A return to normal? After a sequence of strong shocks between 2019 and 2023, the European food retail sector seems to have found a point of equilibrium in 2024, with overall growth of 2.4%, says “The State of Grocery Retail Europe 2025” report, produced by the consultancy McKinsey & Company and Eurocommerce, the main European organisation representing the retail and wholesale sector.

That’s a modest but significant performance: for the first time since the global pandemic began in 2020, sales are up in volume and real value terms, despite inflation still being present (at 2.3%).

However, this dynamic masks national disparities and a market still in convalescence, as inflation-adjusted sales (or sales in real terms) remain 4.1% below their 2019, pre-covid level. In France, to put things in perspective, volume growth remains negative (-6.2%), whilst markets such as Poland (+4.6%) and Germany (+0.8%) are recording a slight rebound.

Distributor brands: the breakthrough is confirmed

Distributor brands (or private labels) and discounters are continuing to grow... albeit at a slower pace than in 2023. Distributor brands now account for almost 40% of food sales on the continent, whilst discounters capture 23.2% of the market.

Those in the lead have clear strategies: a strong presence of private labels (up to 90% of sales in some chains), a meticulous customer experience, fresh product quality and a dynamic--if not aggressive--pricing policy. These chains have generated twice as much sales growth and five times as much productivity as their competitors between 2019 and 2023, the study points out.

Adapting to new behaviours

The sector’s leaders are approaching 2025 with measured--but improving--optimism: 55% of them expect business to remain stable, compared with 39% a year earlier. However, the challenges remain. Pressure on margins, (i.e., their tendency to turn to cheaper products, in response to a fall in purchasing power or out of a desire to save money) and the need to strengthen the resilience of supply chains remain priorities.

Digital transformation, meanwhile, is accelerating: the sector’s technology leaders are outperforming their peers by up to 2.9 times on the stock market. What’s more, retail media (advertising integrated into sales ecosystems) is emerging as a growth driver, with an expected compound annual growth rate (CAGR) of 20% between now and 2030, the survey outlines.

Health, convenience... but less sustainability

As a result of changing habits, European consumers--and Generation Z in particular--are showing a growing preference for healthy, fresh and convenient products. Ready-made meals and takeaways are exploding, as is demand for products with a high nutritional value.

On the other hand, sustainability is marking time, with a clear drop in the intention to buy environmentally-friendly products (-3 points compared to 2024), except among the youngest age groups.

What about Luxembourg?

Whilst the report does not specifically detail the Luxembourg market, the major trends identified--the rise of distributor brands, the quest for quality at the right price, pressure on margins, digitalisation--resonate with the strategy of players operating in the country. The rise of discounters , the growing adoption of food e-commerce and the increase in demand for fresh local produce suggest avenues to explore for retailers looking to make their mark in the Greater Region.

“Healthy” eating, a lever for growth

The transition to healthier eating is emerging as a fundamental trend with major economic implications for manufacturers, distributors and investors, the report stresses.

Driven by a growing demand for fresh, functional products with little (or no) processing, this change in consumer behaviour is redefining the priorities of the agri-food sector in Europe.

So-called “functional” products--enriched with nutrients or compounds beneficial to health--and “clean” foods--i.e., free from artificial additives and mostly natural--are gaining ground. The increase in the intention to buy high-quality fresh food since 2024 (+2 points) bears witness to this, as does the strong appetite for these products among the younger generations.

Generation Z, in particular, crystallises this transformation: it has the highest net intention to eat more healthily, with an increase of seven points in one year. A third of survey respondents say they are prepared to pay a premium price for healthier products.

But the gap between supply and demand remains a brake. Barely 35% of consumers questioned as part of the study believe that their preferred store (the hypermarket closest to their home) offers a range of products suited to healthy eating. This reveals a significant potential for differentiation for retailers capable of quickly adjusting their product strategy, the document concludes.

This shift  represents a growth driver that should not be overlooked. It calls for a rethink of the agri-food value chain, from R&D to marketing, incorporating generational expectations, transparency on ingredients and a sustainable pricing policy. The course has been set.

This article was originally published in .