This is to reflect the fact that when it comes to long-term investment potential, industry
size and growth potential carry the most weight in indicating opportunities, with other structural factors (demographic, labour
statistics and infrastructure availability) weighing in, but to a slightly lesser extent. In addition, our focus and expertise in emerging
and frontier markets has dictated this bias towards industry size and growth to ensure we are able to identify opportunities in
markets where regulatory frameworks are not as developed and industry sizes are not as big as in developed markets, but where we
know there is a strong desire to invest.
FOOD & DRINK (NON-ALCOHOLIC DRINKS) RRI INDICATORS - EXPLANATION AND SOURCES
Source Rationale
Rewards
Industry Rewards
Denotes per capita spending on food & non-alcoholic drinks in USD.

F&D Spending Per Capita BMI Forecast
Wealthier populations spend more on F&D products.
Denotes food & non-alcoholic drinks industry dynamism as a percentage.

F&D Five-Year Growth Rate BMI Forecast Scores based on annual average growth over our five-year forecast
period.
Denotes total household spending on food & non-alcoholic drinks in

Total F&D Expenditure BMI Forecast
USDbn. Large markets score higher than smaller ones.
Country Rewards
Size of the population in millions as a measure for the total addressable

Population BMI Forecast
market.
Proportion of households with an income that exceeds USD10,000.

Mass Affluent Class BMI Forecast Excludes those in poverty but demonstrates potential demand for
branded products.
Size of the urban population in millions. Higher urban population size is a

Urban Population BMI Forecast positive for distribution, higher economic development and accessing
products through a network of retailers.
Proportion of the population between 20-39 years old as a percentage.

Spending Population BMI Forecast This is typically the range that companies target as a high spending/
trendsetting generation.
Risks
Industry Risks
Uses Operational Risk's Economic Openness as a proxy for determining

Regulatory Environment BMI Operational Risk Index
the ease of entering and doing business in a market.
Uses our urban/rural split (%) data as a proxy for determining the level of
F&D Formalisation BMI Forecast retail/hospitality formalisation in the market. Highly urbanised markets
allow companies to easily serve more consumers.
Uses Operational Risk's Logistics Risk to determine the risks and costs
associated with moving products around a market. Higher scores
Logistics Risk BMI Operational Risk Index
indicate quality transport, cheap fuel/electricity and high levels of tech
adoption
Country Risks
Takes into account the structural characteristics of economic growth, the

Long-Term Economic Risk labour market, price stability, exchange rate stability and the
BMI Country Risk Index
Index sustainability of the balance of payments, as well as fiscal and external
debt outlooks for the coming decade.
Seeks to define current vulnerabilities and assess real GDP growth,

Short-Term Economic Risk inflation, unemployment, exchange rate fluctuation, balance of
Index payments dynamics, as well as fiscal and external debt credentials over
the coming two years
Long-Term Political Risk BMI Country Risk Index Assesses structural political characteristics based on our assumption that
Source Rationale
liberal, democratic markets with no sectarian tensions and broad-based

Index income equality exhibit the strongest characteristics in favour of political
stability, over a multi-year time frame.
Short-Term Political Risk Assesses pertinent political risks to investment climate stability over a
Index shorter time frame, up to 24 months forward.
Focuses on existing conditions relating to four main risk areas: Labour

Operational Risk Index BMI Operational Risk Index
Market, Trade & Investment, Logistics, and Crime & Security.
Source: BMI
Food & Drink (Alcoholic Drinks) Risk/Reward Index
Our Food & Drink (Alcoholic Drinks) Risk/Reward Index (RRI) quantifies and ranks a market's attractiveness within the context of the
food & drink (alcoholic drinks) industry, based on the balance between the Risks and Rewards of entering and operating in
different markets.
We combine industry-specific characteristics with broader economic, political and operational market characteristics. We weight
these inputs in terms of their importance to investor decision-making in a given industry. The result is a nuanced and accurate
reflection of the realities facing investors in terms of first the balance between opportunities and risk and second between industry-
specific and broader market traits. This enables users of the index to assess a market's attractiveness in a regional and global
context.
The index uses a combination of our proprietary forecasts and analyst assessments of the regulatory climate. As regulations evolve
and forecasts change, so the index scores change providing a highly dynamic and forward-looking result.
The Food & Drink (Alcoholic Drinks) RRI universe comprises 95 markets.
Benefits Of Using Our Food & Drink (Alcoholic Drinks) RRI
• Global Rankings: One global table, ranking all the markets in our universe for food & drink (alcoholic drinks) from least (closest
to zero) to most attractive (closest to 100).
• Accessibility: Easily accessible, top-down view of the global, regional or sub-regional risk/reward profiles.
• Comparability: Identical methodology across 95 markets for food & drink (alcoholic drinks) allows users to build lists of markets
they wish to compare, beyond the confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
favourable the profile.
• Quantifiable: Quantifies the rewards and risks of doing business in the food & drink (alcoholic drinks) industry in different
markets around the world and helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic
and operating risks.
• Entry Point: A starting point to assess the outlook for the food & drink (alcoholic drinks) industry, from which users can dive into
more granular forecasts and analysis to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
• Methodology: The index is a combination of proprietary BMI forecasts, analyst insights and globally acceptable benchmark
indicators.
Weightings Of Categories And Indicators

