IGD predicts that growth in “lower tier” middle-income cities and more mergers and acquisitions in China, the world’s biggest grocery market, are expected to be key influences shaping this market over the next five years.
Chinese grocery sales will grow by one-third by 2020, reaching US$1.5tr, according to IGD’s forecasts.
Joanne Denney-Finch, IGD’s chief executive, said: “China will maintain its position as the world’s biggest grocery market for the foreseeable future. Although the Chinese growth rate is slowing, it’s still very impressive, particularly in tier three and four cities.
“These are provincial medium-income cities that are undergoing rapid development. There are many more opportunities for retailers and western brands. For example, online grocery will enjoy explosive growth in China, though from a modest base, tripling in size between now and 2020.”
India, the third-largest global grocery market, has plenty of potential but has so far proved challenging for international retailers due to the strength of traditional trade and legislative restrictions on international investment.
“While traditional stores will continue to take the lion’s share of the Indian grocery market, consumer spending per capita in real terms will grow faster in the subcontinent than in any of the top grocery markets,” said Denney-Finch.
“Combined with an expanding working-age population, this will support the growth of modern convenience and supermarket retailing. Retailers are also rapidly setting up online grocery services hoping to tap into the potential of India’s half a billion smartphone users.
“Despite restrictions on foreign direct investment, international retailers continue to see the potential of investing in India.”
In both countries there is also a great opportunity for online retailing in key cities and for international brands. Marks & Spencer, for example, has recently reported impressive growth via Alibaba’s Tmall.com digital marketplace in China.
According to IGD’s forecast, the top 15 global grocery markets are set to grow by 34% to a value of US$8tr by 2020, with Asia, the Middle East and Africa, and Latin America accounting for more than 70% of the world’s grocery growth over the next five years.
“Although growth prospects appear limited in Europe at the moment, this is a time of tremendous opportunity for grocery companies further afield,” says Denney-Finch.
“The vast majority of global grocery growth will come from Asia, Africa and the Middle East supported by increasing affluence, urbanisation, and rising population. With many European products and brands highly regarded in these regions, this will be a boom time for companies with export skills.”
IGD suggests there are three key opportunities for retailers to make use of this expected growth: expanding private label ranges; demonstrating the resonance of their brands internationally; and making the most of a specialism.
There is also plenty of growth potential for quality brands that are able to demonstrate local relevance, according to IGD.