Morgan Stanley (NYSE:MS) released a report highlighting the resurgence of the online grocery market in the United Kingdom (TADAWUL:4280). Following a period of normalization post-Covid, the market has entered a growth mode, outpacing the overall grocery sector for the first time in three years. In 2024, online grocery penetration increased by approximately 20 basis points to 11.7%, signaling an end to the post-pandemic demand stabilization.
Morgan Stanley projects that online penetration will continue to grow by roughly 30 basis points per annum through 2029, achieving a compound annual growth rate (CAGR) of about 6%, and reaching a total addressable market (TAM) of approximately £24 billion, with 13.2% penetration.
Tesco (OTC:TSCDY), holding a commanding 29% share of the UK's online market, is Morgan Stanley's preferred stock within this expanding sector. The report also draws attention to the burgeoning on-demand grocery segment, which is currently valued at around £2 billion and is growing at a CAGR of approximately 15%, or 2.5 times the rate of the broader online grocery market. By 2030, the on-demand grocery market could reach close to £5 billion, yet it would still represent only 2% of the overall grocery market.
Deliveroo (OTC:DROOF) has been identified as the most exposed to the on-demand grocery trend, with the company and Uber (NYSE:UBER) collectively handling about two-thirds of the UK's on-demand orders. Deliveroo's Group Gross Transaction (JO:TCPJ) Value (GTV) from the UK on-demand market alone is approximately 9%, and when including international on-demand, it rises to about 15%. The report suggests that Deliveroo is processing more orders than Ocado (LON:OCDO) in the UK, despite Ocado's higher average order value.
Meanwhile, Just Eat, which holds the largest share of the UK's food delivery market for takeaway demand, is described as playing catch-up in the on-demand grocery space. Although Just Eat currently has half of Deliveroo's GTV in the segment, Morgan Stanley anticipates that by around 2030, Just Eat could potentially harness its dominant position in food delivery to surpass both Deliveroo and Uber in grocery revenues.
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