Food & Drink (Alcoholic Drinks) Risk/Reward Index
Source: BMI
The RRI matrix is divided into two distinct categories:
Rewards: Evaluation of an industry's size and growth potential (Industry Rewards), and macro industry and/or market
characteristics that directly impact the size of business opportunities in a specific industry (Country Rewards).
Risks: Evaluation of micro, industry-specific characteristics, crucial for an industry to develop to its potential (Industry Risks) and a
quantifiable assessment of the political, economic and operational profile (Country Risks).
Assessing Our Weightings
Our matrix is deliberately overweight on Rewards (60% of the final RRI score for a market) and within that, the Industry Rewards
segment (60% of the final Rewards score). This is to reflect the fact that when it comes to long-term investment potential, industry
size and growth potential carry the most weight in indicating opportunities, with other structural factors (demographic, labour
statistics and infrastructure availability) weighing in, but to a slightly lesser extent. In addition, our focus and expertise in emerging
and frontier markets has dictated this bias towards industry size and growth to ensure we are able to identify opportunities in
markets where regulatory frameworks are not as developed and industry sizes are not as big as in developed markets, but where we
know there is a strong desire to invest.
FOOD & DRINK (ALCOHOLIC DRINKS) RRI INDICATORS - EXPLANATION AND SOURCES
Source Rationale
Rewards
Industry Rewards
Denotes per capita consumption of alcoholic drinks in litres. Measures which

Alcohol Consumption Per
BMI Forecast populations consume more on alcohol products at the individual level rather
Capita
than total size.
Alcohol 5-Year Growth Denotes alcoholic drinks industry dynamism as a percentage. Scores based
BMI Forecast
Rate on annual average growth over our five-year forecast period.
Total Alcohol Denotes total consumption of alcoholic drinks in millions of litres. Large
BMI Forecast
Consumption markets score higher than smaller ones.
Denotes per capita spending of alcoholic drinks in USD. Measures which

Alcohol Spending Per
BMI Forecast populations spend more on alcohol products at the individual level rather
Capita
than total size.
Alcohol Spending Growth Denotes alcoholic drinks spending dynamism as a %. Scores based on
BMI Forecast
Rate annual average growth over our five-year forecast period.
Denotes total spending of alcoholic drinks in USD. Large markets score

Alcohol Spending Total BMI Forecast
higher than smaller ones.
Country Rewards
Size of the population in millions as a measure for the total addressable

Population BMI Forecast
market.
Proportion of households with an income that exceeds USD10,000. Excludes

Mass Affluent Class BMI Forecast those in poverty but demonstrates potential demand for branded alcohol
products.
Size of the urban population in millions. Higher urban population size is a

Urban Population BMI Forecast positive for distribution, higher economic development and accessing
products through a network of retailers.
Proportion of the population between 20-39 years old as a percentage. This

Spending Population BMI Forecast is typically the range that companies target as a high spending/trendsetting
generation and are generally over the legal drinking age.
International Tourism Represents the total spend of international visitors. Provides another
BMI Tourism Forecast
Receipts Total potential market opportunity for the alcoholic drinks industry.
Represents the total spend of international visitors on a per capita basis.

