State of grocery retail MENA 2026: Managing the growth paradox

The past year has been one of mixed fortunes for grocers in the Middle East and North Africa (MENA) region. While consumer confidence continues its upward trend from previous years, that optimism has not translated into faster growth. In fact, growth has slowed over the past year, despite a sharp uptick in new store openings, suggesting that a change of strategy may be required for grocers to succeed in 2026. Our 2024 State of Grocery Retail MENA research highlighted that, after years of declining consumer confidence, the market had turned a corner—and our 2025 research confirms it.1“A growth arena: State of grocery retail 2024 Middle East and North Africa,” McKinsey, October 22, 2024. Across the region, consumers are balancing price consciousness and bargain hunting with a willingness to spend more on selected products. Fewer consumers, from both higher- and lower-income groups, were intending to trade down to save money in 2025, compared to 2023 and 2024, and more consumers across the income spectrum expressed an intent to buy high-quality and premium food products (Exhibit 1). Healthy and fresh produce, and food-to-go, were the primary beneficiaries of this trend. The State of Grocery Survey MENA, now in its third year, is part of an annual global survey analyzing spending behavior, sentiment on global trends such as health and sustainability, and consumer perceptions of leading grocers. In 2025, we expanded our sample, surveying more than 5,520 consumers across five markets: Egypt, the Kingdom of Saudi Arabia (KSA), Morocco, Qatar (which makes its first appearance in the survey), and the United Arab Emirates (UAE). We also interviewed industry experts to get their perspectives on key challenges and priorities in the region. However, this willingness to spend has not provided the tailwind for growth that might have been anticipated. Growth in the formal grocery industry was slow in the five markets included in this study, with the exception of Morocco, where it picked up to 4.7 percent in 2024 (Exhibit 2) (see sidebar, About this research). New store openings in Morocco also topped the region with an 11 percent increase from the previous year. Egypt’s formal grocery industry saw the lowest growth, contracting by 3.1 percent, while new store openings grew by 6.0 percent, suggesting that store sales are declining in that country, as in most of the rest of the region. Looking ahead, to capitalize on rising consumer optimism and break out of this slow-growth trap, grocers may need to find pockets of opportunity, sharpen their customer offer to cater to shifting shopper preferences, and leverage data and AI to accelerate growth. This article explores ten trends shaping the landscape to help retailers identify where opportunities may lie. An undifferentiated grocery ecosystem with fewer shopping choices creates a clear opportunity for new formats and propositions. Compared to other regions in the world, the grocery industry in MENA is overly reliant on supermarket and hypermarket formats. Together, these two formats account for almost 90 percent of consumer spend in the region (Exhibit 3). By comparison, the industry elsewhere in the world operates a broader range of store formats to cater to diverse customer segments and shopping occasions, ranging from small-format stores targeting urban convenience shoppers to larger warehouse stores serving bulk and family shoppers.

In Latin America, for example, supermarket and hypermarket formats account for only 56 percent of consumer spend, with convenience, discount, and warehouse formats making up the difference. The lack of shopping formats is driving low customer satisfaction across the MENA region because of limited choice and convenience. Our research shows that consumers have a wide range of shopping missions—from quick daily top-ups, food-on-the-go, and bargain hunting to special-occasion shopping and major weekly or monthly stock ups—but current formats are not serving these diverse missions effectively. On average, customers’ satisfaction with different elements of their shopping experience across these missions is well below 40 percent (Exhibit 4). Price, in particular, is the largest driver of dissatisfaction in the market, which may explain why discounters are growing much faster than the market as a whole. On average, only a third of shoppers surveyed were satisfied with the prices they paid across shopping missions. Partly in response to this, discount formats grew at a 20 percent CAGR between 2021 and 2024, far outpacing total modern grocery growth in countries included in the survey, which grew at just a 1 percent CAGR. Discounter growth was fastest in the UAE, at 56 percent, albeit from a low base, and slowest in the KSA at 11 percent.2McKinsey analysis based on Euromonitor data (constant prices and 2024 fixed exchange rates) accessed in July 2025. The quest for value in this market creates an imperative for retailers to find innovative ways to meet this need. While we are seeing early signs of format differentiation across the region, the field is still wide open for grocers. Emerging format trends in the region include a rise in value-focused discounters, formats combining value and convenience—such as small discounters—and “fast and fresh” convenience stores catering to grab-and-go urban lifestyles.3Expert interviews; McKinsey research. The persistence of baqala stores in the MENA region also points to the relevance of formats anchored in the community that provide value-added services like credit and free delivery. Private labels offer a route for hypermarkets and supermarkets to tap into the value opportunity, but grocery retailers have yet to unlock the formula for success in the region. Consumer acceptance of private labels is high and growing across the region. In our survey, more than 80 percent of consumers saw private labels as equal to or superior to branded products and as offering better value for money, with attitudes surprisingly consistent across markets and shifting in favor of private labels with each passing year.4The percentage of survey respondents who answered that they preferred their store’s own brand foods (food products sold under the label of the grocery retailer) over branded products, beyond price, is above 80 percent in all markets and increased by between –1 and 4 percentage points between 2024 and 2025. Despite this rising interest in private labels, market penetration remains low, even by emerging-market standards. In four out of five markets, penetration of private labels is below 10 percent, compared with 20 percent or more in comparable markets such as Türkiye and South Africa, and close to 50 percent in many European markets (Exhibit 5). Supply-related challenges, such as a limited base of local manufacturers and high import costs, are obstacles to growth in this area as they hinder retailers’ ability to create sufficient variety and stock of private label products at a good price to meet consumer demand.5Expert interviews; McKinsey research. The retailers that solve this challenge first and build an integrated private label supply chain are likely to capture a significant opportunity. To unlock the opportunity, grocers can consider partnering with international manufacturers to establish a local presence or investing in owning or controlling parts of the supply chain directly. Consumers’ preference for lower prices over convenience is creating an opportunity for grocers to reclaim market share from digital competitors. There is significant headroom for continued growth in e-grocery, as penetration is still low relative to global benchmarks, and intent to buy more online is high. Online grocery grew by more than 40 percent a year between 2019 and 2024 in four of the five MENA markets examined (Exhibit 6). Qatar has the highest share of e-grocery, at 11.4 percent—already on par with, and likely to surpass, global benchmarks. At the same time, consumers are willing to buy even more online, further boosting growth prospects. Forty-four percent of consumers in Qatar said that they intended to buy more groceries online in 2025, up by six percentage points from 2024, the highest in the region. Even in Morocco, where intent was lowest, 21 percent of consumers said they intend to buy more online. So far, the e-grocery opportunity has been captured by digital attackers focused on ultra-convenience at high prices. However, this might be difficult to scale further as online shoppers are increasingly seeking a better trade-off between price, assortment availability, and convenience. Consumers who have stopped buying online cited high prices, poor user experience, and limited product availability and range as their top reasons for moving offline. Incumbents can address the gaps left by quick commerce players and offer consumers a more balanced online value proposition. By leveraging their existing strengths, incumbents can cater to consumers in the e-grocery space by offering lower prices and better user experience, along with a broader range of products, even if this comes with slightly slower delivery. Migros in Türkiye presents a compelling case example of a traditional retailer successfully using this strategy to gain market share in e-grocery.6Antonio Moreno and Gamze Yucaoglu, “Migros Turkey: Scaling Online Operations (A),” HBS case collection, August 2020 (revised March 2021). Healthy eating remains a priority in the region, with low-income shoppers in particular showing increasing demand for fresher and healthier products. Across income groups, the level of intent to buy healthier products is converging. The net intent of high earners to buy more healthy products is 54 percent, down seven percentage points from 2024. Lower-income consumers are catching up, with a 52 percent net intent, up six percentage points from 2024 (Exhibit 7). Despite the appetite for healthy products, consumers—especially low-income earners—are not necessarily willing to pay more for them. Among low-income consumers, our survey reveals that net intent to pay more is below 20 percent in all markets.7Net intent represents the share of consumers who want to do more of the activity minus the share of consumers who want to do less of the activity. Consumers were asked: Think about 2025. Are you planning to do more, less, or about the same of the following? For example, this figure is at 19 percent in the UAE, up three percentage points from the previous year, and Egypt and Qatar are at 3 percent, respectively. This suggests an opportunity for grocers to deliver