The year 2024 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,1 slightly above the food price inflation rate of 2.3 percent.2 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.
Key trends
1. Low volume growth
The grocery retail sector experienced low volume growth in 2024. While this trend is expected to continue in the next five years, there are a few promising pockets of potential growth.
Volume growth was low in 2024 (0.2 percent since 2023), and this trend is expected to continue, with up to 0.2 percent volume growth annually through 2030 across Europe.3 As far as channels are concerned, the shift from traditional trade4 to modern trade5 is expected to drive net growth of 0.1 percent annually through 2030, especially in Central and Eastern Europe,6 as well as Southern Europe.7 Meanwhile, the shift from grocery to foodservice is expected to lead to a decline in volume of 0.3 percent annually. The largest positive effect is population growth, with a net growth of 0.2 percent annually in Europe, yet negatively impacting Central and Eastern Europe. Calorie consumption per capita is expected to increase by 0.1 percent a year, reflecting three developments: an increase in daily calorie intake (0.15 percent per annum), a growing share of older people who have lower calorie intakes (–0.04 percent per annum), and the potential uptake of weight-loss medication (with a potential –0.01 percent decrease per annum).8
Despite low overall growth, there are pockets of potential growth in certain countries, channels, and categories. Northern and Southern Europe are projected to grow at 0.4 to 0.5 percent annually, respectively. Western Europe can expect a slight growth of 0.1 percent a year. In contrast, volume will likely decrease in Central and Eastern Europe (–0.3 percent a year) (Exhibit 1). Among channels, online is expected to see the highest growth (2.0 percentage points above average), followed by discounters (0.8 percentage points above average).9 Categories that are expected to grow the most include fresh foods, healthy foods, and functional foods, such as power bars, protein-rich options, and sports drinks. Convenience and food-to-go categories are expected to be major growth pockets, too.
For the third consecutive year, cost and margin pressure are a top priority for grocery retail CEOs. The two key factors driving this continued pressure are low volume growth and the fact that grocers may not be able to fully offset growing sourcing costs by increasing consumer prices due to high price sensitivity and competitive pressures.
2. From private labels to private brands
Private labels gained additional market share in 2024, and retailers increasingly position them as differentiated alternatives to A-brands.
The private label share of total grocery sales value in Europe increased by 0.3 percentage points from 2023 to 39.1 percent in 2024. Although consumer downtrading decreased in 2024, most consumers are not reverting back to A-brands from private labels. In our 2025 survey, 84 percent of consumers say they will continue buying private-label products even if their purchasing power grows.
The sales share of private labels could reach 40.0 to 42.0 percent by 2030, up from 39.1 percent in 2024. The lower end of this range (40 percent) is based on the growth rate observed between 2014 and 2019, while the higher end (42 percent) is based on the growth rate observed between 2014 and 2024.10
Private labels are an important driver of market share growth for grocers. Our growth champions’ analysis shows that retailers that have an above-average private label share have a 2.8 times greater likelihood of gaining market share than their peers. Those with top-quartile private label product quality have a 1.6 times higher chance than others to gain market share (Exhibit 2).
Grocers who create not just private labels but private brands, similar to A-brands, can gain significant market share. These grocers have established their own product development, concept, design, and packaging departments to differentiate their offering. Rather than adopting cross-category brands, they often use category-specific brands designed to evoke specific emotions and appeal to different customer groups.
3. Growing appetite for healthy food
Consumers, particularly Gen Z, increasingly seek healthy and functional foods—a growth opportunity for grocers.11
The demand for healthy options is growing, especially for fresh, functional, and “clean” food.12 Healthy options and foods that offer additional health-related benefits, referred to as functional foods, are growing rapidly.
The net intent of European consumers to buy more high-quality, fresh products has increased by two percentage points since 2024. At the same time, some consumers are concerned about certain ingredients that are often found in processed foods.
