2022 in Review: MARKET Trends 

One of the most significant factors affecting the food and drink industry in 2022 was the continuing global supply chain crisis swiftly followed by the cost of living crisis. Uncertain conditions continued to put pressure on global supply chains, undermining the production and distribution of food and drink across the UK.  

Supply bottlenecks that COVID-19-related restrictions created on shipping, labour and energy were further impacted by Brexit supply concerns.  This was closely followed by the war in Ukraine, resulting in a strong increase in the cost of raw materials and, in turn, food products globally. With average fuel prices reaching the highest level on record, and rising inflation, there has been an unsustainable burden on logistics businesses which operate traditionally on very narrow margins.

In summary, the supply chain crisis, together with rising electricity prices, wages and the cost of raw materials, have caused food prices to shoot up in an unprecedented manner. Manufacturers are struggling to keep pace with the increases, and retailers face an unprecedented dilemma in terms of how much of the increase in costs they pass on to their customers.

The ONS reported that the food and beverage sector was the worst hit, as a result of increased energy prices.

Proportion of businesses with 10 or more employees, reporting energy prices had an effect on production or supply. ONS March 2022

The supply chain crisis also lead to a 60% increase in food waste in the UK, with more than a third of businesses admitted to deprioritising food waste due to the ongoing challenges in the supply chain, according to a study by Sodexo.

According to the Trussell Trust, the cost-of-living crisis is exposing the severity of food poverty in the UK. Millions are being pushed below the breadline, struggling to feed themselves and their families. The Trussell Trust saw record numbers of people seeking help between April and September this year, with 320,000 people forced to turn to the charity’s food banks. That is a 40 per cent increase in comparison to the previous year. 

One of the most positive market trends which was seen in 2022 is the continued joy of home cooking. This rose in popularity during the Covid lockdowns, remained prevalent in 2022, with more than a fifth of UK consumers now cooking every meal from scratch, compared to just one in eight in 2019. UK home cooks love to learn new cooking skills and recipes, with over four in ten keen to improve their cooking skills, according to research by Mintel in 2022.

Fresh food, fresh cooking ingredients and meal kits were the categories that recorded the fastest growth during 2022.  This has been driven by the rising health and wellness trend, together with consumers’ need for convenient food solutions, and opportunities for simple and quick to prepare meals.

Meal kits, in particular, are projected to continue growing as out-of-home mobility increases and consumers’ disposable time reduces. Mintel reports that home delivery meal kits have been tried by around three in ten home cooks, as they seek to continue to cook from scratch, but with the benefit of the shortcuts that meal kits provide.

Health and sustainability market trends maintain their importance, boosting the rise of plant-based diets and functional food and beverages. It is not just about one’s own health-conscious diet, but about a responsible eating culture that also includes the health of the planet.

Beverages and food that meet the need for control, health and sustainability continue to feature increasingly on shopping lists, especially amongst millennial and gen-z consumers.  Since the pandemic outbreak, food manufacturers have been increasingly investing on holistic health with the launch of fortified and functional products that support the immune system and mental health.

The flexitarian trend continues to grow as more people seek to moderate or abstain from animal products for health, sustainability and ethical reasons.

Making a significant impact on the plant-based grocery aisle in 2022 are dairy-free milk alternatives, fish-less seafood, meatless sausages and burgers, and vegan cheese.

Soft drinks today should not only taste good, but ideally also score points as functional drinks with a plus in certain ingredients.  For example, vitamins or minerals that support an active and conscious lifestyle as part of a balanced diet. Functional drinks, including energy drinks, were among the strongest growth areas in 2022.

In the UK alcoholic drinks market in 2022, the trend in seeking value was juxtaposed by the continuing trend in premiumisation, according to IWSR’s consumer survey in October. IWSR data showed signs of down-trading across many beverage alcohol categories, with an increasing focus on reducing quantity but maintaining quality. 

The new imperative is conscious indulgence, balance and luxurious experience. The rise in health consciousness means that many consumers are now drinking a little less, but higher quality, looking for premium drinks and spirits that they can take time to savour and enjoy.

The UK drinks market is no longer just about getting the best value for money, but about knowing what’s under the label, both in-home and out-of-home.

Consumers are seen to be moving away from high-volume, lower-value beverages, such as wine and beer, and moving into lower-volume, higher-value categories, continuing the boom in gin, and also categories such as whisky, Tequila, and Cognac.

Bacardi’s Cocktail Trends Report 2022 notes there has been a shift in the perception of tequila from a party spirit to a sophisticated sipping serve.

Supply chain challenges, increasing costs and labour shortages have all played a part in increasing the UK’s food and beverage prices. Increased interest rates, global economic uncertainty and the cost-of-living crisis mean that household budgets are facing significant pressure as we move into 2023.

Nevertheless, in the face of ongoing challenges in the food and beverage industry, we have shown how a number of categories are going from strength to strength, and the outlook remains positive for 2023. Food and beverage businesses operating in the areas of convenience, health and sustainability are set to thrive, as consumers find ways to support gut-health and immune systems, as well as protecting the planet.