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Market and trends

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Market and trends

Digitalization, demographic changes, competition and a heightened focus on sustainability and price value are examples of rapidly evolving trends that are shaping society and the food retail industry. Our ability to understand how these forces affect us so that we can leverage them into a long-term strategy and concrete actions enables us to meet customers’ changing needs.

The food retail trade in Sweden is a mature market in which Axfood is the second largest player – a position that has strengthened in recent years. The competition is fierce and has grown in recent years with the emergence of discount stores, the establishment of e-commerce, and the increase in Swedes who eat out more.

1. Demographics

  • High population growth
  • Ageing population
  • Widening income gaps
  • Greater diversity
  • Continued high pace of urbanization affecting both cities and the countryside

Sweden’s population has been growing steadily for quite some time, and during the last five years the average annual rate of growth was approximately 1%. According to Statistics Sweden’s forecast, Sweden’s population will reach more than 11 million by 2030. Population growth is expected to be greatest in the major cities. The share of people born outside the country will increase to around 22%. Meanwhile, the share of elderly is growing at the same time that the share of people of working age is decreasing. All of these factors affect what, when and how food is consumed.

2. Competition

  • Continued fierce competition from traditional and new actors
  • The market’s actors are creating ecosystems of products and services
  • Innovative, small actors seeking partnerships

Competition in the food retail market is intense and is coming from traditional as well as new actors. The increased consumer interest in shopping for food online has created an opportunity for new actors to make their offerings available to a large share of the population without a broad network of brick-and-mortar stores. Large, global actors are creating ecosystems with different products and services, and Swedish actors are building retail ecosystems on a food platform. To reach out to a broader market, innovative, smaller actors are forging partnerships with larger, traditional retailers.

3. Price value

  • Strong discount trend, especially in times of economic uncertainty
  • Low price is not the only factor that determines if a product offers price
  • Private label products and large purchasing volumes are key for being able to offer price value

With digitalization comes greater price transparency, and it is clear that the
discount trend continues to be strong, especially in a time when society is beset by economic uncertainty and higher unemployment. More and more actors are selling food, and it is easy for consumers to compare the various options with each other. Consumers in Sweden are generally very price conscious, and Axfood’s own surveys show that customers regard value for money as most important after quality. At the same time, it is not only price that determines what customers perceive as value for money. Pleasant service, attractive peripheral services and a high-quality assortment are also important. To bring down prices for customers, retailers are relying on private labels and large purchasing volumes.

4. Sector convergence

  • Long-term trend toward increased sector convergence, especially in
    major cities
  • Focus on culinary spaces and meal solutions
  • New distribution channels being established for meal solutions

The line between sectors is becoming fuzzy as many companies offer products and services that traditionally are not part of their core businesses. Groceries are being sold to a greater extent at restaurants, convenience stores and other retail venues. Cafés and pharmacies are sharing space with grocery stores, and also selling food products. According to Statistics Sweden, during the last 20 years the share of household expenses that go to groceries has been around 12%. Longer term, the share of household expenses consumed at cafés and restaurants is expected to rise, although the pandemic has affected the development in the opposite direction.

5. Health and sustainability

  • Growing awareness about climate change and the impact of food on the climate and health, especially among young people
  • More and more consumers open to changing their food consumption in
    order to reduce their carbon footprint
  • Sustainable food consumption is putting high demands on changes in the food production chain

Issues such as responsibility, environmental impact and health are becoming
increasingly important, and conscious consumers are manifesting their lifestyles through active food choices. More sustainable packaging, reduced food waste, food in season, social responsibility and traceability are becoming increasingly important considerations. Many customers want more information about the source, quality and ingredients of products.

6. Digitalization

  • Increase in digitalization and accelerated growth in e-commerce
  • Customers who shop online are looking primarily for time savings and
  • Growth in e-commerce is being driven through major expansion by traditional actors
  • The e-commerce business model is challenging, especially for pure-play online retailers and for home delivery

Digitalization is making an impact in all areas of food retail, from product development and purchasing to logistics, ways of working, marketing and the customer meeting. This means more automation and efficiency, but also a greater need for competence development. When the corona pandemic broke out, growth in e-commerce accelerated, and growing numbers of customers began shopping online, even seniors. According to the Swedish Trade Federation, online sales are expected to grow in the coming years. Changed shopping behaviours are opening up for new business models and businesses.