Last year was challenging for both consumers and retailers around the world. Although many countries are now coming out of recession, it is widely agreed that this year certainly will remain tough, particularly if commodity price inflation gathers momentum.

However, the food and grocery industry remains resilient and it has seen growth continue in many markets, in some cases boosted by lingering food retail inflation combined with currency devaluations.

It seems then that there is still everything to play for and as part of our latest research, 10 for 2010, which outlines ten key themes the grocery industry should be aware of in the next 12 months , we have predicted the top grocery markets of the future.
 

Top Ten Grocery Markets to 2014 (€bn)

Note: 2010F and 2014F are calculated using fixed exchange rates based on the average rates of 2009 from www.oanda.com (01.01.09 to 07.12.09)  Source: IGD Research, December 2009

Our forecasts show that China is set to overtake the US as the largest grocery market in the world by 2014. This figure is based on grocery retail market sizes that are nominal values at current prices and include inflation.

	Consumer spend in China is increasing

Although the US remains the largest single market in 2010, economic growth in emerging markets is slowly shifting the balance to the rest of the world, a trend which has been fuelled by the global credit-crunch. In 2008/09, US economic growth decelerated while China was less affected by the global economic slowdown.

The IMF's latest World Economic Outlook, published in October 2009, forecasted a real GDP Compound Annual Growth Rate (CAGR) for the US of 4.07% vs. 11.44% for China over the time period 2009-2014. It is clear therefore that China could grow nearly three times faster than the USA.

During the credit-crunch, the Chinese Government's stimulus package, combined with sustained bank lending, has buoyed up the economy and subsequently driven up private sector demand. In addition to this, consumer spend in China is increasing and the country is seeing a significant amount of investment, two areas that are further helping to fuel growth.

A fast rate of population growth is another factor that will help China reach the top spot. According to the UN's World Population Prospects: The 2008 Revision China's population will reach 1.4billion by 2015. Between 2010 and 2014, China is expected to add double the amount of people than the US, 27 million new inhabitants compared to 13 million in the US.

Finally, although food inflation is very difficult to forecast over a long-term period, the IMF suggests that there will be limited inflation in China because the Government will be keen to 'manage' this area to avoid public unrest. If this is underestimated however, the grocery retail market will be boosted further.
 

Plan ahead now

It is not surprising therefore, that the BRIC markets will offer the most significant growth prospects in the next 5 years, especially as the middle-class continues its ascension and gains greater access to modern retail outlets. Many retailers and suppliers are already gaining traction in these markets but for those who have not yet invested, it is important to start planning ahead now because the pace of growth for emerging markets will continue to outstrip that of the developed world.

IGD will be visiting China in April 2010. If you would like a briefing on the latest developments in the market, please contact us.
 

More information:

	10 for 2010
	Are you ready for the year ahead? This new IGD research will help you understand the ten key themes to drive commercial performance in UK and global grocery retailing in 2010.

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Cecile Riverain is a Senior Business Analyst with a strong focus on the latest trends in pan-European retailing and the discounter sector. Cecile is also a specialist of the transitioning markets of Central and Eastern Europe and has published several reports on the region.

Cecile regularly presents on international retailing trends at conferences and bespoke briefings commissioned by IGD’s clients. Read her biography here.