Retail Practice

The state of grocery in

North America 2023
Grocery executives face a host of new challenges, including flat
growth and margin pressure. Five trends could point the way to
renewed momentum.

This article is a collaborative effort by Bill Aull, Prabh Gill, Dymfke Kuijpers, Nancy Lu, Eric Marohn,
and Griffin McLaughlin, representing views from McKinsey’s Retail Practice.

© SDI Productions/Getty Images

September 2023
 After a tumultuous 2022, grocery executives stronger private-brand offerings and promotions, an
hoped rampant inflation and snarled supply chains elevated omnichannel experience, broader business
would soon recede, signaling the return to a more diversification, the integration of generative AI,
traditional landscape. In some ways, they got their and sustainability as a driver of top- and bottom-
wish: inflation has fallen significantly, and supply line results. Grocery retailers that integrate these
shortages have moderated. Yet the lingering effects insights could be better positioned to meet
of these trends and consistent pressure on margins consumers where they are and provide offerings
have dampened the outlook. Leaders may be that deepen loyalty—all while keeping pace with an
wondering when the days of greater predictability ever-changing industry.
and higher profits will return.

Despite their weariness, CEOs should be Dominant themes for 2023

prepared to act aggressively. As we have discussed After experiencing double-digit growth last year, the
in years past, the best-performing grocery grocery industry has experienced a flatter line in
retailers are those that consistently focus on 2023 to date. A series of trends paint a picture of the
innovation and pursue new ways to create value.1 challenges that lie ahead.
Indeed, the very constraints that keep executives
up at night also contain the seeds to jump-start Increased economic pressure driven by inflation
growth, diversify revenue streams, and achieve The good news for grocery retailers is that inflation
greater operational performance. fell to 3.2 percent in July, well below its 2022 peak
of 9.1 percent.2 This drop offers executives a respite
Our research and analysis identified five trends from having to choose between passing on cost
that hold the key to thriving in 2023 and beyond increases to consumers or pushing them toward
(see sidebar, “About the research”). They include lower-cost options. Still, the threat hasn’t gone away

1
Bill Aull, Becca Coggins, Sajal Kohli, and Eric Marohn, “The state of grocery in North America,” McKinsey, May 18, 2022.
2
“Consumer Price Index summary,” US Bureau of Labor Statistics, August 10, 2023.

About the research

Our team conducted several proprietary interview 30 grocery and consumer in supporting the engagement of CEOs
research efforts to gain insights into the packaged goods CEOs on how they were from leading North American grocery and
changing grocery retail industry. The adapting to persistent change as well consumer packaged goods companies.
McKinsey Consumer Pulse Survey as their perspectives on the future. The We hope this research offers new
consists of responses from nearly 4,000 McKinsey Consumer Loyalty Survey from insights that can help grocers and those
US consumers in late February and early December 2021 featured a sample of in the broader food industry remain
March 2023. In July 2023, the State of 10,000 respondents who weighed in on competitive as they continue to operate in
Grocery Consumer Survey explored the their expectations of brands and priorities a challenging environment.
changing attitudes and preferences of moving forward.
more than 2,000 US respondents. For
the 2023 FMI-McKinsey State of Grocery The authors wish to thank FMI, the Food
CEO Survey, McKinsey partnered with Industry Association for its collaboration
FMI, the Food Industry Association, to in developing these perspectives and

