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Specialist Food and Drink Retailers - UK - March 2015
Introduction
 
The specialist food and drink grocery market continues to see modest growth, with turnover reaching £10.24 billion in 2014. The number of specialist stores has been broadly declining for a number of years. This is a likely result of the rising business rates in many city centres and increased competition within the food and drink retail sector, leading to the growth of many online operators and a rejuvenation in food box deliveries such as HelloFresh and Graze.

The category saw an upturn in fortunes in the wake of the horsemeat scandal in early 2013 as food transparency became more important to many consumers. It has also benefited from the increasing trend for consumers to do less of their main shopping at supermarkets, instead looking towards top-up shopping trips. However, specialists are being overshadowed by the performance of convenience stores which are often doing a better job of securing the business of top-up shoppers, with the online channel and continued growth of the ‘discounters’ adding further competition.

While specialists are widely seen to offer higher quality goods, they also continue to be somewhat hampered by perceptions of high prices. This issue may become increasingly pertinent in the immediate future as the supermarket price wars escalate. The onus is therefore on specialists to try to convince shoppers that their produce and service is worth making the visit for and can justify higher costs where applicable.

Consumer questions for this report explore the following areas:

●	Usage of different types of specialist food and drink retailers;
●	Ways in which people shop in specialist retailers;
●	Engagement and attitudes towards shopping at specialist outlets;
●	Comparing how shoppers of specialists compare these stores with supermarkets;
●	Ways of boosting consumer visits to specialist retailers.

Definition
This report looks at food and drink sales through specialist retailers, including the following as per the Standard Industry Classifications from the Annual Business Survey:

●	Greengrocers (fruit and vegetables)
●	Butchers (meat)
●	Fishmongers (fish/seafood)
●	Bakers and confectioners (bread, cakes, chocolate and sugar confectionery)
●	Off-licences (alcoholic beverages)
●	Farmers’ markets
●	Other food specialists including delis and health food shops

Sales through convenience stores (c-stores) such as Tesco Express and Spar are excluded, and are covered in Mintel’s Convenience Stores – UK, April 2014 report and upcoming April 2015 iteration.

Financial definitions
●	Sales: turnover as reported by the company, excluding VAT.
●	Operating profits: profits after depreciation, but before interest and tax and excluding non-trading income such as the sale of fixed assets and any exceptional items, including provisions.
●	Pre-tax profits: operating profit less net interest payable and exceptional charges, but before tax, dividends and other appropriations.
●	Operating margin: operating profits as a percentage of sales.

Crown copyright material is reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland.

Value figures throughout this report are at retail selling prices (rsp) unless otherwise stated. Market sizes at constant 2014 prices have been calculated using Mintel’s food deflator.

Abbreviations
CAMRA | Campaign for Real Ale
FARMA | Farmers’ Retail & Markets Association
M&S | Marks & Spencer
NPD | New Product Development
NUS | National Union of Students
QSM | Quality Standard Mark
SKU | Stock Keeping Unit
USP | Unique Selling Point
VAT | Value Added Tax

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