Ask a person on the street what one of the fastest growing sectors are in the UK economy, and you’ll probably get answers like ‘tech’ or ‘finance’. And they’d be wrong; the correct answer is the food and drink sector. The UK food-to-go market, for example, surged to £48.2 billion in 2024, a 14% increase from the previous year)
This substantial industry growth has been driven in part by inflation, but also by changing consumer preferences, with a major shift towards convenience and on-the-go options like sandwiches, meal deals and pizza. In this article, we’ll explore this growth, take a look at some trends and predictions and examine how it impacts the logistics sector.
Current trends in food and drink
Our increasingly busy lifestyles are fuelling a preference for on-the-go eating. Convenience foods have seen a major rise in consumer spending, with spontaneous purchases accounting for about half of all transactions. The lunch crowd, in particular, accounted for 71% of purchases in the first quarter of 2024.
High-end sandwiches are emerging as a popular choice as consumers seek options that are as appetising as they are affordable (Lumina, 2023). To meet this demand, retailers have introduced tiered meal deals that allow customers to enjoy higher-quality food without breaking the bank.
Government policies are also contributing to the success of the sector with initiatives such as providing access to sustainable energy and water and cutting planning red tape to speed up the construction of glasshouses. These measures, along with a new blueprint for growing the UK fruit and vegetable sector, are set to drive domestic production and investment.
So what’s the outlook for the coming year?
Looking ahead to 2025, the sector is expected to continue its growth trajectory. The market is projected to experience a sizable increase, with forecasts indicating a nearly 40% rise by 2028 compared to 2019 levels (IGD) – with convenience foods remaining a prime driver.
To help things along, the government is looking to address the labour shortages in the sector and promote investment, meaning productivity is likely to remain as high as ever. How Number 10 will reconcile this with its disapproval of junk food (which encompasses any number of convenience foods) remains to be seen – but more on that later.
Technological advancements
The ongoing integration of automation and AI-driven solutions in the sector will continue to heighten operational efficiency. Investment in these technologies helps firms respond more effectively to increased demand, allowing forward-thinking companies to position themselves to fully capitalise on the sector’s growth.
Potential hurdles
That all said, several factors could impact the sector and its growth predictions. While the government may have pledged to address the worker shortages that beset the sector, the situation on the ground is yet to change. Despite some mild improvements in vacancy rates, the sector continues to face serious staffing issues, which could affect productivity and growth.
If the labour shortage crisis isn’t resolved by government action, companies will need to take a number of measures to maintain continued growth – such as exploring new recruitment strategies, investing in workforce development and improving employee retention.
Regulatory changes and economic policies
While convenience foods are responsible for much of the sector growth, the UK government is attempting to reduce the consumption of high-fat, sugar and salt (HFSS) foods. Although a tax on HFSS foods has been ruled out, restrictions on advertising and sales to younger consumers may alter market dynamics. Either way, businesses will need to adapt their product lines and marketing strategies to comply with any new HFSS legislation.
Trade barriers and geopolitical factors
Regulatory challenges are significantly affecting food exports, making it harder for companies to compete internationally. Post-Brexit trade agreements, for instance, have introduced new layers of complexity, increasing costs and slowing down the movement of goods, putting increased pressure on profit margins.
The world’s geopolitical instabilities and conflicts are also throwing a major spanner in the works of the food and drink industry. Ongoing wars, for example, have resulted in major disruptions in the global supply chain, particularly for commodities like grain and cooking oils. These problems have created shortages of key ingredients, driving up prices and making it difficult for businesses to meet demand.
Cybersecurity threats
Virtual attacks are also taking their toll on the sector. Food and drink companies are regularly targeted by cyber-attacks, and the potential damage inflicted by these attacks is a growing concern, especially in the light of the sector’s modernisation.
As the industry embraces automation and AI-driven solutions, they’re becoming increasingly vulnerable to malicious operators. Cyber-attacks targeting key infrastructure, such as production lines or distribution networks, can bring entire operations to a halt and have severe financial repercussions.
Evolving consumer trends
While the UK population may be experiencing a convenience food wave, consumer trends are always changing, with health a growing consideration in consumer preferences. In recent years, there’s been a marked shift toward healthier options. The demand for food and drink products that align with this dietary choice is growing quickly, with businesses needing to introduce low-calorie, low-sugar and organic options to meet consumer expectations.
Sustainability is another key trend driving change in the sector, particularly in younger demographics. As environmental awareness increases, consumers are demanding products that are ethically sourced, sustainably produced and packaged with minimal environmental impact. Businesses that fail to cater to this perspective risk alienating a large segment of the market.
4PL: The essential ingredient in food and drink logistics
In the face of substantially increased consumer demand, the logistics sector needs to be as responsive to this change as the manufacturers and retailers they serve. To this end, 4PL (Fourth-Party Logistics) solutions like those provided by X2 (UK) deliver a highly efficient and dependable way forward.
Bringing advanced technologies and comprehensive supply chain strategies to the food and drink table, X2 (UK) allows businesses in the sector to reliably meet any demand fluctuations and maintain growth. Our control tower methodology, for example, allows businesses to respond quickly to changes and maintain operational efficiency.
For more information, head to x2uk.com