2 The state of grocery in North America 2023

entirely: food prices still rose 4.9 percent year over The beneficiaries of this purchasing behavior have
year through July 2023, fueled by a 7.1 percent been private-brand goods and warehouse club
increase in food-away-from-home costs during channels. Private brands’ share of growth in grocery
this period.3 categories jumped by double-digit percentage
points from 2021 to 2023. Meanwhile, McKinsey
These twin trends have had predictable results. analysis shows that warehouse clubs have also
In a McKinsey survey conducted in July 2023, gained market share at the expense of traditional
two-thirds of consumers reported spending grocers and supermarkets.
significantly more on groceries in the past two to
three months compared with the previous year. Resilient e-commerce leads to increased digital
Moreover, nearly 60 percent of respondents said engagement
grocery spending represented a significantly The rapid migration of consumers to e-commerce
higher share of their income.4 Consumers have channels during the pandemic has plateaued. In
also adapted their buying habits by trading down May 2023, e-commerce stood at 7.2 percent of all
to save money. According to McKinsey’s Consumer grocery spending, more than 35 percent above
Pulse Survey 2023, 66 percent of consumers have prepandemic levels (Exhibit 2). Consumers were
sought out less-expensive goods, an increase of initially drawn to online grocery out of necessity,
four percentage points from 2022 (Exhibit 1). This but as they have become more familiar with these
shift was particularly pronounced for consumers channels, their preferences have shifted toward
with incomes below $100,000 in categories such as e-commerce.5
meat and dairy and shelf staples.

3
Ibid.
4
State of Grocery Consumer Survey, McKinsey, July 7–15, 2023; n = 2,011; sampled and weighted to match the US general population 18 years
and up.
5
McKinsey Consumer Pulse Survey, February–March 2023.

According to McKinsey’s Consumer

Pulse Survey 2023, 66 percent of
consumers have sought out less-
expensive goods, an increase of four
percentage points from 2022.

The state of grocery in North America 2023 3

 Exhibit 1
Facing higher food prices, consumers have been trading down more across
grocery categories to save money.

Share of respondents who traded down on groceries in the past 3 months,1 %

Grocery overall Overall change from

+4 +5 +5 –2 July 2022, percentage
points
66 68 68
55

Overall Low income Middle income High income

(< $50,000) ($50,000–$99,999) ($100,000+)

Fresh produce

60 61 64
56

Overall Low income Middle income High income

Meat and dairy

71 69
65
52

Overall Low income Middle income High income

Center store and shelf staples

68 72 70
57

Overall Low income Middle income High income

1
Question: Within the past 3 months, have you done any of the following when purchasing a product? Trade-down behavior includes one or more of the following
answers: shopped from a lower-priced retailer, shopped from lower-priced brand, bought private brand, bought a brand for which you had a coupon, used
buy-now-pay-later, delayed a purchase, bought a larger-size pack for a lower price, bought smaller size or quantity, and made more shopping trips in search of
discounts.
Source: McKinsey US Consumer Pulse Survey, Feb 24–Mar 1, 2023 (n = 3,973, sampled and weighted to match the US general population aged 18 years
and older)

McKinsey & Company

4 The state of grocery in North America 2023

Exhibit 2
The proportion of online spending for grocery has increased since the onset of
the pandemic.

Proportion of grocery spending done online,1 %

2018 2.7
Pre-COVID-19
2019 3.4

2020 5.5
Pandemic period
2021 6.5

Late and post- 2022 6.6

pandemic
period
20232 7.2

1
Grocery is defined as food and nonalcoholic beverage sales, including canned goods, produce, etc. Does not include restaurant sales.
2
Forecast.
Source: Forrester, US Online Retail Forecast, 2023 to 2028, July 2023

McKinsey & Company

Our grocery consumer survey found that In 2022, executives cited supply shortages as their
convenience—in the form of time savings, delivery, top impact theme. What a difference a year makes.
and ease of price comparisons, among others—was Possibly because grocers have acquired additional
the overwhelming draw for online channels.6 But capabilities and flow of goods has increased, supply
in addition to the advantages of online shopping, shortages have now fallen to the middle of the pack
consumers cited several obstacles, including high of concerns.
delivery fees and a preference for personal contact
with products in store. Grocery retailers would likely However, rising capital expenditures have also
need to enhance the online experience to boost contributed to margin pressure for both grocery
e-commerce penetration further. retailers and consumer packaged goods (CPG)
companies. Over the past decade, this increased
Accelerating pressures on profitability spending has outpaced revenue growth. The capital
To cope with the pandemic’s upheaval, grocers expenditure–revenue ratio was 23 percent lower
dramatically increased their capital expenditures: in 2022 than in 2012, highlighting the divergent
from 2020 to 2022, these expenditures rose at a paths of these metrics. From 2018 to 2022, EBITDA
CAGR of 7.5 percent. Our CEO survey found much of margins for grocery retailers and CPG companies
this investment went to stabilize supply chains. The decreased 0.4 and 1.5 percentage points,
top three categories for capital expenditures were respectively (Exhibit 3).
forecasting capabilities (80 percent of respondents),
inventory management (77 percent), and supplier
base diversification (70 percent).

