Grocery: A promising channel to drive growth

As we navigate the dynamic landscape of CPG retail in 2025, forging effective strategies in the evolving retail landscape requires prioritizing channels with strong growth potential. Among these, Grocery stands out as a resilient and growing sector, offering critical opportunities that can help offset potential challenges from slower-growing areas like the Drug channel. For suppliers, tapping into Grocery shouldn’t be a fleeting consideration—it can be an essential strategy to drive sustainable growth in a competitive and shifting marketplace.

Why Grocery? The Numbers Speak Volumes

	Market Size: The overall U.S. grocery industry was valued at $1.5 trillion in 2023, with a growth rate of 5.6%. Maintaining focus on Grocery should be a priority, as the channel still wins the top prize for most trips and has the highest reach.
	Grocery Outpacing All Others: Increased promotions drove Grocery growth in dollars and units as traffic grew with the holidays, even outpacing traffic in Supercenter/Mass and Discount/Value locations. Of note: Q4 promotion was the highest it’s been over the past four years for national brands.
	Steady Growth Ahead: Despite continued economic headwinds and elevated prices, modest growth is expected to continue in 2025 for the Grocery channel, with forecasts pointing to low single-digit annual growth rates consistent with pre-pandemic levels.
	Hybrid Shopping Continues to Grow: Online grocery market growth continues to accelerate. U.S. online grocery sales are projected to reach $257.5 billion in 2024 and could surge to $363.8 billion by 2026. In fact, 28% of American adults now shop for groceries online at least once a month. This shift in consumer behavior opens up new avenues for CPG brands to connect with customers. At the same time, though, customers in this channel continue to place high value on in-store shopping experiences, making an omnichannel strategy crucial.

What does this mean for you?

Retailer segmentation models should be updated to reflect new growth projections by channel and include revised door counts based on forecasted store openings and closings by key retailer.

Once updated, suppliers should be disciplined about leveraging their segmentation outcomes to define go-to-market channel strategies for when/where to launch innovation, spend brand marketing dollars, and invest in promotion/trade programs. Deciding where (and where not) to play or differentiate will be key.

What will be important to know in 2025?

The focus will continue to be on value in 2025. Simply put, shoppers are still pressured by the rising costs of living (especially lower income, younger families, and households with kids) and are adapting their behavior and spending habits accordingly. Be mindful about taking price as a vehicle to increase consumption dollars, as wallets are still be stretched which could result in brand switching and negatively impacting brand loyals. Consider analyzing promotional spending across channels and if fewer, deeper discounts are an option to reward and delight your brand shoppers with surgically planned promotions.

Grocers continue to up their eCommerce and delivery game, either partnering with third-party marketplaces like Instacart and DoorDash or creating their own in-house automated micro-fulfillment centers. Some are adding delivery perks to their loyalty programs, like Walmart+ and Kroger Boost, for example. Be ready with resources, capabilities, or investment dollars to support these opportunities to deliver potential growth, especially as traditional grocery retailers start to “catch up” to dotcom competitive sites.

Looking to drive growth in the dynamic and complex Grocery landscape? Market Performance Group is helping many of today’s fastest-growing consumer brands thrive in this competitive space. Our highly experienced Grocery team leverages deep relationships across 120+ retailers and all categories to connect you with the right people and drive retail success. With dedicated Regional, Strategic Food, and National Food teams, we understand each retailer’s specific consumers, their success requirements, and the opportunities they present for our brand partners. Our end-to-end, omnichannel solutions include full-service sales representation, backroom administration, actionable analytics, and insights-driven omnichannel strategies to achieve your growth goals.

Interested in hearing more to boost your business in Grocery this year? Reach out to Mike Sainsbury, Vice President, MPG Grocery at Mike.Sainsbury@mpgllc.com for a conversation.