the healthy, high-quality products that both high- and low-income consumers desire at affordable prices. Convenient eating is another key area where MENA’s consumers are willing to spend. The food-to-go market in MENA is growing fast and continues to outpace total grocery growth. Between 2021 and 2023, this segment grew at a 16 percent CAGR, almost four times the pace of total grocery sales over the same period. Growth continued in 2023–2024 but slowed to 10 percent (Exhibit 8). Exhibit 8We strive to provide individuals with disabilities equal access to our website. If you would like information about this content we will be happy to work with you. Please email us at: McKinsey_Website_Accessibility@mckinsey.com Younger generations are driving the greatest interest in ready-to-eat options. Between 2024 and 2025, net intent to buy ready-to-eat meals increased by 9 percent, 7 percent, 6 percent, and 1 percent among Gen Z, millennial, Gen X, and baby boomer consumers, respectively.8Survey respondents were asked: Now, think about the following categories you would normally buy in a grocery retailer. How would you shop this category in 2025? Net intent is the difference between consumers who would buy more and those who would buy less in 2025 versus 2024. This suggests there is an opportunity to further accelerate ready-to-eat products tailored to the needs of younger generations. Ever-smarter and hyperpersonalized loyalty programs, driven in part by AI, are successfully turning customer data into deeper engagement and higher spend. In recent years, many leading retailers have launched or restructured their loyalty programs to deliver more value to consumers. Four key trends include the expansion of all-in-one ecosystems that go beyond retail; the shift away from points-based systems toward instant discounts and exclusive promotions; leveraging AI and customer relationship management (CRM) to drive hyperpersonalization and precision loyalty, delivering tailored experiences through deeper customer insights; and finally, the rise of subscription-based loyalty programs, where consumers pay for exclusive benefits such as unlimited deliveries and deeper discounts for members-only benefits. Done right, loyalty programs offer clear value in driving incremental customer behavior and deeper relationships. Unpublished McKinsey research has shown that loyalty programs can drive a 4 to 7 percent increase in incremental revenue and lower marketing costs by 6 to 8 percent.9McKinsey Consumer Loyalty Survey 2022; McKinsey proprietary database of loyalty programs across the United States as of May 2022. However, retailers need to guard against the risk that greater sophistication could create more complications for customers. Increasingly, the most successful loyalty programs are those that are the simplest for customers to understand and engage with. Across the region, the deployment of gen AI is accelerating in line with global trends, with the potential to deliver up to $20 billion in value to retailers and consumer packaged goods (CPG) companies (Exhibit 9). Retailers in the region have already started to experiment with gen AI use cases across the value chain. These range from marketing use cases, such as auto-generated and personalized marketing content and sales campaigns to drive customer loyalty, to AI-driven task orchestration to optimize labor scheduling in stores, and agentic AI use cases in commercial decision-making and support functions.10Mayowa Kuyoro and Umar Bagus, Leading, not lagging: Africa’s gen AI opportunity, McKinsey, May 12, 2025. While gen AI is currently receiving a lot of attention, we estimate that the vast majority of value to be captured will likely come from non-generative or analytical AI. There is still significant value on the table for analytical AI in retail, especially in core areas such as pricing, promotions, and assortment.11Mayowa Kuyoro and Umar Bagus, Leading, not lagging: Africa’s gen AI opportunity, McKinsey, May 12, 2025. Retail media (RM) is still nascent in MENA, but momentum is picking up, thanks to improved data management capabilities, better customer insights, and higher traffic on e-grocery channels—increasing grocers’ relevance to advertisers. RM is delivering outstanding returns to grocers globally. McKinsey analysis shows that cutting-edge RM users are achieving margins of 40 to 50 percent on this business, with incremental revenues of 1 to 3 percent. For CPG brands, this medium offers an irresistible opportunity to reach their target customers more directly, thereby enhancing marketing efficiency and return on investment. The acceleration of RM in MENA is moving hand in hand with the rising sophistication of loyalty programs. The deep, data-driven customer insights these programs enable allow for highly personalized, targeted retail media advertising, which boosts customer engagement and conversion rates. Thus, retailers in the region are well positioned to extract further value from their loyalty programs by establishing a core retail media business and a full suite of audience-driven product offerings.12Expert interviews; McKinsey analysis. In addition, grocers don’t have to think only about RM in the online channel. There is also an opportunity to deploy RM in-store with digital screens, smart shelves, promo