6
State of Grocery Consumer Survey, McKinsey, July 7–15, 2023.

The state of grocery in North America 2023 5

 Exhibit 3

Even with increased prices, grocery retailers and consumer packaged goods
companies face downward margin pressure.

Comparative margins, %

XX Change in percentage points (p.p.), 2018–22

20181 20222 20181 20222

–1.6 p.p. –2.0 p.p.

47.6 45.6
50 50
23.7 22.1
Gross margin
0 0

–0.4 p.p. –1.5 p.p.

50 50
23.8 22.3
EBITDA margin 6.1 5.7
0 0

–0.1 p.p. –1.1 p.p.

50 50
EBIT margin 20.1 19.0
4.1 4.0
0 0
Consumer packaged goods
Grocery retailers3
(CPG) companies4

1
2018 denotes the fiscal year that starts in 2018, regardless of how companies themselves define their fiscal years.
2
2020 denotes the fiscal year that starts in 2020, regardless of how companies themselves define their fiscal years.
3
For a collection of 15 publicly traded hypermarkets and supercenters, food retailers, and general-merchandise stores: Big Lots, Casey’s Retail Company, Costco,
Dollar General, Dollar Tree, Ingles Markets, Kroger, Natural Grocers by Vitamin Cottage, PriceSmart, Sprouts Farmers Market, Target, Tuesday Morning Corpora-
tion, Village Super Market, Walmart, and Weis Markets. Aggregated figures shown.
4
For a collection of 15 publicly traded CPG companies: Campbell Soup, Clorox, Coca-Cola, Colgate-Palmolive, Conagra, Constellation Brands, Dr Pepper, General
Mills, J.M. Smucker Company, Kellogg, Keurig, Kraft Heinz, Mondelez, P&G, and PepsiCo. Aggregated figures shown.

McKinsey & Company

Upheaval in the labor market has approximately four million more open positions
The Great Resignation was one of many striking than candidates searching for work.8
developments during the pandemic. While the
overall workforce has largely rebounded, grocery Sustainability as part of core
retailers continue to struggle with talent attraction business operations
and retention. In early 2023, 44 percent of frontline Our 2022 survey found that grocery retail CEOs
retail workers were considering leaving their jobs expected consumers to prioritize sustainability
in the next three to six months.7 Even though the in their purchasing behavior.9 They proved
quit rate has fallen sharply since then, CEO survey prescient, as events within and beyond the
respondents cited labor shortages as the biggest industry have kept the issue in the spotlight.
challenge (along with inflation) for the grocery Other stakeholders—regulators, investors, and
industry in 2023 (Exhibit 4). Today, the retail industry nongovernmental organizations (NGOs)—are also

7
McKinsey Talent Trends Survey, January 2023 (n = 15,366).
8
Bureau of Labor Statistics Job Openings and Labor Turnover Survey, June 2023.
9
“State of Grocery Europe 2022: Navigating the market headwinds,” McKinsey, March 31, 2022.

6 The state of grocery in North America 2023

Exhibit 4
CEOs cite labor shortages as one of the biggest challenges for the grocery
industry in 2023.

