David Gilroy is the managing director of Store Excel
Conjuring up visions of a Bavarian forest location great for a weekend break, I have no idea why it was called the Hunting Lodge. This well-established pub on a large housing estate bore absolutely no resemblance to a lodge of any type, and apart from stray dogs, there had never been a trace of wildlife to hunt within 50-mile radius.
It was a drinkers and smokers community pub. Darts, dominoes, pool table, football teams on a Sunday. The nearest thing to a meal on offer was a bag of crisps and a packet of nuts.
The pub was a flourishing business with a seemingly loyal clientele and secure future.
Like many other pubs of its type, the smoking ban came along, and its days were numbered. Within two years, it was shuttered and is now a McDonald’s restaurant.
Foodservice
The number of UK pubs has been in decline since 2007. Lumina Intelligence reports that pubs continue to close, especially smaller independent ones. The number of pubs has dropped from around 45,000 in 2019 to a projected 41,000 this year. According to Lumina, the pub market is now growing slowly.
Inflation, premiumisation, consumer spending on eating and drinking out are helping. Value growth is moderate and fragile (1-2% annually), and there are pressures on margins. There is a structural shift, too, with more investment in managed, branded and franchised pubs, and in higher-end, premium offerings. These tend to perform better than smaller, low-margin traditional pubs. Then there’s JD Wetherspoon – the behemoth of the pub sector in the UK with nearly 800 outlets. This is a seriously well-run business with incredible attention to detail and shows what can be done even in a segment under such pressure.
The founder and chief executive, Sir Tim Martin, is all over it, and it is no accident that its latest financials reported sales up 5.1% to £2.7bn and pre-tax profits up 10% to £81.4m. Wetherspoon’s success is not down to a single factor, but rather a combination of tight operational discipline, a strong value proposition, efficient use of property, motivated employees, adaptability and a diversified revenue base. Its culture of incremental improvement, regular investment and cautious but opportunistic expansion are all helping it to weather economic turbulence.
The value of the pub sector is around £24bn in a UK hospitality/foodservice market worth some £71bn. There are various sources of data and some contradictory. They indicate that the sector is in single-digit growth supported by inflation. That said, the hospitality sector’s segments are not uniformly strong, and the consensus is that, overall, it remains below pre-pandemic levels. Pubs are effectively static right now, accommodation/hotels seem to be recovering, but it is too early to draw conclusions.
The UK fast food, quick service, takeaway market is growing, but the growth rate appears to be moderating. It is currently valued at some £30bn, but some estimates put it at £40bn. Forecasts show mid-single-digit annual growth (around 5% per annum) for the next several years.
Convenience
Eric Chappell could see the world around him changing and knew his days were numbered. His store, Chappell’s News – on the same estate as the Hunting Lodge – was dated and needed serious investment to change the format from confectionery, tobacco and news to convenience. He’d traded it for more than 40 years, earning a decent living on six days a week, but now was the time. He sold the freehold to One Stop. They gutted the store and modelled it into a convenience-format trading from 6am to 9pm, seven days a week.
It has traded strongly, but is about to be refurbished again and converted to a Tesco Express. It will be interesting to see how it performs and the impact it has on the fragile traffic and parking infrastructure. Tesco is the dominant player with more than 28% share in the UK grocery market, roughly valued at some £240bn. The market is growing, but not strongly. Estimates put it at around 2% with a five-year forecast at 3.8%. Many of the gains reflect price inflation and shifts in channel (online, etc) rather than volume increases.
Separately, household food spending (in real constant prices) decreased from £109bn in 2022 to £106bn in 2024, suggesting that volumes are flat to declining even if nominal value is up. According to the Association of Convenience Stores’ (ACS) Local Shop Report 2025, there are more than 50,000 convenience stores across the UK. The estimated market size is around £48.8bn, and growth overall has declined, which seems to be underperforming against the grocery market in total. Some experts are predicting a hard time for convenience stores – already in decline. Other forecasters (Mintel Store) indicate a positive outlook at around 12% growth over the 2025-29 horizon.
The number of small stores is holding up – notably, unaffiliated independent stores and investment in the convenience store sector is rising. In 2024, convenience retailers invested £1bn in refitting stores and upgrading/ installing technology.
Just as Sir Tim Martin, Ken Murphy, chief executive of Tesco, is across the detail in his firm. In a recent article, he outlined his approach to driving the business. Three key principles: at least hold market share, move away from operating margin obsession to become more focused on cash optimisation and to be more ambitious on save to invest in terms of capital investment and more in price. He is technology-led and highly tuned to consumer trends. He has simplified the Tesco app, driving all traffic through one customer experience, making the journey as slick as possible and then trading people into as many different propositions as they are interested in.
