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European supermarket chains have suffered from downtrading and pressure on margin last year, but there is hope: new consumer research points to a cautious recovery in FMCG volumes in 2024 as shoppers are treating themselves to a bit more.
Turnaround on the way
2023 was a tough year for supermarkets, as consumers cut their grocery spending sharply. They bought less overall, and the remaining spending was done more on private labels and promotions. As a result, the industry’s growth last year (at 8.6 %) was significantly lower than food price inflation (12.8%). Real food sales (adjusted for inflation) fell again and are now 4.5 % below 2019 levels. Nevertheless, consumer research points to a turnaround: in 2024, consumer confidence is quietly returning and buying behaviour will follow.
Shopping volumes have actually already stopped falling and are even starting to rise again in some markets, courtesy of declining inflation. The first few months remain challenging as the economy is still feeling the after-effects of the period of high inflation, but if inflation stabilises around 2 % and real purchasing power rises again, McKinsey expects FMCG volumes to grow again in the second half of the year.
Pessimism decreases
Almost half (45 %) of European consumers say they will still be looking for ways to save money when shopping in 2024, but that is down slightly from 51 % a year ago. More consumers plan to indulge themselves a little more this year with healthy, sustainable, local and on-the-go products. However, there are huge differences between the eleven countries surveyed.
European food retail CEOs are showing a little less pessimism about market conditions in 2024: 64 % think this year will be stable or better. The biggest challenges remain cost and margin pressure, downtrading by consumers, and the search for talent.
For the new report The State of Grocery Retail 2024: Europe – Signs of hope, published by McKinsey & Company and the European retail federation EuroCommerce, analysts surveyed some thirty major European supermarket companies and over 12,000 consumers in eleven European countries. The 2024 edition is the annual magazine’s fourth.
