United Kingdom Food and Drink Report Q2 2016
BMI View: We maintain our favourable consumer outlook for the UK, with household spending growthoutperforming most Western European markets. This will boost sales of food and drink, although the sectorwill expand at a more moderate pace than headline household spending due to the existing maturity of theindustry. In addition, the ongoing price war in the food retail sector will continue to put downward pressureon nominal sales.
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The UK remains one of our favourite consumer markets in Western Europe. Nonetheless, we seeincreasing risks to household spending over the coming quarters. We do not expect further significantreductions in unemployment, while the expansion of wages has cooled down. With consumptionaccounting for a large share of household income and high leverage, any external shock couldsignificantly affect our growth prospects.
Our positive consumer outlook will boost sales of food and drink. Nonetheless, sales will expand at aslower pace compared with headline household spending, due to existing sector immaturity. In addition,the price war in the food retail sector will continue to impact nominal sales. German discounters Aldi and Lidl continue to invest heavily in the UK, taking market share away from legacy retailers (Tesco,Sainsbury's, Asda and Morrisons).
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