The prevailing concern over living costs is significantly influencing the shopping habits of consumers in the UK. According to new data, 36% of shoppers are reducing their grocery purchases, while 48% are exploring multiple stores to secure savings. This highlights the ongoing struggle families face amid economic pressures, as reported by Circana’s latest analysis in the ‘State of the Nation 2025’ report.
The food and drink sector in the UK is anticipated to experience a modest growth of 1% in 2024 as living costs gradually ease. However, specific product categories are witnessing substantial growth. Notably, the gut health market, valued at £367 million, has expanded by 12% year-on-year. Meanwhile, alcohol-free beverages have surged by 25%, and nicotine pouches have seen a dramatic 92% increase in demand.
Despite these positive trends, the industry is encountering several significant challenges. New regulatory requirements, such as the £3 billion extended producer responsibility (EPR) scheme, are exerting additional financial pressure on businesses already burdened by rising operational costs. Furthermore, the introduction of restrictions on products high in fat, salt, and sugar (HFSS) is influencing market growth. The government may impose further restrictions due to stagnant trends in fat, salt, and calorie consumption.
For businesses aiming to maintain and drive growth into 2025, Circana advises a strategic focus on distribution efficiency and innovative retail strategies. Employing off-shelf displays for promotional purposes, leveraging price elasticity to inform pricing decisions, and favouring round-pound promotions over multibuy offers are recommended approaches. Additionally, tapping into health-conscious consumer trends and functional health products could present significant opportunities for accelerated growth.
Speaking on future prospects, Alex Lawrence, a senior strategic insight director at Circana, noted, ‘2025 is shaping up to be another challenging year for the FMCG sector. However, manufacturers that invest wisely can still achieve solid growth. With health-conscious trends on the rise, smarter promotions and better use of retail channels, there are also opportunities to accelerate growth.’
The UK grocery market is at a crossroads, influenced by evolving consumer behaviour driven by economic challenges and regulatory changes. While the sector faces hurdles, especially with regulatory pressures, there are ample opportunities for innovation and strategic growth, particularly in health-conscious product lines. Businesses that can adapt to these shifts are likely to find enduring success.
