McKinsey&CompanyEuroCommerceNavigating the market headwindsThe State ofGrocery Retail2022-Europe- ContentsForeword and editors6Food and grocery market KPIseuropanel9State ot Grocery Europe: Navigating the market headwinds20Ten key trends shaping the grocery industry in 2022 and beyond24Interview wit/h Marthias Wunderin, Chver Commercia/ Oficer, Migros Supemmarkers (CH)29Learning and insights on key trends3062The next S-curve of growth:Crlisls or opportunity? How grocers canOnline grocery to 2030build stronger people models3668Interview with Melanie Smith, CEO,Interview with Clduc/a Azevedo, CEO,Ocado Retar (UK)Sonae4072Instant grocery:Pushing granularWill it stay or willit go?decisions through analytics4478Interview with Kagan S(mer, CEO,/ntenview with Aciam Manikowskl,GoriffasManaging Director, Zabka4882Grocers’ sustainability opportunity inGrowing beyond groceries:transforming the food systemThe ecosystem expansion58Interview with AMarina Caprotti,Executive C/a/mman, Esss/unga (Italy)88Contributors, acknowledgments,and contactsCover image 0 Johner Images/Getty Images Navigating the market headwinds The State of Grocery Retall 2022: Europe ForewordIn the past 24 months, food retailers' sales have reached unprecedented levels, owing to restrictions onconsumers' movements during the COVID-19 pandemic, This trend began to reverse course in 2O21. however.with the reopening of restaurants and travel and despite the comeback of GDP, but with infiation and energyprices on the rise, The inva sion of Ukraine in February 2O22 produced a further shock and, although its fullenergy. agri-food commodities, and raw-materials markets, the confict is likely to exacerbate some of thenegative trends that emerged at the end of 2021This year's reportalthough its insights and analysis are based on the situation before the invasion ofUkrainehighlights some ot the key trends atecting consumption patterns and considers questions forgrocery retailers: What is the impact of inflation, and how can grocers react to it? How have consumeronline sales, including instant grocery. look like by 2O3 O? What opportunities arise from the sustainabilitytransformation of food systems? Why are skills and talent taking center stage? What about opportunities inbuilding ecosystem approaches and data analytic s?The State ot Grocery report is an annual global publication covering three continents, with dedicated reportsfor Asia, Europe, and North America. This year's report, *Navigating the market headwinds The Stateof Grocery Retail 2022: Europe,*is a continuation of a partnership between McKinsey & Company andEuroCommerce, designed to provide executives with a comprehensive view of the market and future trends.In preparing the report, we surveyed more than 12,0O0 consumers and around 60 grocery executives acrossEurope, We interviewed six industry thought leaders and pioneers, We combined Euro Commerce's policy andsector knowledge with McKinsey's globalexpertise and analytical rigor.We hope this report will offer new insights and perspectives that will help grocers navigate themarket headwinds.Jel berfluChristelDelbergheDaniel LaubliDirector GeneralPartnerEuroCommerceMcKinsey & CompanyNavigating the market headwinds The State of Grocery Retall 2022: Europe EditorsChristel DelbergheRichard HerbertChristel is the Director General ofRichard is responsible for the developmentEuroCommerce, the European organizationof global insights at Europanel and worksrepresenting 5 million of retaillers andwith international consumer data sets andwholesalers in 27 countries, With a tean ofEuropanel's academic partners. For more2O professionals, she leads and coordinatesthan 2O years, he has worked with globaladvocacy for the se ctor and is its chieftast-moving consumer g oods (FMCG) playersspoke sperson at the EU level.and has been instrumental in setting up andrunning international Europanel projects onbrand growth (B G2O), innovation, private label,discounters, and sustainability.Franck LaizetDaniel LaubliFranck leads McKinsey's Retail Practice inDaniel has been with McKinsey for 15 years andEurope, the Middle East, and Africa (EMEA).Is based in the company's Zurich otrice. He leadsHe has extensive experience in strategy andMcKinsey's Food Retail Practice globally andtransformation topics across consumer-facingadvises leading grocery and nonfood retailersindustrie s, With his management-consulting andacross Europe on category managementoperational experience, he works with senior(assortment, price, and promo), advancedleaders and their management teams to driveanalytics, store operations, and strategy.growth and performance transformations.4Navigating the market headwinds The State of Grocery Retail 2022: Europe Jean-Albert NyssensBeatrizRastrolloJean-Albert is EuroCommerce's chief economist.Beatriz has been with McKinsey &, Company forIn that capacity, he is leading research on the roleeight years and is based in the company's Madridof retail in the European ec