Food and grocery think tank IGD predicted that the UK grocery retail market will be worth £118.1bn (US$217.6bn) by the end of this year, an increase of 2.7% year on year, and could be worth £133.5bn by 2009.

The key factors driving growth are the steady population change, increasing contribution of non-food (which will account for 10% of total annual sales by the end of the year) and consumers trading up to premium ranges.

Keeping growth in check is low food price inflation, running 2% below background inflation at 0.5%. Food & Grocery, however is now the third biggest element of household expenditure, accounting for 13% in 2003, and for 49p of every £1 of retail spend.

In its new report, Grocery Retailing 2004, IGD said that the market will continue to grow at an average rate of 2.5% over the next five years and will be worth £133.5bn (current prices prevailing) by 2009. This growth will come from the two ends of the national store portfolio – convenience and hypermarkets. There are currently around 600 hypermarkets, and IGD believes this will increase by a third in the next five years, while the convenience sector will grow from £23bn to £29bn in the next four years.