Discount to Heap More Pressure on Large Format Grocers

Discount is set to grow by $217bn globally from 2024 to 2029, making it the fastest growing physical channel in grocery retail. For both retailers and suppliers, it is vitally important to know what the key drivers of growth will be in the discount channel for the short to medium term. This will help both to plan and prepare their strategies for this period.

The significance of the discount channel in the UK market, which ranks third globally by value, is on the rise. Forecasts indicate that discount sales will increase by over 19% between 2024 and 2029, ultimately capturing a market share of 16.6%.

Europe remains the heartland for the channel, with the top 14 countries by discount market share in the region. Despite this, there is encouraging growth across the globe with new regional players emerging, discounters expanding to new markets and retailers focusing on their discount banners.

Dan Butler, Senior Insights Analyst says: “The continued growth of discounters in grocery retail cannot be ignored, with suppliers needing to identify opportunities to work with them and competitors wanting to know how to fight back. Our report shows the key trends that are driving discounters forward, which takes inspiration from our global research despite Europe’s dominance in the channel. We identify which markets have the best prospects for discount growth and who the main players will be through our data and five-year forecasts.”

So what trends coming out of IGD’s Global Discount Trends Report will be most important to discounters in 2025?:

• Value leadership: value remains at the core of discounters’ operating model, and top of mind for shoppers. Discounters will keep EDLP as their foundation, experiment with loyalty, and evolve store formats to maintain their positions as value leaders.
• Renewed focus on networks: discounters have renewed their ambitious store network expansion plans. City centres are a target for expansion and acquisitions will be used in saturated markets. To remain relevant to shoppers’ changing needs and to add sustainable and energy-efficient features existing networks will be targeted for upgrades.
• Rethinking non-grocery: discounters must adapt their non-food strategy to cater to changing shopper needs. Dedicated outlet stores will become more prominent, and variety discounters will continue to enjoy fast sales growth, driven by strong store expansion in Europe. Ecommerce will have a role to play in the non-food space.
• Affordable health: discounters will aim to limit the impact of price on shoppers’ decision-making process for healthier options. Physical health will be supported through event activation, non-grocery ranges, and shopper education.
• Strengthening sustainability: discounters will increase their sustainability efforts with 2025 being a critical year, given the targets to be achieved by 2025. Shoppers will look to discounters to help them make affordable sustainable choices, which will help discounters build trust and loyalty.

Going forward, Europe will remain the discount channel’s global hotspot, with its share advancing to over 23% of sales by 2029. Central and Eastern European markets and Portugal offer strong prospects for the discount channel, with high penetration and sales growth rates to 2029.

All regions, except Asia, are expected to see discount’s market share continue to grow. Shoppers switching into the channel and networks’ continued expansion will drive growth. However, only one market outside of Europe, Canada, will have a discount market share of over 15% in 2029.

In terms of retailers, Aldi and Lidl will continue to dominate the channel. The discounters’ combined total sales are set to pass US$320 bn by 2029. Together Aldi and Lidl will account for 34% of the channel’s global sales in 2029.

Lidl, Aldi and 18 other operators will account for 83% of the channel’s additional sales between 2024 and 2029. They should be top of mind in building any strategic plans for the channel.

By understanding the key drivers of growth and adapting strategies accordingly, businesses can not only thrive but also lead the charge in transforming the grocery retail landscape. Embrace the insights, innovate, and position your brand at the forefront of this dynamic market.

The future of the discount channel is bright and full of potential. As the channel continues to evolve, those who are proactive and strategic in their approach will reap the rewards. The insights provided in this report are invaluable for businesses looking to stay ahead of the curve and make informed decisions that drive growth and success. Now is the time to act, innovate, and lead the way in the discount retail revolution.