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Food retail market: Key trends and developments following COVID-19
Floris van der Pijl published on May 30, 2022
The food retail industry reported average sales growth of 4% between 2017 and 2021, while average EBIT margins stood at 2.6%. COVID-19 had a positive impact on sales growth: the sector grew by 5.1% on average during the pandemic and EBIT margins increased slightly (2.7%). However, our data shows that discounters lost their edge, illustrated by a decline in margin (2.3%). Furthermore, a changing competitive landscape challenges players to adopt a clear online strategy. A-INSIGHTS analyzed the financial data of the top 65 players in the industry. Read our insights here.
Financial data can reveal a lot about the performance of an industry. By benchmarking that data, it is possible to identify value-adding strategies in terms of growth and profitability. In our report, we analyzed the performance of the largest players in the food retail industry, focusing on net sales growth (CAGR) and profitability (EBIT).
Key trends and developments in the food retail industry:
- Food retail benefits from the pandemic, unsurprisingly, but growth was not staggering: The net sales growth was 5.1% on average in 2020, and another 3.4% during 2021.
- Traditional supermarkets experienced net sales growth during the COVID: They managed to increase their net sales by 3.6%, while discounters grew only 0.8%.
- Discounters lost their edge during the pandemic: While supermarkets' margins show steady growth, with preliminary 2021 results even showing margins of 3.0%, discounters' margins drop by 2.3% to below those of supermarkets in 2021.
- Accelerated e-commerce trends force traditional retailers to innovate: With the arrival of online supermarkets and rapid-delivery players, convenience is rising and traditional supermarkets are forced to respond to the changing competitive landscape.
Margin development: discounters versus traditional supermarkets
Average margins at discounters are higher (3.5%) than at supermarkets (2.5%) over the 2017-2020 period. Growth rates at discounters, averaging 1.8% over the 2017-2020 period, are also higher than at supermarkets (-0.3%). In 2020, both supermarkets and discounters achieved higher margins than average between 2017 and 2020. However, with net sales growth of 3.6% in 2020, supermarkets are growing much faster than in previous years. They also outpace the discounters, who only achieve growth of 0.8% on average in 2020.
Figure 1: Margins supermarkets vs discounters
Polish companies on the rise – margins under pressure for German retailers
Polish supermarkets are thriving thanks to the country's higher disposable income and standard of living. In 2021, disposable income in Poland increased by 6% year-on-year, which is one of the best results in the world. With higher disposable income, the country is proving to be fertile ground for retailers, with Polish retailers thriving. Retailers like Zabka, Dino and Stokrotka all report strong sales growth over the past few years.
Margins are significantly lower for German retailers than for their European counterparts. As a result, retailers in Germany generally have more control over their value chain and are more likely to pursue more value chain integration.
Changing competitive landscape – at-home delivery market is far from mature
With the increase in demand for home delivery, the competitive landscape is also changing. The convenience of having groceries delivered at home has helped Picnic nearly double its sales in 2020 compared to 2019 (from €232 million euros to €455 million euros). Other variants of the grocery delivery service, such as Hello Fresh, are also reporting high growth rates.
The fact that this market is far from mature is demonstrated by the increasing number of players. Among the newer entrants in the competitive landscape are those in the field of rapid delivery. They are growing fast, with German player Gorilla's reporting net sales of €5 million in 2020 and €220 million in 2021. Gorilla's now operates in eight European countries and the US. Getir, which has its origins in Turkey, was already at the level of €220 million sales in 2020 and reports €1 billion in sales in 2021. With 34 million downloads, the latter has an estimated 40% market share of the fast delivery players in Europe. These players are in the competitive space of traditional supermarkets, but also of the services that provide home deliveries from restaurants, such as Just Eat Takeaway and Uber Eats.
Curious about the performance of key players in the food retail industry?
Want to know more about the importance of having a clear online strategy? Are you interested in the key drivers behind profitability and growth? Find out more about trends and developments in the retail industry in our trend report.