Overview of Europe’s Grocery Retail Sector

2024 marked a transitional year for Europe’s grocery market—offering early signs of recovery while still navigating persistent economic pressures. Consumers remained cautious with spending, which led to only a 2.4% sales growth, just slightly above food inflation (2.3%). Discount retailers and private label brands continued to grow but at a slower pace than in 2023, reflecting longer-term market shifts. Consumer behavior stabilized—those trading up balanced out those trading down.

2025 is anticipated to build on this stabilization, with retailers seeing modest optimism. However, profitability challenges and limited volume growth will persist. To stay competitive, grocers will need to pursue growth through strategic differentiation, operational excellence, tech adoption, and aligning with changing consumer needs.

1. Continued Low Volume Growth, but with Bright Spots

The industry experienced marginal volume growth in 2024 (0.2%), and this minimal increase is expected to continue through 2030. While modern trade is set to gradually replace traditional trade—especially in Central, Eastern, and Southern Europe—shifts toward foodservice are expected to reduce grocery volumes. Slight population growth and a minor increase in calorie consumption per person (driven by aging demographics and lifestyle changes) will provide limited uplift.

Key growth areas:

Geographies: Northern and Southern Europe (0.4–0.5% annual growth).
Channels: Online grocery and discount retailers.
Categories: Fresh, healthy, and functional foods (like protein products and sports drinks), along with convenience and food-to-go options.

2. Evolution of Private Labels into Strategic Brands

Private label products increased to 39.1% market share in 2024, and 84% of consumers indicated continued interest in these products even as their financial situations improve. By 2030, private labels could capture up to 42% of the market.

Retailers with strong private label offerings are 2.8x more likely to gain market share. Leaders are moving from generic private labels to category-specific private brands that rival national brands in quality and emotional appeal.

3. Rising Demand for Health-Conscious Products

There is a clear consumer shift toward healthier food choices, especially among Gen Z, who are the fastest-growing shopper segment and most willing to pay extra for health-focused items.

Gen Z’s intent to eat healthy increased by 7 percentage points since last year.
Baby Boomers focus on heart health, while younger generations prioritize high-protein, low-calorie options.
Only 35% of shoppers feel their primary grocer offers a strong healthy food selection, pointing to an opportunity for improvement.

4. Catering to the ‘No-Cook’ Generation

Ready-to-eat (RTE) and heat-and-eat meals are booming as Gen Z and millennials cook less frequently. Foodservice channels are growing faster than grocery retail.

77% of Gen Z and 72% of millennials buy food on-the-go monthly.
Nearly half of Gen Z shoppers buy RTE meals weekly.
Convenience and time-saving are major drivers, signaling growth potential for grocers offering high-quality RTE options.

5. Personalized Engagement as a Loyalty Driver

Modern shoppers expect highly personalized experiences, especially younger ones. Yet, only 1 in 4 consumers believe retailers are delivering well on personalization.

Retailers are responding by:

Revamping loyalty programs to focus on personalized offers.
Using AI-driven chatbots for smarter customer interactions.
Integrating digital health offerings like in-store pharmacies and partnerships with healthcare providers.

Despite the rise of digital tools, friendly in-store staff remains a key factor in overall satisfaction.

6. Tackling the Sustainability Challenge

Sustainability remains important but has become more nuanced. Although overall consumer intent for sustainable purchasing declined slightly, Gen Z and millennials are 1.8x more likely to prioritize it than older cohorts.

Grocers are preparing for new regulatory requirements (e.g., CSRD, EUDR, PPWR, CSDDD), with many pushing back voluntary sustainability timelines. Scope 3 emissions (those not directly produced by the retailer) are the hardest to tackle and require tailored, cost-efficient action plans and partnerships across the value chain.

7. Accelerating European Consolidation

Profit margins are shrinking, dropping from 6.9% EBITDA in 2019 to 6.2% in 2024, prompting grocers to seek economies of scale.

Larger retailers are more profitable and resilient.
M&A activity among food retailers rose from 16% in 2019 to 21% in 2024.
Grocers are consolidating procurement, private label development, and IT systems across countries.

More cross-border M&A and buying alliances are expected as retailers hunt for cost synergies.

8. Data, AI, and Tech Take Center Stage

Tech transformation is now a top priority. Between 2021–2023, capital expenditures among 19 leading grocers rose by nearly 14%, mostly in IT, automation, and AI.

Grocers using advanced tech see 2x revenue growth and up to 2.9x greater shareholder returns.
Applications include pricing, inventory, supply chain optimization, and now gen AI for customer interaction, recipe recommendations, and negotiation tools.

Yet, 90% of these transformations have not scaled, primarily due to weak adoption strategies and lack of ROI measurement. High-performing companies invest the majority of their AI budgets in adoption, not just experimentation.

9. Retail Media Becomes a Powerhouse

Retail media—ads placed within grocery platforms—is the fastest-growing profit stream beyond traditional retail. Spending is projected to grow from €14B in 2024 to €41B by 2030.

Standardization efforts in 2024 (via IAB Europe and Media Rating Council) aim to attract more advertisers.
New ad formats are emerging: shoppable video, connected TV, and third-party web platforms.
Generative AI will boost ad creation, targeting, and performance.

Strategic Recommendations for Grocers

To succeed amid these shifts, grocery retailers should:

1. Focus on Growth Niches

Prioritize high-potential categories like healthy foods, RTE products, and fresh offerings. Build strong private label brands and diversify retail media partnerships.

2. Optimize Operational Efficiency

Double down on cost-efficiency programs, especially around sourcing and procurement. Use buying alliances to increase leverage and reduce costs.

3. Appeal to the Next-Gen Shopper

Adapt to Gen Z expectations: personalized experiences, health-conscious options, and affordable sustainability. Upgrade loyalty programs to reflect their preferences.

4. Harness the Power of Tech

Invest smartly in AI, data, and tech. Ensure ROI by focusing on adoption and enterprise-wide alignment. Embrace gen AI for both front-end innovation and back-end optimization.

The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect those of Bespoke Business Development. They are intended to encourage discussion and reflection, rather than serve as legal, financial, accounting, tax, or professional advice.

Have Questions or Thoughts About Our Latest Insights?

We’d love to hear from you. Whether you’re curious about a recent post, want to explore a topic further, or have ideas you’d like to share—reach out to us. Our team is here to connect, collaborate, and provide clarity.