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March 19, 2020

Covid-19 has profound implications for UK food system – Shore Capital

One of the UK's well-known food industry analysts has said the Covid-19 outbreak could have a profound impact on the country's food system.

By Leonie Barrie

One of the UK’s well-known food industry analysts has said the Covid-19 outbreak could have a profound impact on the country’s food system as demand shifts from foodservice to grocery retail.

Clive Black of Shore Capital said the virus could lead to an “expectation of a 20-25% on-going increase in aggregate grocery retail demand”.

He said: “Large supermarkets are set to gain considerable share from a worried nation, with maybe 20-25% of the nation’s calorific intake switching from F&B [foodservice] to retail. 

“Where supermarkets and their respective supply chains gain, F&B and its input purveyors will be looking anxiously at government support for business.” 

Black added: “The change in the way coronavirus is to be managed in the UK had quite immediate implications for the food system, not least when the Prime Minister announced that folks should not frequent the nation’s bars, nightclubs, restaurants and the like. 

“The corresponding behavioural change has brought the F&B segment to crisis territory.”

Black said the decision by the UK government to close schools from the end of tomorrow (20 March) will also add to families’ grocery spend.

“The end of the school year in mid-March is likely, to us, to take retail demand through yet another gear,” he said.

Black is also of the view that rationing by the supermarkets – introduced to stop customer hoarding which has led to empty shelves – could have an impact on the number of SKUs on offer.

“The increase in aggregate retail demand requires adjustments to supply chains, particularly around SKU rationalisation to permit longer production runs of essential items,” he said.

Black said he expects the switch from foodservice to retail to lead to “a step up in the demand for fresh food production from the retailers and a shift in distribution across the whole food system, again possibly on a SKU rationalised, so lower choice, and store rationed basis”.

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