Growth Prospects of Online Grocery Sector in the UK to 2029

Overview of the Online Grocery Market in the UK

Morgan Stanley has recently released a report that sheds light on the remarkable revival of the online grocery sector in the UK. This resurgence follows a period of stabilization following the pandemic, with the market now entering a robust growth phase that is outpacing the overall grocery sector for the first time in three years. In the most recent analysis, the online grocery penetration increased to approximately 11.7%, indicating a positive trajectory towards growth.

Future Projections for Online Grocery Penetration

According to Morgan Stanley's projections, online grocery penetration is expected to grow steadily by about 30 basis points each year, culminating in a compound annual growth rate (CAGR) of about 6% by 2029. This growth is expected to boost the total addressable market (TAM) to around £24 billion, further increasing online grocery penetration to approximately 13.2%. These numbers signify a shift towards more digital consumption of grocery items, making it a vital area for retailers.

Key Players and Their Market Share

Tesco has emerged as a leading player in this expanding market, currently holding a substantial 29% share of the UK's online grocery sector. As indicated in the report, Tesco stands as a preferred stock among investors focusing on the grocery digital landscape. Its continued dominance showcases the effectiveness of its online strategies in adapting to changing consumer behaviors.

The Rise of On-Demand Grocery Services

The on-demand grocery segment is also gaining significant traction, initially valued at around £2 billion and projected to grow at an impressive CAGR of 15%. Morgan Stanley predicts that by 2030, the on-demand grocery market could potentially reach close to £5 billion. However, it’s important to note that this figure would still represent only 2% of the overall grocery market, highlighting the ongoing evolution in consumer preferences towards quick, convenient grocery shopping.

Deliveroo's Position in the On-Demand Grocery Trend

Deliveroo has been spotlighted as a key player exposed to the on-demand grocery trend, alongside Uber, as they account for around two-thirds of the UK’s on-demand grocery orders. Currently, Deliveroo's Group Gross Transaction Value (GTV) from the on-demand grocery market stands at approximately 9%, and this figure elevates to about 15% when considering international operations. This dynamic indicates a competitive edge for Deliveroo, showcasing its capabilities in processing an increasing volume of orders.

Competition Among Grocery Delivery Services

Just Eat, a major player in the food delivery market, aims to strengthen its foothold in the on-demand grocery segment. Despite having only half of Deliveroo’s current GTV in this area, analysts predict that Just Eat, leveraging its strong position in food deliveries, has the potential to surpass both Deliveroo and Uber in grocery revenues by around 2030. This anticipated shift could reshape the competitive landscape of the online grocery market, emphasizing the necessity for sustained innovation and strategic adaptation.

Conclusion

As the online grocery market continues to advance, Morgan Stanley’s findings highlight significant growth prospects leading up to 2029. With key players like Tesco and Deliveroo leading the charge, the market's trend towards online grocery shopping is becoming increasingly evident. The anticipated growth of the on-demand sector further reflects evolving consumer preferences that retailers must navigate to thrive in this changing landscape.

Frequently Asked Questions

What is the projected growth of the online grocery market in the UK?

The online grocery market is projected to reach approximately £24 billion by 2029, with a CAGR of about 6%.

Which company holds the largest share of the online grocery market?

Tesco currently holds a commanding 29% share of the UK's online grocery market.

What is the expected growth rate of the on-demand grocery segment?

The on-demand grocery segment is expected to grow at a CAGR of around 15% and could reach close to £5 billion by 2030.

How does Deliveroo fit into the on-demand grocery market?

Deliveroo is a key player, processing about two-thirds of the UK's on-demand grocery orders, with a GTV of approximately 9% from this market.

What are Just Eat's prospects in the on-demand grocery market?

Just Eat has the potential to surpass Deliveroo and Uber in grocery revenues by around 2030, leveraging its established position in food delivery.

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