A Resilient Sector That Will Continue to Grow

With the inflation economy, pressures decreasing and consumer confidence increasing gradually, the prospect of the food and grocery industry for 2024 is rather more positive than it has been in the previous years.

Several factors, starting from changes in consumer behavior to the changes in the structure of the retail industry, contribute to this optimism. As we know, grocery sales are expected to grow by a further 3% in 2025.

This sector is not only sustaining but thriving given the leverage of both the economic recovery and the conventional consumer purchase habits, according to the European Grocery Market 2024 report by Savills. 

After the COVID-19 pandemic and the cost of living crisis, many sectors within the retail industry can be considered as having been severely affected while grocery retail can be deemed as one of the most stable.

Whereas the sectors that deal with fashion products and electronics items, which are usually bought when one has spare money, have been greatly affected, the grocery sector is less affected because food is a necessity.

Customers may decide to reduce their spending on the want items or any other items that are not necessary, but the need for food is still there which means that the revenue stream for the grocery retailers across Europe is constant.

Even when inflation reached its highest level ever, especially in the food sector, people still had to buy food, although they preferred cheaper products. This has made many consumers shift to cheap store and store-brand products – this is a change that is revolutionizing the retail industry.

Cheap grocery formats have become popular and the traditional big box stores such as Aldi, Lidl, and other regional players have been increasing their market shares. These retailers have learned how to meet the price-conscious European consumers by providing products at cheaper rates to the consumers who need to save money.

Indeed, the market share of discount stores has been on the rise across different European countries.  For instance, the share of discount grocery stores in Italy grew from 19% in 2019 to 23% in 2023. This is not the case only in Italy – the expansion of discounters is a common trend, and this is expected to continue.

These retailers are well placed to capture the demand for low-cost products that are of good quality due to the current grocery inflation. The traditional hypermarket has not been left behind by the discount formats in the course of their growth the former are striving to improve their performance to stand up to the latter and satisfy the consumers with the feel-the-pinches mentality.

The latest and most significant trend, which is worth mentioning, is the emphasis on the local and the concept of smaller stores. Given the increasing demands of consumers, especially those who are in urban areas, grocery retailers are shifting their focus towards the opening of smaller stores that are centrally located so that people can make frequent and short trips for their basic needs.

Savills’ European Grocery Market 2024 report reveals that the use of local ‘express’ stores has been on the rise, especially in city centers where space is a premium, and consumers prefer to make several small trips than one large trip to a hypermarket.

To read the entire article, please access your complimentary e-copy of Frozen Food Europe November-December, 2024 issue here.