Clubcard membership has increased from 14 million to 23 million, and the app usage from two million to around 15 million. The nationwide convenience-focused rapid delivery capability Whoosh has taken off, doubling over the past 12 months. The Tesco online marketplace has become a huge success, with more than 600,000 SKUs on the site since launch in 2024, and it has just recently partnered with Myrakl. Murphy is pushing hard on AI development and retail media (a huge revenue generator) while keeping a keen eye on the basic trading principles such as Clubcard pricing, Aldi price-matching and range optimisation to eliminate the long tail of slow sellers on valuable shelf space. This is all borne out by half-year results, which show sales up by 4.9% and a full-year profit forecast between £2.9bn and £3.1bn.
Despite relative success in their respective fields, both Sir Tim Martin and Ken Murphy cite serious headwinds due to higher taxes, rising labour costs, and government-initiated price increases in areas such as energy and potential business rates. Add to this inflation, which is stubbornly high and remains at 3.8% at time of writing. Consumer behaviour is another factor to consider. David Smith, of The Sunday Times, says that consumer-facing services fell by 0.6% in the three months to August – in stark contrast to previous behaviour when the UK economy could rely on consumers to pull it through to growth.
Consumer spending over the past three years, comparing the second quarters of 2022 and 2025, is down by 0.1%. Stagnant, in other words. Consumer spending in the UK is down on pre-pandemic levels, the lowest in the G7 countries, with the silent majority of people reducing their spending and personal debt. The view is that inflation and price attentiveness continue to weigh on consumption and saving decisions. David Smith’s and other economists’ opinions are that future potential price rises, taxes, higher borrowing costs and a real squeeze on incomes are prompting people to hold back spending and search hard for value.
How does wholesale fit in?
The grocery wholesaling market in the UK comprises retail customers with 52% share, foodservice (29%), contract caterers (10%), and other channels such as exports and specialists (9%). The market is valued at around £44bn and growing slowly between 1% and 2%. But growth is largely inflation-driven with very weak volume growth. Looking at the bigger picture, the major categories of wholesaler customers, retailers and foodservice/hospitality operators are experiencing pressures brought about by structural changes, socio-economic factors, consumer behaviour and government-induced tax policies.
Firms can no longer count on broad market expansion to lift revenues. There is no doubt that the market is consolidating, with a battle for market share well underway. And there have been several wholesaler business failures recently. At this point, one could be forgiven for taking a downbeat view of the wholesale landscape, but take a look at the top 30 wholesalers, which accounts for more than 85% of the total market value, and this tells a different, more positive story. Most are in good health and bucking market trends. The exceptional recent financial results from Booker, Parfetts and Fillshill, for example, show what can be achieved in this tough climate.
Read more: Viewpoint- What is the purpose of buying groups, and do they add any value?
We can see how industry leaders like Tesco and Wetherspoon are continuing to make progress against strong headwinds, and how important it is to be close to customers and every aspect of the business. There are some basic principles to be applied in a static market. It is important to distinguish if the market is static in volume (units sold) or value (revenues). Recent studies and sector analyses repeatedly show that headline revenue growth in food retail or wholesale can mask flat or falling volumes, with inflation and input cost increases inflating turnover figures.
That matters because volume stagnation calls for different fixes (e.g. demand stimulation, assortment refresh) than value-only stagnation (margin recovery, cost control). When growth is limited, the best operators manage categories tightly: optimising assortment, implementing pricing ladders and merchandising to maximise profit per square metre (or per click). Category management, when executed empirically, can improve gross margin and customer relevance, but it must be tailored to customer demand to avoid bloated SKUs that cannibalise sales.
Controlling the controllables is critical. Cash management, stock, debt control, gross margins, wastage and control of overheads all must be tightly managed. Simplicity allied to excellent service is the name of the game. Introducing measures to streamline operational processes to facilitate great service at the lowest possible cost will insulate against competitive impacts.
Customer data is gold
There’s gold in the customer file. Acquiring customers in a static market is expensive and often futile; retention and higher lifetime value are better bets. Wholesalers have had superb customer data for years, and now is the time to exploit it. Prioritising high-value customers, increasing transaction values, improving margin mix, reactivating lapsed customers and improving purchasing frequency will all bear fruit.
Omnichannel is moving from becoming desirable to essential. Growing online share often outpaces total market growth, so a focus on channels that expand share without destroying margin will pay dividends. Profitable omnichannel requires tight integration of inventory systems to avoid double-selling and to enable fast fulfilment (click & collect, ship from unit). Many wholesalers are already down the track with online and app ordering for customers, but is it all joined up? They should also consider partnering with digital marketplaces – witness Tesco’s rapid success in this area.
Businesses and consumers are under severe financial stress. We are operating in a tough trading climate, and effective operating in a static market is iterative, not binary. Managing a wholesale business in a static market requires a portfolio of small, reinforcing moves: extracting cost and processing efficiencies; sharpening customer relevance; reconfiguring commercial partnerships; and testing selective innovations.
No single tactic suffices; the persistent advantage comes from aligning data, governance and culture so these tactics compound. Starting with diagnostic metrics (volume versus value), maybe picking two high-impact pilots (one on margin management, one on customer relevance) and scaling what raises contribution per customer rather than chasing top-line growth. Despite the challenges, there are many examples of great businesses in our industry doing exceptionally well.
