Morgan Stanley has released a report highlighting the resurgence of the online grocery market in the UK. After a period of post-Covid normalization, the market has entered a growth phase, outperforming the overall grocery sector for the first time in three years. By 2024, online grocery penetration increased by about 20 basis points to 11.7%, signaling the end of post-pandemic demand stabilization.
Morgan Stanley forecasts that online penetration will continue to grow approximately 30 basis points per year through 2029, reaching a compound annual growth rate (CAGR) of approximately 6%, and a total addressable market (TAM) of ‘around 24 billion pounds, with a penetration of 13.2%.
Tesco (LON:), with a dominant 29% share of the UK online market, is Morgan Stanley’s favorite stock in this growing sector. The report also draws attention to the growing on-demand grocery segment, currently valued at around £2 billion and growing at a CAGR of around 15%, or 2.5 times the market rate wider range of online grocery shopping. By 2030, the on-demand grocery market could reach nearly £5 billion, but would still only represent 2% of the overall grocery market.
Deliveroo has been identified as most exposed to the on-demand grocery trend, with the company and Uber collectively fulfilling around two-thirds of on-demand orders in the UK. Deliveroo Group’s gross transaction value (GTV) from the UK on-demand market alone is around 9%, and including international demand it rises to around 15%. The report suggests that Deliveroo is processing more orders than Ocado (LON:) in the UK, despite Ocado’s higher average order value.
-During this time, Just Eat (LON:), which has the largest share of the UK takeaway food delivery market, is described as playing catch-up in the on-demand grocery space. Although Just Eat currently has half the GTV of Deliveroo in this segment, Morgan Stanley anticipates that around 2030, Just Eat could potentially leverage its dominance in food delivery to overtake both Deliveroo and Uber in terms of food delivery revenue. grocery store.
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