European Grocery Retail Seeking for Growth in a Challenging and Dynamic Environment

In an uncertain environment shaped by geopolitical pressures, inflation, and rising energy prices, cost efficiency is essential. 2024 was a year of mixed emotions for European grocers. Volume grew again, albeit slowly, some consumer segments traded up, and AI has been creating value for some grocers. Now, looking ahead to 2025, cost pressure remains high, some supply chains are highly volatile, and many shoppers are still cautious as economic pressure persists. The previous year was mostly a period of stabilization for the European grocery sector with the first signs of recovery in some markets. Despite stabilization, 2024 remained a challenging year for European grocers. Economic pressure persisted, which led to cautious consumer behavior as well as restrained spending. Grocery sales grew by 2.4 percent in Europe, slightly above the food price inflation rate of 2.3 percent. Discounters and private labels continued to gain market share, although at a much slower pace than in 2023, largely in line with a longer-term trend observed in previous years. On average, across Europe, there was almost no net effect from up- or downtrading. The 25 percent of consumers who traded up to more expensive options in 2024 were balanced by a similar proportion of consumers trading down - a clear stabilization after two years of strong downtrading. In 2025, the recovery is expected to gain momentum. Grocery retail CEOs in Europe are slightly more optimistic than they were last year. Nevertheless, the next few years are expected to remain challenging, with low volume growth and sustained pressure on profitability. To thrive in this competitive landscape, grocers could double down on pockets of growth through differentiation, focus on execution efficiency, meet the needs of the consumer of the future, and leverage data, AI, and technology.