The grocery market is expected to be worth £184bn by 2016, compared to £156.8bn in 2011, according to new research.

Data released by IGD Retail Analysis today reveals discount retailers will be one of the key drivers in the market’s expansion, hitting over £10bn for the first time.

Discounters, such as Lidl and Aldi, will grow at an average annual rate of 10.1% and are forecast to be worth £11.4bn by 2016, up from £7bn in 2011.

IGD data shows online will be the fastest growing channel with an annual average growth rate of 13.7%. It is set to almost double in value in the next five years to reach £11.2bn, up from £5.9bn in 2011.

IGD chief executive Joanne Denney-Finch said: “We still buy most of our groceries at supermarkets and hypermarkets but we are also using different types of stores more often, such as online and convenience. And leading retailers are building their presence in these areas.

“Another growth area is discounters and with people increasingly experiencing a squeeze in incomes, this format will benefit despite counting for a small share of the overall grocery market.

“Our ShopperTrack data shows a doubling in shoppers using food discounters for their main source of grocery shopping: 6% of them say they now use this outlet as their main grocery channel, compared to 3% last September.” 

The grocery analyst said technology will be a key feature in driving growth. Proximity marketing where customers who sign-up to the service receive a text when they are near their local store or virtual reality services which allows shoppers with a webcam to get a 3D view of a product when shopping online are likely to prove important.

The convenience sector will grow by 4.7% and is set to be worth £42.2bn by 2016, up from £33.6bn in 2011.