MIDDLE EAST & AFRICA

McKinsey report: 2024 State of Grocery Retail in the Middle East and North Africa

The McKinsey report on MENA's grocery sector highlights strong growth in modern trade, eGrocery, and discount formats, driven by increasing consumer demand for convenience, value, and premium products. Retailers that leverage digital innovations, AI, and emerging eB2B platforms can capitalize on these trends to enhance profitability and meet evolving consumer expectations​.

(Image Source)

McKinsey & Company.

The McKinsey report “2024 State of Grocery Retail in the Middle East and North Africa” explores key trends shaping the MENA grocery sector and highlights the strategies retailers can adopt to remain competitive and meet evolving consumer needs.

(Image Source)

Key takeaways:

1. Modern Trade Growth

• Expansion of Store Networks: Modern trade has continued its upward trajectory across MENA, with Saudi Arabia and the UAE showing steady growth. Countries like Egypt and Morocco have seen rapid increases, driven primarily by new store openings. The region’s high growth potential, particularly in emerging markets, suggests this trend will continue as demand for formalized retail formats grows.
• Investment Opportunities: This growth underscores opportunities for local and international investors, particularly in markets like Egypt and Morocco, where modern trade is still in the minority.

(Image Source)

Image: McKinsey & Company

2. Rising eGrocery Demand

• Steady Online Sales Growth: Despite starting from a smaller base, online grocery sales in MENA have grown significantly. For instance, the UAE and Saudi Arabia lead with annual growth rates of 27% and 25%, respectively.
• Future Potential: Although online penetration remains low compared to mature markets, consumer interest is increasing. Approximately one-third of consumers in MENA express intentions to shop more online in the coming years, offering a strong growth outlook for eGrocery.

3. Surge in Discount Formats

• Consumer Demand for Affordability: Discount retailing is gaining traction, with consumers increasingly seeking value. In Egypt, Morocco, Saudi Arabia, and the UAE, discount formats have grown faster than the overall industry, as seen with brands like Kazyon and Viva expanding across the region.
• Future of Discounts: Given the popularity of discounters in mature markets, retailers have substantial room to grow this format across MENA. However, establishing a sustainable discount model remains a challenge that may affect its pace of expansion.

4. Health and Premium Preferences

• Growing Demand for Quality: Even as consumers look for savings, there’s an increasing willingness to spend on premium, healthy, and organic products. High-income consumers, especially in the UAE and Morocco, are driving demand for organic goods, reflecting a shift towards health-conscious choices in the region.
• Potential for Growth: Retailers responding to these demands can boost customer loyalty by curating premium, quality products that align with health trends.

5. Rise of Food-to-Go

• Convenience-Driven Demand: The food-to-go segment, including ready-to-eat meals and delivery services, has surged, outpacing general grocery growth. This trend reflects consumers’ preference for convenience, with the fastest growth in Egypt and Saudi Arabia.
• Opportunity for Retailers: Retailers can tap into this market by enhancing their ready-to-eat options and introducing in-store dining experiences.

6. Expansion of eB2B Market

• Streamlining Small Retail Operations: eB2B is gaining traction as it simplifies supply chains for small, independent stores that dominate in many MENA countries. Platforms like Egypt’s Capiter are connecting merchants directly with suppliers, offering efficiency and cost savings.
• Growth Opportunities: Retailers can capitalize on the eB2B market by developing platforms that support traditional trade, enhancing both reach and profitability.

7. Retail Media and Digital Advertising

• Unlocking New Revenue Streams: Retail media networks are proving profitable for grocery retailers by generating advertising revenue from their digital and physical properties. In MENA, companies like Carrefour and BinDawood Holding are adopting retail media strategies, offering personalized advertising experiences for consumers.
• Profit Potential: With the right scale and advertising capabilities, MENA retailers can tap into this rapidly growing profit source, potentially mirroring the success seen in Europe.

8. Leverage of AI in Retail

• Enhanced Retail Efficiency: While generative AI is emerging, traditional AI applications in pricing, assortment, and promotions already yield significant results. MENA retailers using AI to optimize store operations and customer experiences are expected to gain a competitive edge.
• Strategic Priorities: For continued growth, retailers should focus on integrating AI across their operations to improve customer insights, loyalty programs, and inventory management.

(Image Source)

Image: McKinsey & Company

This report underscores that MENA’s grocery sector has enormous potential for growth, especially in modern trade, online grocery, discount formats, and eB2B. Retailers embracing innovation in digital, health-focused products, and convenience-driven formats are well-positioned to succeed in the evolving MENA market​. 

Source: McKinsey & Co.