Biggest challenge for the grocery industry in 2023,1 % of respondents

Labor shortages Inflation Demand volatility Flight to value

Solving
supply
chain
volatility

Data and analytics driving

commercial, operations,
and support excellence

1
Question: What do you think will be the single biggest challenge and the single biggest opportunity for the grocery industry in 2023?
Source: 2023 FMI-McKinsey State of Grocery CEO Survey, February 18–March 15, 2023 (n = 30)

McKinsey & Company

elevating sustainability in grocery. For instance, the from such an essential industry, investors have
regulatory environment for grocers is set to become adopted tactics such as exclusion (barring a
more complex: by 2030, more than 15 sustainability- company’s securities from being added to an
related regulations are expected to go into effect, investment portfolio) to push sustainability
and they will complicate the business and operating initiatives further. NGOs have also sought to exert
environment. The majority of the regulations are their will: several are lobbying regulators to extend
related to food waste (for example, ensuring food the US carbon tax to food. NGOs are also important
waste doesn’t end up in landfills), packaging (such as forces in facilitating corporate shifts toward
the phaseout of single-use plastics), and increased sustainable initiatives.
restrictions on labeling. These measures could force
grocery retailers to adapt their operations.
Trends shaping the grocery market in
Similarly, investors are engaging in shareholder 2023 and beyond
activism to demand that food companies actively Our CEO survey found that grocery executives are
work to meet climate goals. Instead of divesting distinctly pessimistic about growth prospects in

The state of grocery in North America 2023 7

 2023. Indeed, two out of three CEOs believe growth offerings could take on added importance. In 2023,
will be slower this year than in 2022. Similarly, in 44 percent of consumers are planning to buy more
our conversations, CEOs described the industry private brands, nearly double last year’s percentage.
as “volatile,” “challenging,” “uncertain,” and Even if market conditions improve, consumers
“competitive”—sentiments that indicate the difficult might continue buying private brands: 83 percent
road ahead. Top of mind for executives are the labor of consumers believe the quality of private-brand
shortage and demand volatility. goods is equal or superior to that of branded
products (Exhibit 5).
Based on our consumer research, CEO survey, and
market analysis, we believe five trends will shape the Consumers’ quest for savings also extends to a
grocery landscape in the years to come. heightened interest in discounts, a pattern that
holds true even among high-income shoppers
1. Ongoing pressure to deliver value (Exhibit 6). Seventy-three percent of consumers
to consumers report that discounts for grocery items have
Reducing spending remains a top priority for become more important in their shopping decisions
shoppers in all income groups. Indeed, nearly 60 compared with a year ago. Other factors, including
percent of consumers are looking for ways to save the continued consolidation of the grocery market
money, an increase of 13 percentage points from through M&A and persistent inflation, will further
2022. This search for savings means private-brand push grocers to offer competitive low-price options.

Exhibit 5
Most consumers across income groups perceive private brands as equal or
superior in quality and value to national brands.

Attitude toward store’s own brands compared to national brands,1 % of respondents

“Store’s own foods are equal “Store’s own foods offer similar
or superior in quality to or superior value for money to
branded products.” branded products.”

Overall 83 89

Low income 85 89
(< $50,000)
Middle income
82 88
($50,000–$99,999)
High income
80 90
($100,000+)

1
Question: We would like to ask you a few questions about store’s own brand foods (ie, food products sold under the label of the grocery retailer). In each line,
please select which statement you agree with the most.
Source: McKinsey State of Grocery Consumer Survey, July 7–15, 2023 (n = 2,011, sampled and weighted to match the US general population aged 18 years and
older)

McKinsey & Company

8 The state of grocery in North America 2023

Exhibit 6
Across income groups, discounts have become more important to grocery
shoppers.

Attitude toward discounts,1 % of respondents

“Discounts for grocery items have 73 74 74 70

become more important in my shopping
decision than a year ago.”

Overall Low income Middle income High income

(< $50,000) ($50,000–$99,999) ($100,000+)

“The final price of a grocery item is more 72 73 71 72

important to me than the percentage of
discount.”

Overall Low income Middle income High income

48 48 49 48
“I will wait until a grocery item is on sale
before I buy it.”

Overall Low income Middle income High income

81 83
“There are grocery items that I will buy 79
73
even if they are not on discount.”

