The European grocery sector may not always be at the center of retail real estate discussions, but the latest “State of Grocery Retail Europe 2026” report by EuroCommerce and McKinsey & Company offers valuable insights far beyond food retail.
The study, based on surveys of more than 35 grocery CEOs and 15,000 consumers across 14 European countries, paints a picture of a sector stabilizing after years of inflation pressure—but simultaneously entering a period of structural transformation that could have significant consequences for physical retail formats and retail property strategies.
Stability Returns — But Growth Remains Limited
According to the report, European grocery sales grew by 3.4% in 2025, driven largely by 2.9% food inflation, while actual volume growth remained weak at only 0.6%.
At the same time, profitability remains under pressure. 77% of grocery CEOs identified margin and cost pressure as their top concern for 2026, while medium-term growth prospects remain muted.
One figure stands out particularly: grocery volume growth in Europe is projected to increase by just 0.2% annually through 2030. As a result, traditional expansion alone no longer seems to be a viable growth strategy.
The Store Is Becoming More Than a Supermarket
One of the report’s most relevant findings for retail real estate concerns changing store formats. Consumer behavior is shifting decisively toward convenience. Foodservice is now growing two percentage points faster than traditional grocery retail, while 82% of Gen Z consumers buy ready-to-eat or ready-to-heat meals at least once per month.
As a consequence, grocery retailers are increasingly integrating foodservice concepts directly into stores. The boundaries between supermarket, convenience retail, café, and foodservice are beginning to disappear.
For shopping center operators and retail landlords, this reinforces a broader trend already visible across Europe: retail destinations are evolving toward mixed-use, service-oriented environments rather than pure transactional spaces.
Pressure on Secondary Destinations
The report also questions one of retail’s traditional assumptions: that more space equals more growth. Since 2019, grocery selling space across major European markets expanded by 4.6%, while volume growth increased by only 1.7%. The result is a sharp declining productivity per square meter.
This mirrors developments already seen in fashion retail and suggests that future store expansion strategies will become far more selective. For retail real estate owners, this likely means increasing pressure on secondary locations while prime, highly productive assets continue to outperform.
Private Labels Continue to Gain Power
Another structural shift is the continued rise of private labels. According to the report, private label products now account for 40% of total grocery sales across Europe, while approximately 90% of consumers plan to continue buying private-label products at the same or higher levels.
More importantly, private labels are no longer positioned purely as low-cost alternatives. The report shows that private labels now account for 44% of all new grocery product launches in Europe — and as much as 70% in food categories.
Retailers are increasingly building their own brands instead of simply competing on price.
AI Moves From Experiment to Strategy
Perhaps the most forward-looking section of the report focuses on artificial intelligence. For the first time, AI and automation ranked as the second-highest strategic priority among grocery CEOs, behind margin pressure.
The report identifies four developments expected to define the sector’s medium-term future:
- Agentic commerce, where AI assists consumers in purchasing decisions
- AI-driven organizations, automating internal processes
- Store automation and physical AI, transforming operational workflows
- Technology ROI as retailers seek measurable returns from digital investments
One particularly striking statistic: 12% of European consumers already use AI tools such as ChatGPT for grocery shopping decisions, with adoption highest among younger consumers.
Grocery Retail Offers a Glimpse Into Retail’s Future
While grocery retail traditionally follows a different business logic than fashion or shopping center retail, many of the structural trends identified in the report extend far beyond supermarkets.
Stores are becoming hybrid spaces. Convenience is replacing traditional shopping missions. Technology is becoming central to operational efficiency. Physical retail is shifting from expansion toward productivity.
As a learning, grocery retail may currently offer one of the clearest indications of where retail real estate is heading next.
Summary
Retail by the Numbers (2026)
- M&A activity since 2022: +47%
- Grocery sales growth Europe: +3.4%
- Private label share: 40%
- CEOs prioritizing AI: 47%
- Grocery volume growth to 2030: 0.2% CAGR
- Online grocery growth 2025: 6.8%
Key Trends in European Grocery Retail
Download
The State of Grocery Retail 2026
For more information, please download the EuroCommerce / McKinsey report
“The State of Grocery Retail 2026” – Europe
(pdf, 40 pages)
