Discount boom, e-grocery drive change as MENA retail struggles to grow

Most MENA grocery markets grew slowly or contracted in 2024, except Morocco.

Grocery retailers across the Middle East and North Africa (MENA) are facing slow growth, even as consumer confidence rebounds and shoppers show greater willingness to spend on premium and healthy products, according to McKinsey’s 2025 State of Grocery Retail MENA report.

Whilst markets like Morocco recorded 4.7% growth and an 11% increase in new store openings in 2024, other markets lagged.

Egypt, for example, saw its formal grocery sector contract by 3.1% despite a 6% rise in store openings, suggesting that higher footfall alone is not translating into sales.

The report highlights a shift in consumer behavior across income groups. Fewer shoppers intend to “trade down” to save money, while demand for high-quality, fresh, and healthy products is rising. Categories such as healthy produce and food-to-go are seeing the largest gains.

However, price remains a key concern. Only about a third of consumers reported satisfaction with grocery prices, fueling the rapid growth of discount formats across the region.

Discount grocery stores are expanding faster than any other format, growing at a 20% compound annual growth rate (CAGR) between 2021 and 2024. The fastest growth occurred in the United Arab Emirates (56 percent), whilst Saudi Arabia saw slower growth at 11%.

Despite this, supermarkets and hypermarkets still account for nearly 90% of grocery spending in MENA, far above the 56% seen in regions such as Latin America.

The lack of diverse store formats limits customer choice and convenience, leaving significant opportunity for new concepts, including small-format convenience stores and hybrid “fast and fresh” outlets.

Consumer acceptance of private-label products is high, with over 80% of respondents rating them as equal or superior to branded alternatives. Yet market penetration remains below 10% in most MENA markets—far below comparable regions like Türkiye, South Africa, or Europe.

Supply chain limitations and high import costs have slowed adoption, but retailers who develop local or controlled supply chains could capture a significant market advantage.

Online grocery is expanding rapidly, growing over 40% annually from 2019 to 2024 in four of the five markets surveyed. Qatar leads with 11.4% penetration, already in line with global benchmarks, and 44 percent of Qatari consumers plan to buy more groceries online in 2025.

Yet challenges remain. Many consumers abandon online grocery due to high prices, limited product ranges, and poor user experience. Analysts say incumbent retailers can reclaim market share from quick-commerce startups by offering better pricing, broader assortments, and improved platforms—even with slightly slower delivery.

Demand for healthier products is converging across income groups. Net intent to purchase healthier food now stands at 54% amongst high earners and 52% among lower-income shoppers. Low-income consumers remain price-sensitive, indicating a market for affordable healthy options.

Food-to-go is another fast-growing segment, expanding 10% in 2023–2024. Younger generations, particularly Gen Z and millennials, are driving demand for ready-to-eat meals, presenting opportunities for retailers to target urban lifestyles.

Retailers in MENA are increasingly leveraging AI, with potential value creation of up to $20b for grocery and consumer packaged goods companies.

Analytical AI applications in pricing, promotions, and assortment planning are expected to deliver the bulk of gains, even as generative AI attracts attention.

Retail media is also emerging as a profitable channel. By combining loyalty programs with targeted advertising, grocers can increase engagement and drive incremental revenue, mirroring global trends where retail media margins reach 40 to 50%.

Retail mergers and acquisitions surged 160% in Africa and the Middle East in 2024, marking one of the highest rates globally.

Analysts view this as a sign of renewed investor confidence and a potential pathway for market consolidation.

Despite sluggish overall growth, opportunities abound for retailers who act decisively.

The report suggested that grocers should diversify store formats, expand private-label offerings, invest in e-grocery, and scale AI and retail media capabilities.