Overview
The report The State of Grocery Retail 2025: Europe highlights essential insights and key data, revealing the strategies necessary to succeed in an increasingly competitive market.
Below is a summary of the main findings and in-depth analyses drawn from this report.
1.Market dynamics and executive expectations
Market stabilization in 2024:
2024 was largely seen as a period of stabilization after the unprecedented changes observed between 2019 and 2023. grocery sales in Europe increased by 2.4%, slightly above the grocery price inflation rate of 2.3%. For the first time since 2020, grocery sales grew in real terms (inflation-adjusted). However, inflation-adjusted sales remain 4.1% below the levels recorded in 2019.
Persistent economic pressure and stabilization of “downtrading”:
Economic pressure continued in 2024, leading to cautious consumer behavior and limited spending. The phenomenon of “downtrading” (switching to cheaper options) stabilized, with a net effect of –0.1%. This stabilization was due to a balance: 25% of consumers opted for more expensive options, offsetting a similar proportion who continued to downgrade. High-income consumers were the main drivers of the shift to more costly options in 2024.
Cautious optimism among CEOs and strategic priorities:
European grocery retail CEOs are slightly more optimistic about 2025 than they were the previous year. While 55% anticipate stability in 2025 (versus 39% in 2024), only 29% expect a less favorable environment. The 2025 CEO agenda reflects this mixed outlook. While “cost and margin pressure” and “consumer downtrading” remain top priorities, “IT modernization” and “supply chain resilience” have gained importance, rising six places each in the priority ranking.
2.Lessons from the “Growth Champions”
Analysis of 127 grocery retailers revealed that growth champions (those who gained market share and achieved above-market sales growth between 2019 and 2023) have distinct financial characteristics.
Superior performance of champions:
Growth champions represent 31% of the sample examined. They are generally 35–50% larger than their peers and generate an EBITDA higher by 0.8 percentage points. They also achieved twice the sales growth and five times the sales productivity growth of other grocers.
Four fundamental practices (Signature Practices):
Four practices emerged as common characteristics among growth champions (supermarkets and hypermarkets):
- High share of private labels (PL): Retailers with an above-average share of revenues from PL are 2.8 times more likely to be growth champions. Champions generate 50–90% of their revenues from PL and often use a portfolio of multiple private brands per category.
- Pleasant in-store experience: Top-quartile performers in this area are 2.4 times more likely to be champions. A key factor is “friendly and helpful store staff.”
- Excellent product quality: Top-quartile performers offering “high quality in fresh products and PL” are 1.6 times more likely. 79% of retailers with the best PL quality also excel in fresh product quality.
- Lowest prices: Grocers ranking in the top quartile for “lowest prices” are 1.5 times more likely to be champions. Top-performing supermarkets compete with discounters on price and quality for more than 80% of the latter’s sales.
It is notable that some attributes, such as superior loyalty programs, convenient opening hours, and a strong selection of sustainable or diet-specific offerings, did not increase the likelihood of outperforming competitors over the past five years.
3.Major future trends (2025 and beyond)
Low volume growth and regional growth pockets:
Volume growth is expected to remain low, around 0.2% per year in Europe until 2030. Growth will be uneven:
- Northern and Southern Europe are expected to grow 0.4–0.5% per year.
- Central and Eastern Europe are expected to see a decline in volume (–0.3% per year).
Key growth pockets include online retail (with expected growth +2.0 percentage points above the average), discounters (+0.8 percentage points), fresh, healthy, and functional foods, as well as prepared meals and food-to-go categories.
Rise of Private Brands:
The share of private labels (PL) in total retail sales value reached 39.1% in 2024. This share could reach 40–42% by 2030. The appeal of PL is enduring: 84% of consumers plan to continue purchasing them even if their purchasing power increases. Retailers are encouraged to develop not only private labels but differentiated, category-specific private brands designed to compete with national brands (A-brands).
Emergence of the “No-Cooking Generation”:
The foodservice sector continues to grow faster than grocery retail (1.6 times faster between 2023 and 2024). This trend is driven by convenience and the fact that Gen Z and Millennials cook less frequently than Baby Boomers.
- 77% of Gen Z and 72% of Millennials buy food-to-go at least once per month.
- 42% of Gen Z buy prepared meals at least once per week.
Growing appetite for health:
Demand for healthy and functional options is rising. European consumers’ net intention to purchase more fresh, high-quality products increased by two percentage points since 2024. Gen Z is driving this trend, with the highest intention (45%) to focus on healthy eating, up seven points from the previous year. One in three Gen Z consumers is willing to pay more for healthier products. However, only 35% of consumers feel that their main grocer offers an adequate assortment for a healthy diet.
The Scope 3 sustainability challenge:
Although consumers’ overall intention to buy more sustainable products declined (–3 pp net intention), Gen Z and Millennials show 1.8 times higher intention to buy sustainable products than older generations. The biggest challenge for grocers is reducing Scope 3 emissions (indirect emissions across the value chain), which is difficult and costly. Collaboration along the value chain is essential to generate cost benefits and sustainable progress.
4.The technology race (data, ai, and retail media)
Growing importance of IT and AI:
IT modernization and adoption of advanced analytics and AI have become major CEO priorities, ranking third and sixth respectively. Retail and consumer goods companies that are leaders in data, AI, and technology deliver total shareholder returns (TSR) up to 2.9 times higher than their peers.
The role of adoption in ai value creation:
Nearly 90% of AI- and technology-based transformations have not reached the desired scale. To succeed, AI and technology leaders spend more than half of their AI budgets on adoption. Generative AI (Gen AI) is being explored to improve office productivity, personalize customer interactions, and accelerate private-label innovation.
Exploiting retail media:
Retail media (advertising on retailer platforms) is identified as the fastest-growing and most profitable source beyond conventional retail. Retail media spend is expected to reach €41 billion by 2030 in Europe, with a CAGR of 20%. Generative AI has the potential to make these networks more attractive by improving campaign creation and optimization, as well as personalization (Meta reports a 17% increase in conversion rates and 32% higher ad returns).
5. European consolidation
The need for scale:
Consolidation in Europe is expected to accelerate. Average margins have decreased (average EBITDA fell from 6.9% in 2019 to 6.2% in 2024). Facing margin pressure, scale is crucial: large grocers have greater capacity to invest in sourcing capabilities, supply chain automation, technology, and efficient private-label development.
Increase in mergers & acquisitions (M&A):
The number of M&A transactions among European grocery retailers increased by 31% between 2019 and 2024. Multinational retailers are increasingly centralizing sourcing (for parts of the assortment), private-label development, and IT systems at the European level to capture cross-border synergies.
Conclusion
The European grocery retail sector in 2025 behaves like a machine that has restarted after a breakdown (stabilization) but continues to operate below full power (low volume growth).
To maintain speed, leaders must identify and exploit growth pockets (such as healthy foods, online retail, and prepared meals) while strengthening their internal engine through operational efficiency, rigorous AI adoption, and highly differentiated private-label development.
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