Circana: the cautious consumer redesigns the grocery market

Circana has presented a new forecast analysis of the packaged grocery market (Lcc) in Italy to offer operators a compass for interpreting the first months of 2026.

The study shows that the packaged grocery market ended 2025 with growth, with volume sales increasing by +1,8% and a value increase of +3,1%, largely driven by inflation. Compared with the pre-pandemic period, volumes are more than 13% higher, while households’ total spending on groceries has increased by approximately 30 billion euros, confirming the sector’s central role in Italian consumers’ baskets.

In the first months of 2026, however, Lcc showed slower growth than in 2025, with a value trend of approximately +1,6% and a more limited increase in volumes, at around +0,6% (progressive data as at 19 April 2026). In this scenario, however, the sector continues to play a role in “capping” prices: LCC price lists are rising by +0,5% compared with an increase of +2,2% in the Istat shopping basket.

Marco Limonta, cpg director at Circana outlines the profile of the future consumer, reflects on the role of Mdd and promotions, and sets out three possible scenarios for the end of the current year.

What are the main factors driving the slowdown in Lcc growth?

One of the main factors influencing purchasing trends is household purchasing power. After years of erosion in disposable income, it is inevitable that consumers are encountering greater difficulty in their spending choices. That said, it is important to put the figure into context. Growth is less robust, but the packaged grocery market continues to perform positively and shows greater resilience than other markets and product categories, which are going through a more challenging phase. Another factor should also be considered: large-scale distribution continues to represent a strong attraction for consumer spending. Some purchases that were previously made through other channels are gradually shifting towards GDO. Consider, for example, traditional specialist shops – delicatessens, butchers, greengrocers and bakeries – which, in addition to declining in number, are also suffering from the transfer of spending shares to the modern channel. Circana’s data on out-of-home consumption also indicate a decrease in total visits, suggesting that some spending is being relocated within GDO. The fact remains that growth in the first months of the year is more moderate and purchasing power remains a central issue. Developments in the coming months will depend to a large extent on price trends: the more prices continue to rise, the greater the difficulty consumers will face in sustaining their purchases and, consequently, maintaining consumption levels.

Circana defines the grocery market as a “price stabiliser”. How long can this role in containing inflation last?

GDO has historically played a role in containing inflationary pressures. Price increases, in fact, are not automatically passed along the supply chain, as may happen in other sectors, such as fuel. In the grocery market, everything passes through negotiation between industry and distribution, a process that takes time and creates a natural delay both in increases and, subsequently, in any price reductions. The real question now concerns the pressures affecting production supply chains. The more these intensify, the more industry will be forced to ask for further increases. At that point, the question will be: how much of these increases will industry and distribution be able to absorb and how much, instead, will be passed on to the end consumer? It is precisely around this uncertainty that we have developed our forecast scenarios for 2026. We have developed three different hypotheses and, depending on the strategies adopted by industry and distribution, the econometric model produces different results, ranging from further growth to possible market contractions.

What scenarios are emerging?

In the first case, industry and distribution adopt strategies aimed at preserving and increasing volumes, so price increases remain contained (around +2,4%) and, in parallel, promotional activity is strengthened (+1,0%) to stimulate purchases and support sales. In this scenario, we expect volume growth substantially in line with that recorded in the first four months of the year (+0,5%) and an increase in value sales of around +2,0%. The second scenario starts from a different premise: industry cannot avoid increasing prices to protect its margins and distribution, in turn, passes at least some of these increases on to the end consumer. In this case, we expect more pronounced price growth (+3,2%), promotional activity that is increasing but considerably less effective (+0,3%), and a consequent contraction in overall volumes (-0,6%), alongside value sales growth of around +1,2%. We have added a third hypothesis to these two scenarios, prompted by the current geopolitical context.

What does the third hypothesis envisage?

International tensions represent a major source of uncertainty for the resilience of supply chains and point to the risk of new and significant price increases. Making forecasts at this stage is particularly complex: international balances change not over weeks or days, but even over hours, making it extremely difficult to estimate the economic effects accurately. In the most critical scenario, which assumes a price increase of around 5%, we expect a very significant decline in volumes (-1,4%). The reason is simple: consumers have already experienced severe inflationary shocks in recent years, and a further surge in prices could trigger a more severe reaction than in the past, with an even sharper reduction in purchases in the packaged grocery market. Naturally, we hope that this hypothesis does not materialise.

If you had to describe the consumer GDO will face over the next 12 months, how would you define them?

I would use the adjective “careful”, because of the progressive deterioration in perceived purchasing power and the highly uncertain context. When consumers find themselves in a situation of uncertainty, they tend to transfer this state of mind into their everyday spending choices. Food spending is, in fact, their “life basket”: they cannot give it up, but at the same time they try not to fill it excessively and employ a series of strategies to achieve their goal, namely shopping more efficiently. How will all this translate into consumption behaviour? Probably through increasingly selective choices. We have already observed this in recent years: consumption at home is increasing compared with out-of-home consumption, and channel preferences are changing. Discount stores also fit into this picture, although they are not currently recording the growth seen in the past.

What competitive scenario is emerging among the various channels over the coming years?