Gen Z is the group seeking healthy options the most. Gen Z has the highest growth as a group of shoppers, and this group also has the highest intent (45 percent) to focus on healthy nutrition among all cohorts (Exhibit 3). Compared to last year, the net intent of Gen Z shoppers to focus on healthy eating increased by seven percentage points. In addition, one in three members of Gen Z indicated a willingness to pay a premium for healthier products.
Healthy eating preferences vary across generations, in line with what health means to different age groups. Baby boomers focus on reducing salt and eating less processed foods to promote heart health and prevent or delay age-related conditions. In contrast, Gen Z and millennial shoppers prefer options that are high in protein and low in calories.13
Consumers are dissatisfied with the healthy options available at their main grocers. Only 35 percent of consumers say that their main grocer offers the right assortment of products for a healthy diet.14 And, while some consumers are prepared to pay a premium for healthy products, there is also a sizable group of shoppers who will or can buy healthy food only if it is affordable.
4. Ready to (h)eat: Catering to the no-cooking generation
As the share of consumers who do not cook grows, ready-to-eat and ready-to-heat meals offer grocers a chance to regain market share from foodservice companies.
Foodservice continues to outpace traditional grocery growth. Before the COVID-19 pandemic, foodservice turnover was growing at 5.3 percent a year, nearly twice the rate of grocery in the period from 2014 to 2019. After a dip during the pandemic, foodservice rebounded, growing at a rate of 3.8 percent—1.6 times faster than modern grocery from 2023 to 2024.15 This trend could continue through 2030, driven by consumer demand for convenience and the fact that Gen Z shoppers and millennials cook less frequently than baby boomers.
On-the-go food options and ready-to-(h)eat meals are gaining traction among consumers. Between 2022 and 2024, on-the-go food sources, such as bakeries, street vendors, food trucks, and vending machines, gained 1.1 percentage points in market share from sit-down establishments within the out-of-home segment.16 Ready-to-eat meals are very popular, with 54 percent of consumers purchasing items such as sandwiches, salads, drinks, and snacks at least once a month. The share of consumers who purchase less than once a month prepackaged, partially cooked, or frozen meals has decreased from 41 percent in 2023 to 36 percent in 2024, signaling a growing acceptance of these convenient options.
Young consumers are at the forefront of the no-cooking trend. Despite their stated intention to cook from scratch (45 percent of Gen Z shoppers versus 30 percent of baby boomers), younger consumers turn out to be a “no-cooking” generation when push comes to shove. Seventy-seven percent of Gen Z shoppers and 72 percent of millennials buy food on the go at least once a month. Moreover, 42 percent of Gen Z shoppers and 37 percent of millennials purchase ready-to-eat meals at least once a week (Exhibit 4).
5. Unlocking a new level of customer engagement
High levels of engagement and personalization are key drivers of customer loyalty, and retailers are turning to gen AI to capture this opportunity.
Evolving customer behaviors and expectations require retailers to rethink their approach to customer engagement. Consumers now view personalization as the standard for engagement: 56 percent say they will likely become repeat buyers after a personalized experience, especially Gen Z members (Exhibit 5).17 These shoppers also want comprehensive product information, especially around sustainability, and they have high expectations around product availability, channel integration, and speed. In a nutshell, they want everything, everywhere, all at once.
Currently, only one in four customers thinks that retailers are performing well as far as personalization is concerned.18 In response to the increasing focus of consumers on health, pioneering grocers are augmenting their offerings with digital health services, in-store pharmacies, and partnerships with healthcare providers, such as optometrists and laboratory testing facilities.
Gen AI might fill in the gap and unlock a new level of customer engagement. Major European grocers have started implementing gen AI-based chatbots for customer service. A few pioneers are offering highly personalized shopping experiences with recipes and product recommendations. Others are piloting chatbot-based online shops that allow shoppers to fill their virtual baskets via a dialogue with the chatbot.
