Eight Major Trends to Watch in the Grocery Industry in 2025

In 2025, the grocery industry is entering a period of dramatic transformation, a judgment based on industry trends at the end of 2024. The mega-merger between Kroger and Albertsons collapsed in mid-December after more than two years of intense scrutiny, and the two companies even ended up in court. Nevertheless, industry observers point out that M&A activity is not impossible in the new year. Current Federal Trade Commission (FTC) Chair Lina Khan has been opposed to large corporate mergers, but under the incoming Trump administration, the agency will have new leadership that may be more open to large corporate mergers, thereby encouraging more M&A activity.

More M&A could help traditional grocers cope with the growing strength of discounters in the food sector. The rise of discounters over the past year reflects consumers' continued efforts to seek value, a trend expected to continue in 2025. For example, many shoppers who first encountered Walmart during the COVID-19 pandemic while looking for reliable grocery delivery services now frequent the discounter out of a need to save money. As David Bishop, partner at grocery e-commerce consulting firm Brick Meets Click, put it: "These customers suddenly came into contact with its value proposition, found its quality far exceeded expectations, and moved a large amount of their purchases there."

Although experts point out that inflation eased in 2024, Trump's promise to impose high tariffs on imported goods has raised concerns about the near-term trajectory of food prices. The following are eight trends that could impact the grocery industry in 2025.

Traditional grocers need to strengthen differentiated competition

Traditional grocers faced increasingly fierce competition in 2024 from rivals such as Walmart, Amazon, and Costco, and analysts expect these pressures to intensify further in 2025. Matt O'Grady, president of the Americas at retail analytics firm Dunnhumby, said: "They will be highly focused on pricing, promotional strategies, promoting the right products, and most importantly, maintaining touchpoints with customers to keep them coming back." O'Grady noted that grocers need to develop strategies to stand out by offering a balance of value and convenience that other retailers cannot match. "Pricing and concerns about pricing and promotions will persist, and the key lies in execution, which will determine who wins and who loses."

Grocers can differentiate the shopping experience through personalization technology to alleviate some of the pressure. Spencer Price, vice president of strategy at Halla, a division of grocery e-commerce company Wynshop, said: "The focus in 2025 will be on fixing the digital foundation to meet rising shopper expectations." The now-terminated Kroger-Albertsons merger highlighted the challenges even the largest traditional grocers face against mass retailers and specialty grocers. Scott Mushkin, CEO of R5 Capital, noted that these supermarket chains sought not only to scale up to compete on price and gain supplier bargaining power, but also to combine financial resources to fund the infrastructure investments needed to catch up with Walmart. "You need massive cash flow to catch up," he said.

Consumers will continue to focus on value

Last year, grocers worked to demonstrate their commitment to helping shoppers save on grocery budgets, and experts say all signs point to this trend remaining strong in 2025. O'Grady said: "People always say inflation has returned to normal levels, but food prices have actually risen over the past four years." He added that consumers are buying fewer items per trip and visiting more stores to recover purchasing power lost to inflation.

Bishop added that shoppers typically value convenience over price when buying groceries online, but lower-priced retailers still have a clear advantage because delivery saves customers the trip to the store. "I think price plays an outsized role in the current value equation, and customers are making trade-offs that could be seen as sacrifices," Bishop said. "They are still financially constrained, which is causing them to change their purchasing behavior, whether in what they buy, where they buy it, or how they buy it." Price expects suppliers to work hard this year to ensure price-sensitive shoppers perceive their products as affordable. "I think while grocers will still maintain price positioning, brands and manufacturers will work to get discounts, promotions, offers, and coupons to the customers who need them, through retailers and other channels."

2025: The year grocers get smart about data management

As retailers increase investment in technology and loyalty programs to collect more customer information, "data will become a matter of life and death for retail," said Gary Hawkins, CEO of the Center for Advancing Retail & Technology. "Retailers still face various data quality issues that create chaos across the enterprise—from incomplete or partially incorrect product descriptions, to wrong product images, to incorrect product attributes." Hawkins believes that in 2025, grocers will finally untangle the "huge data mess" and establish a unified data foundation, what he calls the "company's digital core."

Anne Mezzenga, co-CEO of retail blog Omni Talk and former Target executive, noted that grocers need to analyze data more quickly as they cautiously invest in technology and plan for substantial returns, whether in price accuracy, advertising decisions, or other business areas. Recent advances in AI provide an excellent opportunity for retailers to test and adopt the technology to evaluate and interpret data. "When ChatGPT first came out, people thought, 'Cool, how do I use it to write poetry?' But retailers have truly begun encouraging employees to embrace generative AI, making it more manageable to process information," Mezzenga said.

Where will tariffs go?

As 2025 begins, a key question facing the grocery industry is how President-elect Trump's promised new tariffs on imported goods will affect food prices. Economists describe tariffs as essentially taxes on imported goods, which could push prices up just as grocers work to lower costs for inflation-weary consumers. Capri Brixey, partner in the customer development practice at The Partnering Group and a former Coca-Cola and Kroger executive, said: "If it substantially changes an organization's operating costs, supply chain resilience could be disrupted in an instant, and we would return to inflation, struggling to keep up with rising product costs."