Overall Low income Middle income High income

Question: To what extent do the following statements apply to you? Percent shown is the sum of responses “probably applies to me” and “definitely applies to
1

me.”
Source: McKinsey State of Grocery Consumer Survey July 7–15, 2023 (n = 2,011, sampled and weighted to match the US general population aged 18 years
and older)

McKinsey & Company

The state of grocery in North America 2023 9

 Grocers will have to find ways to deliver increased entire journey, making omnichannel no longer
value to consumers. However, attempting to win a “nice to have” but a critical offering. The nature
on price against national brands is a tough path, of omnichannel retail has changed dramatically
putting grocers under rising pressure to develop over the past several years. During the pandemic,
compelling private-brand offerings comparable to grocery shopping shifted from primarily an
those of other national brands. About 80 percent of in-person exercise to engagement across channels.
food retailers and manufacturers plan to moderately In response, retailers expanded services such as
or significantly increase their investments in private “buy online, pick up in store” and relied on partners
brands over the next two years, with a focus on such as Instacart and Shipt for personalized
value and price as a top area for innovation.10 shopping and delivery. The shifting landscape had
a pronounced impact on loyalty: consumers were
Private-brand products are attractive because increasingly open to trying new brands and store
they typically have higher margins than branded formats to suit their preferences.
products. In US grocery stores, for example, private
brands’ share of dollar volume increased by 10.3 So how can grocery retailers reel consumers
percent in the first quarter of 2023 compared with back in and strengthen loyalty? More than ever,
the previous year, nearly twice the 5.6 percent rise personalization holds the key. Our 2022 consumer
of national brands during the same period.11 loyalty survey found that 80 percent of consumers
are more likely to make a purchase when offered a
H-E-B has invested heavily in its private-brand personalized experience. Over the past two to three
strategy to capitalize on its brand recognition years, retailers that emphasized personalization
among consumers. These goods made up nearly 27 have raised the bar for consumer experience. The
percent of the company’s revenues in 2022.12 One most successful grocers will continue to invest
shopper commented, “I love [H-E-B] because of in personalization and omnichannel capabilities
their store brand and all of the different things they to attract, engage, retain, and deliver value to
make and have to offer. They truly put pride in their customers. To remain competitive, grocers should
work.”13 As one of the fastest-growing US retailers, use purchase history to inform product offerings.
H-E-B has demonstrated the ability of successful
private-brand products to significantly increase Kroger, for example, has partnered with Uber Eats
profits. and DoorDash to expand market penetration of its
ready-made meals in response to shifting consumer
In addition, retailers that create unique experiences preferences. The move comes as Kroger looks to
and provide greater convenience will be positioned grow its presence in consumers’ cross-category
to compete on more than price alone. Identifying food routines, becoming a destination not only for
what consumers value most and offering flexibility groceries but also for ready-made meals.14
(for example, options for smaller pack sizes) will be
critical to this effort. 3. Broader business diversification
Last year, our analysis highlighted how grocery
2. Elevated personalized experience retailers were building ecosystems by partnering
across channels with tech companies, joining forces with delivery
Consumers have come to expect a consistent, companies, and creating new value propositions.
seamless, personalized experience across the Grocery executives continue to explore ways

10
“The power of private brands 2023: Innovation that drives winning private brands,” FMI, 2023.
11
Louis Biscotti, “From buy buy brands to bye bye brands? How private label is beginning to win F&B brand wars,” Forbes, May 10, 2023.
12
“Study reveals Top 10 private label retailers, share of spend,” Blue Book Services, August 1, 2022.
13
“H-E-B returns to the top spot as the #1 U.S. grocery retailer,” H-E-B, February 6, 2023.
14
“Kroger teams with Uber Eats in bid for greater share of food spend,” PYMNTS, May 3, 2023.

