The Institute of Grocery Distribution (IGD) has released its latest Viewpoint report, UK Food Inflation Forecasts 2025-2027, warning that retail food inflation is set to peak at 5.1% in late summer 2025.
It highlighted that this would “significantly outpace general inflation”, with the rise expected to place further pressure on both households and businesses as the UK economy “continues to grapple with sluggish growth and persistent price pressures”.
The report also outlined that food prices are now the top concern for UK shoppers, overtaking worries about energy costs, as they brace themselves for higher food bills in 2025.
Looking ahead to 2027, the report offers “cautious optimism”, forecasting a gradual decline in food inflation to 1.8% by mid-2027. However, the near-term outlook “remains challenging”, said the report, with inflationary pressures fuelled by a potent mix of regulatory costs, extreme weather events and global commodity volatility.
According to IGD’s latest data, 83% of shoppers now expect escalating retail food prices, while 81% are concerned about Away From Home costs. The report said that the “mounting unease” is reflected in IGD’s Shopper Confidence Index, which dipped to +1 in June, down two points from May, with three quarters of consumers anticipating tax hikes.
“Businesses should adapt to shifting customer behaviours by offering value, convenience and memorable experiences to attract customers and drive growth.”
Michael Freedman, head of economic and consumer insight at IGD, commented: “Amid economic uncertainty, shoppers are cautious with their finances, increasing private label purchases while reducing impulse and indulgence buys. We identified only 29% of consumer plans to cut back on grocery spending, suggesting many have already tightened their budgets and have little room to cut back further.
“Instead, shoppers are more likely to look for savings on discretionary purchases like clothing and eating out, underscoring a clear prioritisation of food shopping over other categories. Businesses should adapt to shifting customer behaviours by offering value, convenience and memorable experiences to attract customers and drive growth.”
IGD reported that a “deeper polarisation” was becoming evident among shoppers, with one in four expecting their financial situation to worsen in the year ahead. This figure rose to 41% among lower-income households, which was a ten-point increase since May 2024, and in contrast only 11% of higher earners now expect to be worse off, which was a decrease of five points.
While financially secure consumers remain open to treating themselves through premium dine-in experiences and impulse buys, innovation is increasingly being drive by Gen Z, the report found, whose curiosity for new cuisines and novel formats “is opening up fresh opportunities for businesses to engage and develop new offerings within the food sector”.
IGD’s report called on retailers, manufacturers, and policymakers to stay “closely attuned” to shifting consumer behaviours, particularly around value, convenience and experience, as they navigate the road ahead.