Grocers are redesigning their loyalty programs to provide a more personalized experience. Personalized content and promotions are gaining importance as traditional “earn and burn” shopper rewards lose effectiveness. In response, eight out of the ten largest European grocers restructured their loyalty programs between January 2024 and February 2025—a development that is expected to continue.
Despite the growing importance of digital interactions, the human touch stays important. According to our analysis of growth champions, “friendly and helpful staff” is the most important factor for a pleasant in-store experience. Marit van Egmond, CEO of Albert Heijn, says that customers increasingly expect “a hyper-personalized experience no matter where they are shopping, [ . . . ] while maintaining that all-important personal touch.”
6. Sustainability: Scope 3—the challenge ahead
Reaching sustainability targets is no small feat. Implementing the right measures at the right time can lower costs and help meet evolving consumer demands.
According to our consumer survey, the share of consumers who want to buy products that are more sustainable has decreased. However, Gen Z shoppers and millennials have an approximately 1.8 times greater intent to purchase more sustainable products than Gen X and baby boomers, and their share of the total number of shoppers is increasing (Exhibit 6). Local sourcing, recyclability, and social responsibility gained the most as the factors that are important to consumers in 2024. Meanwhile, the intention to buy organic products, dairy alternatives, and meat alternatives declined by 2 to 4 percentage points across generations.
This year, many retailers are focusing on addressing upcoming regulations. In 2025 and 2026, several major sustainability-related directives and regulations are coming into force (for example, the European Union’s CSRD,19 the EUDR,20 the PPWR,21 and the CSDDD).22 Compliance requires significant effort and investment by retailers. At the same time, several grocers have extended the timeframe for reaching their voluntary commitments for various sustainability dimensions, for example recyclable or compostable packaging.
While grocers make good progress on reducing Scopes 1 and 2 CO2e emissions, reducing Scope 3 emissions remains more challenging and costly.23 Scope 3 decarbonization costs can vary significantly, depending on the grocer-specific context and the selected abatement path. Selecting the right abatement levers is just one element that can have a significant impact on the cost for grocers. The decision on when and how to implement these levers can substantially increase or decrease the cost. Hence, it is fundamental to build a concrete abatement plan for each category to keep costs in check. As a limited volume of products with lower emissions share is typically available today at low cost, it is important for grocers to identify the lower cost levers and tailor their implementation strategy accordingly. Collaborating with companies along the value chain on joint decarbonization plans, especially in difficult-to-abate categories, could generate significant cost benefits and sustainability progress.
7. European consolidation
European grocery consolidation is expected to accelerate in the next five years as multinational grocers increasingly succeed in achieving cross-country synergies.
Margins are under pressure for most European grocers. The average EBITDA margin of European grocers has decreased from 6.9 percent in 2019 to 6.2 percent in 2024, resulting in an average EBIT of 2.8 percent.24 We expect margin pressure to stay high over the course of the next five years due to low growth and cost increases driven by labor scarcity, sustainability targets, and fluctuations in commodity markets. In response, grocers are looking for new ways to increase cost efficiency.
Scale matters—on average, larger grocers have higher profitability. Successful grocers are typically 35 to 50 percent larger than their peers and generate an EBITDA margin that is 0.8 percentage points higher than the sector average, according to our analysis of growth champions. Large grocers have more capacity to invest in procurement capabilities, supply chain automation, tech, and AI. Additionally, scale is needed to develop and produce private labels efficiently.
Grocers double down on capturing European synergies. The number of M&A among European food retailers has increased by 31 percent, from 16 percent in 2019 to 21 percent in 2024 (Exhibit 7). Additionally, multinational retailers have implemented initiatives to increase cross-country collaboration. Practices observed at large European grocers include centralizing procurement for parts of the assortment at the European level, centralizing functions such as private label development, and centralizing IT systems across Europe. We have observed that retailers and buying alliances seek to negotiate more on the European-level for better sourcing conditions rather than relying solely on additional rebates.
