The latest report from the Institute of Grocery Distribution (IGD) reveals the critical risks and opportunities for food and drink businesses ahead in 2026, as food inflation remains persistent and uncertainty continues.
IGD’s latest report, What to Plan For in 2026, warns food and drink businesses face another make-or-break year. Retail food inflation is forecast to remain persistent, only easing slightly, while at the same time, fragile shopper confidence, rising household taxes, and geopolitical risks all threaten economic recovery.
The IGD warns that businesses must prepare for a volatile environment where affordability and selective indulgence will define consumer behaviour.
The report covers IGD’s predictions for what to expect for the economy, consumers and government policy in 2026, through the lens of the food system, including possible implications for businesses.
It predicts retail food inflation is expected to decline gradually (4.3% in 2025, 3.8% in 2026 and then 3.3% by 2027), but geopolitical shocks could trigger fresh price spikes.
In addition, consumer pressure are expected to add to the issues, with 33% of shoppers planning to cut back on grocery spend in 2026, up from 28% in December 2024. For away from home sales, 45% of consumers plan to cut back their spend in the next few months, versus 46% in December 2024.
Household taxation will also rise further in 2026, limiting disposable income and reinforcing value-driven shopping.
However, the IGD hints that, despite all the caution, consumers will selectively trade up, especially during seasonal events like Christmas, creating growth pockets for businesses balancing value and premiumisation.
”Businesses must stay relevant to value-conscious consumers while unlocking growth from resilient segments.”
James Walton (above left), 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.”
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