Australian grocery market to reach US$111.8bn in sales by 2023
The Australian grocery market is expected to reach US$111.8 billion in sales by 2023, making a modest impact on the US$1.9 trillion in sales forecasted for the leading grocery markets worldwide.
According to IGD’s latest research, Australia is expected to have CAGR growth of 2.9 per cent by 2023.
The 20 leading markets are forecasted to grow by 28 per cent between 2018 and 2023, with Asia making up nearly half (44 per cent) of the extra sales, more than Africa, Europe and Latin America combined. Seven of the world’s largest grocery markets by 2023 will be from Asia, with a combined market size of US$3.8 trillion.
Nick Miles, Head of Asia Pacific at IGD said the predicted growth in Asia can be attributed to the rapidly growing middle class, adoption of new technology, improved infrastructure and logistics networks, as well as improvements to retail standards.
“China’s grocery market is expected to continue growing over the next five years, establishing itself as the largest grocery market globally. While growth varies between markets across Asia, countries such as India, Indonesia, Pakistan and Vietnam will continue to grow in importance for retailers and suppliers given the large populations, improving levels of GDP per capita and the development of modern trade. Retail partnerships have also in some cases helped retailers accelerate growth ahead of the market, and we expect more of these relationships to emerge and develop over the next 12 months,” Miles said.
While modern trade retailers continue to expand store networks, traditional trade still plays a role, with modernised offerings and tailored services for local communities. Miles said this is being aided by online retailers such as Alibaba and Amazon in countries like China and India.
“Across Asia the pace of development and focus of retailing varies by market. However, online is expected to be the fastest growing channel regionally over the next five years. Online grocery retailing is already well established in countries like South Korea, Japan and China and we expect the share of sales accounted for by channel in these markets to increase to over 10 per cent by 2023. While online grocery retailing is growing rapidly across Southeast Asia we expect it to still account for less than 2% of sales in most markets in five years’ time,” Miles added.
Europe will be the second most important region in terms of additional sales with US$322 billion in new sales expected in the timeframe.
Head of Retail Insight EMEA Jon Wright said that France, Germany, Russia, Turkey and the UK will be the standout countries, accounting for nearly two-thirds of all additional sales. The continued strength of these markets will dictate the growth outlook for Europe as a whole.
“Online and discount are set to gain the most share to 2023, with discount set to be the strongest gainer between them both. Several factors are set to help maintain the channel’s growth, including expansion from regional leaders such as Aldi and local operators like Biedronka, and improvements in retailer offers as we’ve seen with Salling Group-owned Netto. We’re also seeing growth through more targeting of missions, as with Dia’s to Go format, and an expansion of ranges to include more organic and niche products,” Wright said.
“Despite growing slower than the market, the expansion and embedding of omnichannel strategies from hypermarket and supermarket operators is set to help them compete against discounters and pure play ecommerce retailers. These initiatives are set to be enabled by alliances at a regional level, as between Carrefour and Tesco, and globally, as with US-based Target and Germany-based Metro collaborating.”
Growth opportunities provided by Latin America, with the exception of Argentina and Venezuela, and North America are likely to provide a number of opportunities for retailers and manufacturers between now and 2023. IGD expects inflation to be the most significant factor driving growth over the next five years.
“The US market heavily influences the region’s performance given its size. The outlook is for a fairly low growth scenario, meaning that retailers and manufacturers need to focus on the growth opportunities provided by the online channel and discount retail, as these will be the fastest growing channels over the period,” IGD Canada Programme Director Stewart Samuel said.
“The North American market is seeing significant investment in online grocery retail, particularly in terms of supply chain and fulfilment. There is a big focus on making the channel more efficient which involves lots of testing of different solutions. Albertsons and Ahold Delhaize have partnered with Takeoff Technologies for hyperlocal fulfilment, Kroger partnered with Ocado. These investments suggest that retailers view the channel as being materially more important in the future.”