Consolidation is expected to accelerate further within and across countries in the coming years. Given the need for scale to counter margin pressure and the additional potential of cross-country synergies, there is a high probability of further consolidation through M&A, as well as further collaboration between retailers in buying alliances.
8. The race to get tech right
Data, AI, and tech are higher than ever on the CEO agenda as the gap between leaders and late adopters widens.
Data, AI, and tech attract increasing CEO attention and capital expenditure. Four years ago, “modernizing IT” and “adopting advanced analytics and AI” were not among the top seven priorities for grocery CEOs. Today, they rank third and sixth, respectively. This shift is reflected in investment patterns: capital expenditure by 19 European grocery sector leaders increased by 13.9 percent between 2021 and 2023, mostly driven by investments in IT, AI, and automation.
The benefits of superior capabilities in data, AI, and tech are substantial. Our research shows that retail and consumer goods companies that have above-average capabilities in data, AI, and tech achieve twice the growth and up to 2.9 times the total return to shareholders (TSR) of their peers (Exhibit 8).25
Generative AI and agentic AI bring new value creation opportunities.26 Recent AI and tech benefits came from improved commercial decision-making (including pricing, promotion, and assortment optimization) and supply chain management (including forecasting, replenishment, and automation). The next wave of gen AI-enabled applications will likely help increase the productivity of office jobs, enable more personalized customer interactions, accelerate private label innovation, and improve negotiations with suppliers.
Despite growing AI investment, few grocers see the benefits reflected in their profit-and-loss (P&L) statements. Nearly 90 percent of AI and tech transformations have not reached scale—many companies lack effective measurement systems and face a productivity paradox, driven by the imbalance between the resources invested in AI and the benefits captured.27
Investments in adoption are essential to drive value creation with AI. According to our research, 87 percent of data, AI, and tech leaders spend over half of their AI budgets on adoption, compared with only 23 percent among those that generate lower TSR. These leaders typically align the entire organization on the areas of greatest value, they develop domain-specific roadmaps, and they put the right enablers in place, including data, tech, operating model, talent, and risk management.
9. Retail media growth and professionalization
As retail media spending grows, grocers are streamlining advertising sales and diversifying advertising opportunities to take advantage of this important profit source.
Retail media spending by advertisers keeps growing fast. IAB Europe expects retail media spending to reach €31 billion by 2028, up from €14 billion in 2024—a CAGR of about 20 percent.28 This means that retail media spending could reach €41 billion by 2030. That said, in 2024, the retail media share of total advertising spending is even higher in the United States—by 5.4 percentage points (Exhibit 9). For European grocers, retail media is the largest and fastest-growing profit source beyond conventional retail.
Grocers are streamlining the way they market retail media to advertisers. Over 50 percent of European retailers have had a retail media proposition for over a year. However, the fragmented landscape has made it hard for advertisers to reach consumers across different retailers.29 According to IAB Europe, 60 percent of advertising buyers cite standardization as the key to future growth.30 In response, in 2024, the IAB and the Media Rating Council introduced standardized performance metrics to enable accurate performance assessment across retailers. This could increase the attractiveness of retail media networks’ for advertisers.
The year 2025 will be marked by a diversification of advertising opportunities. So far, retailers have scaled their offerings on platforms they operate themselves, such as advertisements on their websites and in-store screens. Additional growth could be unlocked by extending the reach of their networks and offering their targeting capabilities on platforms operated by others. Examples include third-party websites and social platforms, shoppable video, and connected TV advertising.31
Gen AI has the potential to make retail media networks more attractive. It can improve campaign creation, campaign optimization, targeting, and personalization. Alphabet, Amazon, Meta, and TikTok have launched gen AI tools in these areas. Meta reports that these tools bring significant increases in conversion rates (17 percent uplift) and returns on advertising spending (32 percent uplift).32