10 The state of grocery in North America 2023

to create new revenue streams and expand 4. Acceleration of generative AI
ecosystems, all in an effort to meet consumers Last year, we noted the potential of automation
where they are. and AI for the retail industry. This year, retailers
are exploring that potential. About 85 percent
We now see grocery retailers moving beyond the of retailers reported experimenting with new
core by entering new categories, developing new technologies to improve the customer experience,
sourcing strategies, expanding into consumer and 35 percent of suppliers are using AI to better
services, and selling B2B services that harness harness customer data.16
their strengths. For example, Kroger, Albertson’s,
and many others have launched e-marketplaces The introduction of generative AI has expanded that
that enable third-party vendors to sell directly to potential considerably. Based on our latest research,
consumers. The resulting “endless aisles” vastly generative AI could add $2.6 trillion to $4.4 trillion
increase the available assortment. Both national annually to the global economy across more than
and regional grocery retailers continue to launch 60 use cases, including many in retail.17 For now, the
retail media networks to take advantage of the majority of use cases remain within analytics and
rising demand for a targeted ad experience using the consumer front end.
consumer data.15 Moreover, grocery stores have
become a destination for health and wellness—not Recognizing generative AI’s vast potential, grocery
just for food but also for nutrition and healthcare players are already making moves. Kroger has
services. To support these new forays and enhance partnered with 360i to develop Chefbot, which
capabilities, the grocery industry has seen a rising uses visual AI to recognize ingredients for more
number of partnerships between grocery stores than 20,000 recipes in order to simplify meal
and tech companies (for example, Kroger and planning and minimize food waste. Walmart has
Cooler Screens). invested heavily in using generative AI to enhance
store operations and employee experience. It has
Grocery’s ever-expanding role can enable broader already implemented AI-powered simulations to
business diversification. Grocers are redefining predict customer patterns and ensure supply chain
their business models to capitalize on fulfillment readiness. And Instacart launched a ChatGPT plug-
opportunities and adapting their value propositions. in to recommend products by answering shopper
They could extend their reach by embracing questions, such as “What are good sauces for
third-party marketplaces, dark stores, and grilling chicken?” or “What are dairy-free snacks for
microfulfillment centers. kids?”

Grocery retailers have an attractive set of options Generative AI is not just about labor efficiency. It
for strategic expansion. As margin pressures is reshaping commercial activities (for example,
persist, they should identify growth areas beyond through personalization algorithms), corporate
the core to build a broader ecosystem of services functions (such as call-center support and business
and offerings that expand the consumer value operation processing), and heavily labor-intensive
proposition, build capabilities, and improve the store activities. Grocers should consider developing
financial profile of the business. plans to harness generative AI to transform their

15
Marc Brodherson, Jon Flugstad, Quentin George, and Jack Trotter, “Six secrets of unleashing the power of retail media,” McKinsey,
May 18, 2023.
16
The food retailing industry speaks 2023, FMI, 2023.
17
“The economic potential of generative AI: The next productivity frontier,” McKinsey, June 14, 2023.

The state of grocery in North America 2023 11

 business, capture more value, and accelerate greater reliance on energy—grocers could consume
growth opportunities. As a first step, grocers could 40 percent more electricity, on average, by 2030—
prioritize relevant use cases—in part by tracking makes it more vulnerable as energy becomes more
their relative level of adoption among competitors. expensive and intermittent. As an indication of how
sustainability has permeated strategy, 87 percent of
5. Sustainability as a driver of the top and food retailers and 91 percent of food suppliers have
bottom lines identified environmental, social, and governance
A brand or retailer’s sustainability commitments (ESG) as an organizational priority.19
continue to influence purchasing decisions,
particularly among younger consumers (Exhibit 7). Some grocers have already taken action to diversify
Shoppers increasingly expect companies to “walk the their energy sources. For example, Walmart’s
walk.” In fact, we see a clear link between consumer Project Gigaton has taken major action to reduce
spending and a company’s ESG efforts.18 Products its total Scope 3 emissions. The initial goal was
with ESG-related claims achieve 1.7 percentage to reduce or avoid one billion metric tons of
points more sales growth than products that don’t. greenhouse gases from the global value chain
by 2030, but the retailer had already achieved 75
Sustainability and cost are often seen as percent of its target by 2022.20
diametrically opposed trade-offs, but sustainability
itself is increasingly critical to the viability of Grocery shoppers have cited the recyclability of
business operations and profit and loss (P&L). The goods as the most important sustainability factor.21
transition from fossil fuels to renewable energy is Yet while use of plastic continues to increase,
becoming more complex as power outages and demand for recycled plastic far exceeds supply,
increased points of failure threaten disruption of and investment in recycling infrastructure is falling
day-to-day operations. The grocery industry’s short. According to McKinsey analysis, the amount

