McKinsey – State of Grocery Central Europe, 2023

The intro to McKinsey's report on the state of the grocery sector in Central Europe in 2023 highlights the defining event of 2022, which was an inflationary spike caused by the post-COVID-19 recession, disruptions in the supply chain, the war in Ukraine, and sanctions on Russia. Despite these challenges, the overall market value of online and offline grocery retail grew in all Central European countries, except Ukraine, driven mainly by price. The report suggests that market conditions are expected to normalize in the coming months, but negative sentiment towards inflation may linger. Consumers will need to adjust to a new normal, resulting in changes in their behavior such as trading down, declining loyalty to grocers and brands, and a greater willingness to buy private-label items. The report identifies four key trends driving the CE market in 2023 and beyond: a focus on grocery affordability, the need to offer more for less, a new generation challenging the retail status quo, and a margin squeeze due to price sensitivity and increasing cost pressure. McKinsey conducted extensive research to summarize these trends, including speaking with consumers, interviewing CE retail and consumer-packaged-goods (CPG) leaders, and conducting additional research. The report concludes that consumers are trading down, looking for cheaper options, and switching brands to cope with inflation. Retailers and suppliers need to focus on crafting attractive promotions, adjust product offerings for affordability, and reinvent local one-stop shopping. Moreover, online grocery shopping is gaining share in Central Europe, but affordability needs to be prioritized to grow the customer base. The report also highlights the increasing influence of Gen Z consumers, and the need for networks to adjust their value propositions and provide seamless online and offline experiences to attract and retain this demographic.