Grocery shoppers are likely to demand a greater range of healthier options, more efficient online services, and better value as the COVID-19 pandemic subsides, a new report by McKinsey and EuroCommerce has found.
The Disruption and Uncertainty – State of Grocery Retail 2021 report examines the impact of the pandemic on grocery revenue, the level to which businesses were able to react and the rapid adoption of online, among other topics.
It found that revenues were positively impacted by the pandemic – based on Europanel data, during the first lockdown in March 2020, grocery sales in Europe increased on average by 20%, and by 10% during 2020 as a whole.
However at the same time, operational costs, pressure on supply chains, and the need for additional safety measures were all factors that impacted retailer margins.
In addition, the stricter lockdown measures became, the more consumers changed their shopping patterns, necessitating greater flexibility among operators.
"Our sector, recognised as an essential ecosystem for the European economy, has been hit hard in areas of non-food retail and food wholesale," commented Christian Verschueren, Director-General at EuroCommerce, "and while COVID has shifted demand away from closed restaurants and hotels to boost sales in food retail, it has also raised costs for retailers, in disruptions in supply, unprecedented demand and the significant costs in keeping our staff and customers safe.
"The massive growth in online grocery sales has also meant substantial investment in e-commerce which will take some time to become profitable.”
Key Trends
Based on a survey of chief executives, as well as consumer research, the report has identified four key trends that will likely shape the industry going forward. These include:
- Lifestyle agendas drive food demand. Different consumer groups have increasingly different demands that they expect grocers to fulfil. For example, 50% of consumers have said that they plan to adapt their grocery spend to meet their lifestyle agenda, including towards healthy foods (34%), regional/local (29%) and environmentally-friendly products (23%).
- Value is king (again). While during the pandemic, consumers did not look to trade down and save money, this is likely to change in 2021 and beyond. Some 37% of surveyed consumers in Europe plan to look for ways to save money while grocery shopping in 2021 compared to 2020.
- Online set to become core. The pandemic has dramatically accelerated the shift to online and this looks set to continue. In 2020, the online channel in Europe grew by 55%, as grocers adapted at unprecedented speed to the changed retail environment.
- The return of restaurants. Even though eating out will likely take some time to return to pre-crisis levels, the report predicts a sharp rebound once restrictions ease.
The common theme emerging from all of these future trends is increased margin pressure on grocery retailers over the coming years with the need to cater for broader consumer demands, growing price pressure, growth of a so far mostly loss-marking online business and increasing multi-channel complexity.
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© 2021 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
