Emerging Markets: Overview and Growth in Opportunities in Grocery Channels

Half of all retailing sales will come from emerging markets by 2018

In EMEs, the retail landscape varies from market to market, but overall retail sales in are gaining share from developed markets and are expected to represent 53% of global grocery retailing in 2018, boosted by strong growth in China, in particular.

Purchasing habits are evolving as young and urban consumers move away from traditional channels

Demographic changes in EMEs are shaping purchasing habits. Grocery retailers have adapted their offer to cater to increasing demand for convenience formats in city centres from a younger and increasingly urban population.

Modern grocery channels are gaining share but traditional formats still dominate in emerging markets

Whilst modern grocery channels see strong growth, most consumers continue to shop in small independent local stores and markets. This is due to fewer women being involved in the workforce than in developed countries, as well as poor urban planning and low car ownership in some markets, restricting supermarket/hypermarket growth.

Moves towards both smaller and larger grocery formats

As a result of rising car ownership and urbanisation, among other factors, the penetration of hypermarkets on one hand and convenience stores on the other hand is growing, at the expense of supermarkets, although these remain the most common modern grocery format.

International retailing players lead expansion of the grocery channel in emerging markets

Players from developed markets are entering EMEs through franchise partnerships with local operators, as well as acquisition of local players. This is partly a response to legislation on FDI, but also allows retailers to boost their global store expansion while offering their expertise, participating in the modernisation of local retail infrastructure.

Smaller formats to complement large formats offer

Urbanisation and higher disposable income in EMEs have created the need for more convenience. As a result, convenience stores are increasingly replacing traditional independent small grocers in these markets.

In order to sustain future growth, grocery retailers could expand through both small and large formats. In Latin America for example WalMart has few convenience stores, but this expected to be the best performing grocery channel over the 2013-2018 period.

Growing opportunities in second-tiers cities

The large and expanding middle class in EMEs is contributing towards a gradual transformation in consumption patterns, reaching second-tier cities, where average disposable incomes are approaching the same levels as in larger cities.

This represents an opportunity for retailers to expand their networks outside saturated larger cities and achieve higher returns and long-term growth.
For example, as part of its expansion strategy in China, Carrefour is tapping into second-tier cities where its stores can be more profitable than in first-tier cities.

Expanding through franchises and joint ventures to lower risks

Whilst joint ventures and partnering with franchise operators makes it difficult for retailers to generate large profits, it allows them to expand their networks rapidly to gain a larger geographic coverage while limiting risks.

Franchise operations and joint ventures also allow international retailers to have access to the local expertise essential to succeed, and to respond to restrictions on foreign direct investment. In the case of Carrefour, this also gives the company access to retail infrastructure and prime locations, as its partner, Majid Al Futtaim, also has real estate activities.

What this report includes

• Top-level strategic analysis of how major consumer trends will influence global markets
• Consumer insight
• Impact across all relevant consumer markets
• Unique graphics and case studies
• Key market snapshots
• Accompanying presentation to synthesise main findings

Why buy this report

• Identify factors driving change now and in the future
• Understand motivation
• Forward-looking outlook
• Briefings and presentation should provoke lively discussion at senior level
• Take a step back from micro trends
• Get up to date estimates and comment