Food and drink businesses face another make-or-break year, with retail food inflation forecasted to remain persistent and only easing slightly, IGD’s latest Economic Viewpoint report states.
‘What to plan for in 2026’, warns that fragile shopper confidence, rising household taxes, and geopolitical risks all threaten economic recovery. IGD also warns that businesses must prepare for a volatile environment where affordability and selective indulgence will define consumer behaviour.
Key Insights:
- Inflation Outlook: Retail food inflation expected to decline gradually (4.3% in 2025, 3.8% in 2026 and 3.3% by 2027), but geopolitical shocks could trigger fresh price spikes.
- Consumer Pressure: 33% of shoppers plan to cut back on grocery spend in 2026, up from 28% in December 2024. For Away From Home, 45% of consumers plan to cut back spend in the next few months, versus 46% in December 2024.
- Tax Burden: Household taxation will rise further in 2026, limiting disposable income and reinforcing value-driven shopping.
- Opportunities: Despite caution, consumers will selectively trade up, especially during seasonal events like Christmas, creating growth pockets for businesses balancing value and premium.
James Walton, chief economist at IGD, said: “2026 will be a critical year for the food and drink industry. Businesses must stay relevant to value-conscious consumers while unlocking growth from resilient segments. Those able to deliver affordability alongside moments of indulgence will be best placed to succeed.”