The different distribution channels are becoming increasingly competitive with one another. We are no longer seeing competition only between discount stores and traditional distribution, but also increasingly intense competition within the discount sector itself. The consumer’s role, therefore, will continue to be decisive. This is a consumer who is increasingly less loyal to retailers and purchasing channels, moving more easily from one retailer to another, from one channel to another, from industrial brands to private label and vice versa, constantly seeking the solution they consider most convenient and best able to meet their needs.

Returning to discount stores, what should we expect after years of growth?

In recent years, discount stores have been the fastest-growing channel in the market, supported by two main drivers. On the one hand, the expansion of the sales network, with the number of stores constantly increasing; on the other, like-for-like growth, namely improved performance from individual stores already in existence. The combination of these two factors has enabled the channel to progressively gain market share. Today, however, we are seeing a change. Like-for-like growth is considerably more limited and, in some cases, is even negative when volumes are considered. Conversely, the network continues to expand, but numerical expansion alone is no longer sufficient to guarantee the growth rates of the past. That said, I do not see a crisis for discount stores on the horizon. Their history shows that, during periods of greater economic difficulty, this channel has always been able to reposition itself and become particularly attractive to consumers again, thanks to propositions perceived as convenient and relevant. Among the factors currently strengthening its appeal is the presence of industrial brands. Today’s consumer is increasingly mobile, moving between retailers and channels and, despite this increasingly low level of loyalty, continuing to have certain points of reference. One of these is the brand itself. Discount stores cannot offer the assortment depth of traditional distribution, but a limited selection of recognised brands represents a reassuring and attractive element for customers. At the same time, the growth of traditional modern distribution is supported above all by private label.

After a particularly strong 2025, however, private label is slowing down. Is PL merely a tool for protecting purchasing power?

Private label continues to expand thanks to the broadening of the assortment and the introduction of new references, which make it possible to meet increasingly diverse consumption needs. It is precisely the ability to innovate, even excluding the references that are periodically removed from assortments, that has enabled private label to consolidate its presence on shelves and continue gaining market share. In all likelihood, this trend will continue in the coming months: on the one hand, discount stores are strengthening their appeal through a targeted selection of industrial brands; on the other, modern distribution continues to grow thanks to innovation and the development of its private label.

So does private-label growth depend on innovation, premiumisation and high-value-added segments?

Private label continues to do what it has always done in recent years: progressively broaden its assortment, naturally within the limits of the categories in which it can be present and the strategies of individual retailers. The other key element is the increasing depth of the offering. It is no longer simply a matter of covering the various product categories, but of moving increasingly into the individual segments that make them up. In other words, private label is not limited to being present in a category, but seeks to offer consumers a range of solutions capable of meeting different needs, price points and consumption occasions. It is precisely this ability to structure and segment the offering that is enabling private label to strengthen its role on the shelf and meet an increasing number of end-consumer needs.

In a context of cautious consumption, what role does innovation play today, and what characteristics must new products have to generate real value?

Circana has been monitoring innovation trends in Lcc for years, and there is one rule that, with some exceptions, tends to recur: after their second year on the market, the performance of an innovation generally begins to decline. The cycle is fairly consistent. In the first year, the product gradually enters stores and builds its distribution; in the second, it generally reaches its performance peak; from the third year onwards, sales begin to slow. The point, however, is to understand what happens after this phase. Some products stabilise and maintain interesting sales levels over time; others disappear from the market and their life cycle comes to an end. The distinguishing factor is the value that the product manages to convey to consumers. If consumers perceive that the product offers a tangible benefit and a fair value-for-money ratio, they will continue to buy it in subsequent years. Conversely, when an innovation is launched by riding a temporary trend but is not supported by genuine added value, it tends to quickly lose its appeal and, over time, disappear from shelves.

How do promotions fit into this context?

We are seeing a progressive decline in the ability of promotions to generate results compared with the past. This phenomenon is mainly linked to changes in the promotional mix. Today, promotions are increasingly focused on simple price cuts and less on traditional tools such as leaflets, which are undergoing a process of substantial rationalisation by distributors. Retailers are in fact trying to reduce what could be described as genuine “leaflet inflation”. Over the years, consumers have been exposed to an ever-increasing number of promotional communications, with the risk of creating saturation and reducing their effectiveness. The rationalisation under way could instead be a positive factor. The aim is to move from a quantitative to a qualitative approach, with more selective, less crowded leaflets that focus more closely on offers that are genuinely relevant to consumers. Rather than increasing the number of promotions, therefore, the challenge for the future will be to make them more efficient: less dispersive, more targeted propositions with greater appeal for end consumers.

Which categories are showing the greatest dynamism?

The fresh and ultra-fresh departments are undoubtedly among the most dynamic and the ones most often discussed. However, it is important to remember that the real backbone of the packaged grocery market continues to be traditional food grocery. But the fresh and ultra-fresh departments are now one of the main areas of competition among retailers. This is where an important part of the distinctiveness of the offering and the ability to attract and retain consumers is built.

This article was translated from the original Italian version with the assistance of artificial intelligence. In case of discrepancies, please refer to the original Italian version.