kiosks, and more. While digital attackers led the initial growth phase of e-B2B platforms in MENA countries, the pendulum is now swinging toward retailers with cash-and-carry models, which are increasingly launching their own platforms to compete. Some early e-B2B market movers may have struggled to scale their offerings due to supply chain challenges.13Expert interviews. Our research suggests that securing enough supply to offer a good assortment at a competitive price can prove difficult for digital attackers because they often lack the required purchasing scale. Grocery retailers are well positioned to capture the e-B2B opportunity by capitalizing on their strengths in assortment and procurement, and their existing logistics footprint. For example, retailers with cash-and-carry models14Includes wholesalers that enable small businesses such as restaurants and caterers and corner shops to purchase goods in bulk and pay for them with cash at the point of purchase and take them away with them immediately.—such as Atacadão in Morocco—are entering into the e-B2B space. Atacadão has launched a flexible e-commerce platform and mobile app specifically to meet the needs of small and medium-sized traditional retailers, which is supported by a dedicated logistics and distribution network.15“Customer story: LabelVie, How digital newcomer LabelVie Group achieved a 71 NPS after launching eCommerce in only 5 months,” Commerce Tools website, accessed on December 10, 2025; McKinsey analysis. Retail M&A, including grocery, is rebounding in the Middle East and Africa, with the number of deals more than doubling in 2024 to levels last seen in 2021. Between 2023 and 2024, retail M&A deals grew by 160 percent in Africa and the Middle East, up from a CAGR of –5 percent between 2021 and 2023 (Exhibit 10). This was the second-highest rate globally, with Europe at a 165 percent increase in deal volume. Latin America’s retail M&A activity grew the slowest at 20 percent. Three main motives appear to be driving M&A growth in the region: expanding scale, building capabilities, and diversifying into new profit pools. Noteworthy M&A deals in the MENA region that exemplified these approaches include Tamimi Markets’ acquisition of Al Raya in 2024 to strengthen its position in the KSA and BinDawood’s acquisition of Zahrat Al Rawdah in 2024 to expand into healthcare and wellness.16“BinDawood Holding acquires Zahrat Al Rawdah; deal value changed to SAR 441.1M,” Argaam, February 18, 2025; “Tamimi Markets Company completes the acquisition of Al Raya,” Argaam, February 15, 2024. Rather than waiting for consumer optimism to filter down to the bottom line, grocers across MENA could proactively capture growth opportunities by focusing on three strategic priorities. In a low-growth environment, retailers can improve their position by increasing differentiation, accelerating innovation, and driving targeted premiumization. Specific opportunities include: Capturing the full opportunity from AI requires a comprehensive approach that goes well beyond tech and data. Retailers have often struggled to scale their AI capabilities beyond small-scale pilots because they have treated AI primarily as a tech and data challenge.17“What is digital transformation?,” McKinsey, August 7, 2024. Those that take a much more holistic and transformational approach, addressing six enterprise capabilities, are more likely to capture the opportunity at hand (Exhibit 11). This requires first establishing a clear, value-driven strategy and road map that prioritizes the transformation of specific, high-value business domains. Delivering this strategy depends upon building a strong in-house talent bench of engineers and supporting them with an operating model that can scale cross-functional teams across the entire enterprise. Technically, success hinges on fostering a distributed technology environment, using the cloud and APIs to empower independent innovation, while ensuring every team has access to reliable, governed data structured into easily consumable data products. Finally, success depends on strong adoption and change management to ensure the changes are scaled and sustainable. Investing in growth requires a simultaneous focus on cost efficiency to free up funds to reinvest. Top performers are prioritizing efficiency through a combination of data-driven sourcing optimization (for example, using customer insights to support supplier negotiations), operational excellence in stores and logistics, and organizational efficiency to streamline head office costs. There are plenty of reasons to be optimistic about the future of grocery retail in the MENA region. Consumer preferences are changing. A new generation of shoppers is evolving. And despite low overall growth, there are pockets of potential that grocers can pursue. Those that can unlock these new avenues of growth by scaling AI and tech across their core business and prioritizing efficiencies to fund the required investments will likely be best positioned to thrive. Abdellah Iftahy is a senior partner in McKinsey’s Dubai office, Damian Hattingh is a partner in the Johannesburg office, where Pauline Carrion is an associate partner; Gokmen Ciger is a partner in the Istanbul office. Never miss an insight. 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