Bobby Gibbs, partner at Oliver Wyman, said grocers could try to take steps to reduce costs to mitigate tariff-driven price increases: "In the absence of mid-term clarity, it's easier to adapt in the short term through promotions." Bishop noted that uncertainty over cost pressures facing grocers remains a core issue. "The biggest variable or 'elephant in the room' is the new administration and its policy implementation, which are not yet fully understood or formed, and the first- and second-order ripple effects on product costs are unpredictable."

Health and wellness demand evolves

During the COVID-19 pandemic, consumer attention to health and wellness on grocery shelves increased significantly, but experts say demand for healthy food is evolving. Bishop noted that increased transparency in food labeling, along with product repositioning around health attributes such as "added protein" or "low sugar," is sparking consumer awareness and desire for healthy eating.

This is prompting suppliers to develop more sugar-free products, such as yogurt with no added sugar. Bishop expects to see more affordability and clarity around health benefits this year. "Healthy eating has historically been more expensive. But now, consumers, due to the health consequences of past unhealthy eating, are more carefully examining what they consume... This is not necessarily a shift to natural, organic lifestyles, but a shift to healthier products." However, organic products remain expensive for many consumers, and "most people see price as a barrier to buying healthy food," O'Grady said. Grocers need to address affordability, accessibility, and motivation issues to help people discover and stick with healthy eating habits: "Imagine hosting a 15-minute workshop in-store teaching how to prepare quick and easy meals."

Private labels will put enormous pressure on CPG

Private label growth dominated in 2024, with grocers proving that their store brands are not just cheap options but high-quality choices. This momentum is expected to continue into the new year, with industry analysts anticipating more curated and specialized approaches to private label lines. "I think we will see retailers more deliberately investing in differentiated products targeting specific consumer segments," said Diana Sheehan, founder and CEO of PDG Insights. Sheehan highlighted Walmart's launch of bettergoods last year, a trendy private label line with a variety of plant-based options: "The brand launched with clear intent and was a leap for Walmart. They had never really done that before, but they recognized growth in that space. To attract younger consumers and healthier products, I think other retailers will follow suit."

John Clear, senior director in the consumer and retail group at consulting firm Alvarez & Marsal, noted that retailers like Costco and Aldi have long been known for their private label lines, but 2024 proved that any grocer can build a store brand. Specialty grocer Sprouts Farmers Market, while not having a low-price image, has successfully launched private labels that are "extremely strong on affordability." Gibbs believes that successful private label growth, combined with an emphasis on cross-category innovation, could begin to hurt CPG. "Consumers have realized that grocer private label products are of decent quality. Once brand loyalty is broken, it's very hard for CPG companies to win it back," Gibbs said. He added that looking ahead to 2025, private labels will drive innovation as grocers and CPG compete for consumer spending.

Electronic shelf labels will enter mainstream use

Electronic shelf labels (ESLs) had ups and downs last year. Walmart announced plans in June to deploy ESLs in 2,300 stores by 2026, seemingly gaining momentum, but then hit a major obstacle when several U.S. senators publicly questioned Kroger and Stop & Shop's use of the technology. Clear said that as the technology became politicized, especially before the presidential election, retailers paused or quietly continued their ESL efforts. "There's no evidence that ESLs are being used for surge pricing or gouging," Clear said. "They exist all over the world, and that hasn't happened. But I think the political scrutiny came at a timely moment because everyone is so focused on pricing."

But Clear and Mezzenga agree that ESLs are poised to take off in 2025. The "business case for ESLs is clear—in most cases, they lower labor costs and improve the shopping experience—so I think they will make a comeback," Clear said, noting that many companies Alvarez & Marsal works with say they are exploring the technology. Mezzenga said ESLs offer the opportunity to layer additional capabilities on top of their core function. Pick-to-light features can help consumers and employees quickly find products by flashing lights on labels. Labels also eliminate the need for employees to print and hang paper tags, while giving retailers clearer visibility into pricing data, inventory, and out-of-stocks.

Consumer-facing AI will grow

Last year, grocers gradually integrated artificial intelligence into their operations, and now they are using the technology to manage a wide range of tasks, including forecasting fresh produce inventory, assisting with category management, enhancing retail media operations, and more. Heading into 2025, most experts expect grocers to apply AI in more targeted ways, with a focus on personalizing the shopping experience. "I think the opportunity for generative AI and enhanced personalization, especially as it relates to retailer loyalty programs, will become important in 2025," said Rachel Dalton, head of retail insights at consulting firm Kantar. Dalton added that the overall focus on personalization will improve both in-store and online shopping experiences, such as through generative AI search features.

Amanda Lai, director of the food industry practice at McMillanDoolittle, also expects AI to play a more prominent role in grocers' personalization efforts, especially when building features like custom recommendations. While Lai does not expect custom recommendation technology to be a "breakthrough innovation," she predicts the technology will become more customized and faster as existing capabilities accumulate. Bishop believes that as AI technology continues to recommend relevant products and recipes to consumers—primarily by collecting shopper data based on past purchases, search history, and even user account profiles—grocers will see "sales lifts and cost reductions because AI brings greater efficiency."