Global grocery markets: our forecasts to 2020

Date : 17 August 2015
Global grocery markets: our forecasts to 2020

IGD Data and Insight Manager Katie Johnson shares the key trends and growth opportunities identified in our latest global grocery market forecasts.

  • IGD expects the value of the world’s grocery market to increase by a third over the next five years, reaching $11.8 trillion by 2020
  • Low income countries will see the fastest growth but lower-middle income countries are the greatest contributors to global growth, driven predominantly by India, Indonesia and Nigeria
  • Rising prosperity has a bigger positive impact on global grocery sales than population growth or urbanisation

Source: Retail Week

Fastest market growth in low income economies

Since 2010, grocery markets in low income countries have grown notably faster than those of high income economies. This reflects broader macro-economic trends, with GDP increasing by over 80% in low income countries compared to 14% in their high income counterparts over the same period.

Grocery sales in low income countries have increased by almost 70% since 2010. By 2020, we expect them to have more than doubled. 

Source: World Bank, IGD Research

Despite high growth, low income countries still form a tiny percentage of the world grocery market – 1.8% in 2010 and a forecasted 2.2% by 2020.

Total growth is predominantly driven by middle income countries, which have contributed almost 70% of global growth in the last five years and are expected to drive a similar proportion over the next five.

By 2020, middle income countries will make up over half of world grocery sales.

Source: World Bank, IGD Research

With middle income countries contributing so extensively to world grocery growth, it’s worth spending some time understanding the specific dynamics of this group.

What are 'middle income' countries?

The first thing to highlight is that the label ‘middle income’ covers a very wide range of economic standings. Kenya and Brazil are both classified as middle income despite Brazil’s GDP being 36 times as large as Kenya’s. In fact, incomes in this group range from as little as $1,046 to $12,735 Gross National Income per capita (Source: World Bank, Atlas method).

Dividing the group into two subgroups (upper-middle and lower-middle income countries) allows us to more accurately identify which countries are driving growth.

Looking only at countries that fall under the same subgroup in both 2010 and 2015, lower-middle income countries dominate growth. In fact, they account for almost 40% of the total growth in the past five years, and are expected to deliver 45% of it by 2020.

So why are these countries experiencing such extensive growth?

What is fuelling market growth?

With incomes of between $1,046 and $4,125 per capita, lower-middle income countries are in the early stages of development. They are experiencing increasing prosperity, urbanisation and a growing population. That being said, explosive growth in this group is not a ubiquitous phenomenon - India, Indonesia and Nigeria account for over 50% of grocery sales in this forty-six country group.

When you exclude these three countries, the expected contribution to global grocery market growth from the lower-middle income group falls by half. So what is setting India, Indonesia and Nigeria apart?

From 2008-2013, they exhibited a similar rate of urbanisation and population growth to the rest of the lower-middle income group; the differentiating factor was income per head. During that period, India, Indonesia and Nigeria saw per capita incomes increase by double that of the rest of the group.

Source: World Bank, IMF, IGD Research

Income per capita linked to grocery market growth

Interestingly, we see no relationship between grocery spending and either population growth or urbanisation within the lower-middle income group. However, countries with faster per capita income growth do have faster grocery market growth and this relationship also holds for the rest of the world.

In short, grocery market growth has a stronger correlation with per capita income growth than increasing population or urbanisation. 

Source: World Bank, IMF, IGD Research

Biggest growth from best of both

So on one hand, markets shaped by fast-growing per capita incomes will see the fastest growth. On the other hand, the greatest contributors to global growth in value terms are those markets that are already sizeable.

For industry professionals, the appeal of the lower-middle income countries we’ve noted lies in the way they combine both of these characteristics, acting as the engine of global grocery growth over the next five years.

Source: World Bank, IMF, IGD Research

So, while it can be helpful to consider the global market in clusters, the real value lies in understanding each market on its merits and tailoring your strategy. If India, Nigeria and Indonesia can capitalise on their current potential, getting your strategy right for these three markets could make a big difference to your sales line.

To understand more about the market dynamics in these countries and over 150 others, visit our Retail Analysis website.

Why not download our handy infograph, detailing the top 15 largest grocery markets by 2020 and their value, global grocery market share by income group and what is driving the growth of the MINT markets – Mexico, Indonesia, Nigeria and Turkey.

Katie Johnson

Katie Johnson

Data and Insight Manager