18
“Consumers care about sustainability—and back it up with their wallets,” McKinsey, February 6, 2023.
19
The food retailing industry speaks 2023, FMI, 2023.

Exhibit 7
Consumers, especially younger ones, continue to place a premium
on sustainability.

Attitude toward premiumization and sustainability,1 % of respondents who are willing to pay more for
environmentally friendly products (eg, zero pollution, recyclable materials, or minimized packaging)

Overall 28

Gen Z 49

Millennials 48

Gen X 23

Baby boomers 16

1
Question: Think about the following types of food/services. Which statement best describes your attitude?
Source: McKinsey State of Grocery Consumer Survey July 7–15, 2023 (n = 2,011, sampled and weighted to match the US general population aged 18 years
and older)

McKinsey & Company

12 The state of grocery in North America 2023

 of recycled plastic in the market, on average, hasn’t — How can we create a seamless omnichannel
Find more content like this on the
McKinsey Insights App changed in 20 years. An added challenge: high- experience to deliver a personalized offer and
quality recycled material commands a premium in messaging at the right time and in the right place?
the market.
— What growth areas beyond the core can
To have any hope of meeting recycling goals, broaden our ecosystem of services and
grocery players would need to work together to offerings to provide more value to customers
embrace recycling solutions. For example, the and build capabilities for the business, and how
Beyond the Bag Initiative is a multiyear collaboration can we reimagine the operating model for long-
across retail sectors to address plastic bag waste. term profitability?
Scan • Download • Personalize

By the end of the decade, factors that are now — Which generative AI use cases should we
adding to complexity—including energy, recycling, prioritize, and how do we create a test-and-learn
and infrastructure—will become critical. Grocers will culture to get the most out of this technology?
need to keep pace with changing trends to remain
competitive in the long run. Amid growing disruption, — What actions do we need to take to accelerate
grocers could prioritize sustainability now to ensure our transition to renewable power, establish
longer-term success. For example, switching to recycling solution coalitions with other grocers,
renewable energy and forming coalitions to meet and amplify messaging around ESG-related
recycling goals could improve energy stability and claims?
waste management, respectively, while generating
returns for grocers over the coming years. Grocery executives who can develop effective
strategies across these five trends will position their
organizations to not only restart growth but also
Top priorities for 2024 weather an unpredictable landscape.
As grocery executives consider their priorities for
2023 and beyond, they should address several
questions:

— What steps can we take to enhance the focus

on value perception, including the role of private
brands in increasing value to the consumer?

20
“Project Gigaton,” Walmart Sustainability, accessed September 5, 2023.
21
State of Grocery Consumer Survey, McKinsey, July 7–15, 2023.

Bill Aull is a partner in McKinsey’s Charlotte office, Prabh Gill is an associate partner in the Vancouver office, Dymfke Kuijpers
is a senior partner in the Singapore office, Nancy Lu and Griffin McLaughlin are consultants in the New Jersey office, and Eric
Marohn is a consultant in the Chicago office.

The authors wish to thank Steve Begley, Steve Hoffman, Karina Huerta, Varun Mathur, Bill Mutell, and Angus McOuat for their
contributions to this article.

Designed by McKinsey Global Publishing

Copyright © 2023 McKinsey & Company. All rights reserved.

The state of grocery in North America 2023 13