Yet that momentum is coming against the background of rising tariffs, jaw-dropping commodity inflation, and a consumer base that will switch brands, or channels, at the slightest whisper of price rise. In other words: growth is returning, but the ground is still shaky. This article explores what that means for retail strategy, margins, and vitally, the technology choices that will decide who stays ahead.
Understanding the Current Landscape
The UK grocery retailing industry is recovering and proving resilient. Following a number of years of turmoil, recent large grocer trade updates indicate the industry is returning to form. Before the latest much-publicised cyber attack, Marks & Spencer posted an 8.7% rise in food sales in early 2025, and Tesco's latest results showed a 6.8% rise in UK like-for-like sales over the Christmas 2024 trading period, one of the best festive performances since the pandemic (The Times, NFU Online).
Online grocery shopping continues to be a sector shaper. Over 5.6 million households were shopping for groceries online by the end of 2024, with Tesco posting an 11% rise in online sales. Ocado also grew its market share to 1.8% (Grocery Gazette), a clear indication that convenience, personalisation, and delivery innovation are driving lasting behaviour changes.
At the same time, shopping behaviour is also changing. Consumers are consistently making healthier food choices, and sales of fresh poultry and meat are increasing. Tesco, for instance, has pledged to achieve 65% of sales in healthier foods by later this year (The Guardian).
All of those indicators signal a changing and expanding industry. With that optimism, however, is ongoing volatility, from cost pressures to supply chain unpredictability, that is making retailers wonder about the way they conduct business and invest.
Uncertain prognosis
Retail food shops are already under increasing economic pressure. Tit-for-tat tariff barriers have already resonated across global supply chains, pushing up the cost of everything from tinned produce to agricultural inputs. The OECD alerted that tariffs can cut 0.3 percentage points from UK growth prospects (Grocery Gazette).
At the same time, adverse weather has driven dramatic commodity inflation, with coffee over 100% more expensive, cocoa up by 163%, and butter significantly higher — all of which tighten production costs (The Guardian).
These headwinds coincide with the structural margin pressures that retailers already experience such as increasing wage, energy, and logistics expenses. In response, top grocers Asda, Sainsbury's, and M&S cut jobs, with the former alone slashing more than 200 jobs in its corporate IT departments (The Grocer).
Consumers are already reacting, confidence is low, price sensitivity is high, and private-label ranges are picking up market share as households search for value. In this climate, the challenge is brutal: how do retailers safeguard both value and viability? Operating leaner, acting quicker, or investing in resilience?
Strategic Responses to Economic Uncertainty
As prices continue to escalate and trading conditions remain unstable, UK food retailers are making measured, cautious decisions to protect profitability and respond to evolving consumer needs. Across the sector, there is a growing emphasis on functional efficiency, particularly in areas such as energy usage, logistics, and workforce planning. Retailers are increasingly examining infrastructure and resourcing models in an attempt to reduce overheads and insert resilience into critical operations (IGD Retail Outlook 2025).
With prices, the majority of the retailers are taking a strategic, tactful approach. Rather than blanket increases, they're focusing on highly targeted categories in which inflationary forces are at their strongest. With smarter pricing initiatives, such as Electronic Shelf Edge Labels, retailers like Sainsbury's and Co-op can dynamically control price and promotions on individual products and categories store by store (The Grocer). These changes are followed by clearer value communication, especially for own-brand labels, which are more in demand. Kantar finds that in 2024, own-brand food products held more than 52% of the total grocery sales as shoppers looked for value in addition to quality (Kantar).
Diversification is also being prioritised in retailers' longer-term plans. Some are investing in new revenue streams, like retail media networks, food-to-go, or health and wellbeing ranges. (Grocery Gazette, Retail Gazette, The Times). Others are developing their in-store experiences or experimenting with new forms of online fulfilment to address changing customer demands (The Times).
These projects are not merely expansionary, they're also about establishing operational flexibility in a market that demands it. Far from merely responding passively to pressure, top grocers are fighting back with strategic reinvention.
Adopting Technology During Uncertainty
Turbulent times have a habit of forcing change. And the UK grocery market stands at a crossroads right now where margins remain under pressure, costs keep on going up, and shopper behaviour is far from certain. For progressive retailers, that's no excuse to slam on the brakes. Quite the opposite, for some it’s an excuse to floor it.
Technology is no longer a nice-to-have for grocers; it's the most clear-cut route to operational resilience and a leaner, more agile business model.
Throughout the industry, we're seeing increased investment in solutions that deliver quantifiable efficiency. Whether through AI-driven forecasting for better availability, intelligent scheduling to end unnecessary labour hours, or unified data platforms to enable teams to decide faster, the objective is identical: Achieve more with less. And achieve it with certainty.
Retailers like Sainsbury's and Tesco have been ramping up their use of predictive analytics and automation to improve everything from market replenishment to pricing (IGD). Lidl, meanwhile, is trialling in-store robots to assist with conducting shelf audits, a small move that could bring substantial labour savings over time (The Grocer).
These aren't hypothetical innovations. They're real-time answers to the very problems grocery stores are dealing with: expensive labour, thin margins and variable demand. And the best part? Return on investment is faster and more tangible than ever.
The next 12–18 months will likely bring even more turbulence, from supply chain volatility to further regulatory pressure. That only makes the case for retailers to act now all the more compelling. Investing in the right technology today doesn't merely address today's pressure, it sets the stage to move faster, smarter and more competitively to address whatever comes next.
Conclusion
All indications are that the coming months will challenge the grocery leaders on two fronts: sustaining the new growth trajectory and protecting profitability from a squeeze that does not appear to be abating. The winning retailers will be those who take uncertainty as a cue to modernise. Ramping up data, automation and agile operating models while rivals are still arguing over the cost.
If your company is poised to make the change from "watch and wait" to "plan and deliver," let's discuss. Our data and selection-tech solutions are enabling top grocers to reduce waste, optimise labour and safeguard margins, with no negative impact on the customer experience. Contact us on LinkedIn or email Jonty.Edwards@rascalsystems.com to initiate the conversation on transforming today's pressure into tomorrow's competitive advantage.