International Tourism
BMI Tourism Forecast Measures economic potential of the alcohol drinks market at the individual
Receipts Per Visitor
level rather than total size.
Source Rationale
Risks
Industry Risks
Uses Operational Risk's Economic Openness as a proxy for determining the

Regulatory Environment BMI Operational Risk Index
ease of entering and doing business in a market.
Uses our urban/rural split (%) data as a proxy for determining the level of
F&D Formalisation BMI Forecast retail/hospitality formalisation in the market. Highly urbanised markets allow
companies to easily serve more consumers.
Uses Operational Risk's Logistics Risk to determine the risks and costs
Logistics Risk BMI Operational Risk Index associated with moving products around a market. Higher scores indicate
quality transport, cheap fuel/electricity and high levels of tech adoption
Country Risks
Takes into account the structural characteristics of economic growth, the

Long-Term Economic Risk labour market, price stability, exchange rate stability and the sustainability of
Index the balance of payments, as well as fiscal and external debt outlooks for the
coming decade.
Seeks to define current vulnerabilities and assess real GDP growth, inflation,
Short-Term Economic Risk
BMI Country Risk Index unemployment, exchange rate fluctuation, balance of payments dynamics,
Index
as well as fiscal and external debt credentials over the coming two years
Assesses structural political characteristics based on our assumption that

Long-Term Political Risk liberal, democratic markets with no sectarian tensions and broad-based
Index income equality exhibit the strongest characteristics in favour of political
stability, over a multi-year time frame.
Short-Term Political Risk Assesses pertinent political risks to investment climate stability over a
Index shorter time frame, up to 24 months forward.
Focuses on existing conditions relating to four main risk areas: Labour

Operational Risk Index BMI Operational Risk Index
Market, Trade & Investment, Logistics, and Crime & Security.
Source: BMI
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Q4 2023

Industry Trends And Developments .....................................................................................................................................17

United Kingdom Demographic Outlook...............................................................................................................................67

Food & Drink Glossary ................................................................................................................................................................70

Food & Drink Methodology .......................................................................................................................................................71

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e/f = BMI estimate/forecast. Source: National sources, BMI

Latest Updates And Industry Developments

Nominal Spending Largely Being Driven By Higher Prices

Source: Office For National Statistics, BMI

UK Households Are Still Exposed

Short-Term Food Spending Outlook (2023-2024)

Food Price Inflation Impacting Sales

e/f = BMI estimate/forecast. Source: National sources, BMI

FOOD SALES (UK 2020-2027)

Bread, rice and cereals, sales, GBPmn, %

Pasta products, sales, GBPmn, % growth

Baked goods, sales, GBPmn, % growth y-

Meat and Poultry, sales, GBPmn, %

Fish and fish products, sales, GBPmn, %

Oils and Fats, sales, GBPmn, % growth y-

Fresh and preserved fruit, sales, GBPmn,

Fresh vegetables, sales, GBPmn, %

Sugar and sugar products, sales, GBPmn,

Other food products, sales, GBPmn, %

Short-Term Alcoholic Drinks Outlook (2023-2024)

Large And Mature Alcoholic Drinks Market

e/f = BMI estimate/forecast. Source: WHO, BMI

TOTAL ALCOHOLIC DRINKS SPENDING AND CONSUMPTION (UK 2020-2027)

Short-Term Non-Alcoholic Drinks Outlook (2023-2024)

Inflationary Pressures Weighing On Spending

e/f = BMI estimate/forecast. Source: National sources, BMI

NON-ALCOHOLIC DRINKS SALES (UNITED KINGDOM 2020-2027)

Coffee, teas and other hot drinks, sales, GBPmn, %

Fruit and vegetable juices, sales, GBPmn, % growth

Mineral or spring waters, sales, GBPmn, % growth y-

Industry Trends And Developments

Dietary Spending Shift Overview

Inflationary Pressures Will Weigh Heavily On Real Food Spending

e/f = BMI estimate/forecast. Source: Office for National Statistics, BMI

UK Households Consistently Spending On Five Categories

f = BMI forecast. Source: Office for National Statistics, BMI

1. Rising Health-Consciousness Driving Shifts In Food Consumption

Households Allocating More Spending To Fruits & Seafood

f = BMI forecast. Source: Office for National Statistics, BMI

2. Meat-Free And Flexitarian Diets Playing Greater Role

Poultry Now Dominates Meat Consumption In The UK

e/f = BMI estimate/forecast. Source: Defra, BMI

3. Household Spending On Chocolate And Confectionery Is Plateauing

Consumers Will Gradually Cut Back Their Spending

e/f = BMI estimate/forecast. Source: Office for National Statistics, BMI

Market Drivers And Trends

Food Imports Spiked Over 2022, Driven By Higher Prices

Source: Trade Map, BMI

Fish And Seafood

Chocolate And Confectionery

Market Drivers And Trends

Coffee & Tea

August 2023 Duty Increase

Red Wine Remains Dominant, Prosecco Biggest Winner

Source: Trade Map, BMI

Mass Grocery Retail

UK Food & Drink Report Q4

UK Food & Drink Report Q4