Convenience beats the cookbook: Retailers double down on food service

Food service is expanding across Europe considerably faster than traditional grocery retail: between 2022 and 2025, the sector grew by an average of 6.8 percent per year, while grocery managed only 4.8 percent over the same period. That's according to the latest report, The State of Grocery Retail Europe 2026, from McKinsey & Company and EuroCommerce.

This gap has widened further since the COVID-19 pandemic and reflects a long-term trend: fewer and fewer people are cooking for themselves. The shift is visible on supermarket shelves too – products for immediate consumption are growing at around 7 percent, noticeably faster than the rest of the assortment.

The force behind this development sits mainly in one age group: Gen Z and millennials treat convenience as a given in everyday life – ready meals and food-to-go are simply part of how they eat, while cooking from scratch is losing ground. Gen X and baby boomers show the opposite pattern: for them, the home kitchen remains the starting point for meals, and ready-made products play a minor role.

One notable structural shift is happening within this growth itself: it's increasingly driven by price rather than volume. Rising per-unit prices, not higher sales volumes, are now what's pushing revenue up. Retailers benefit from this only to a limited extent – their share of the immediate-consumption business did tick up slightly, from 11.6 percent (Q2 2023) to 12.6 percent (Q2 2025), but the lion's share of the pie still goes to traditional foodservice operators.

To capture a bigger share of away-from-home food consumption, more and more grocers are building their own food service and coffee concepts into their stores. Ready-to-(h)eat ranges are being expanded, and hot food counters are being integrated directly into store formats. At the same time, store layouts are being redesigned so convenience and immediate-consumption offerings are more visible and easier to reach. The result: the line between retail and foodservice is increasingly blurring.

Interestingly, the shift toward convenience is by no means at odds with rising quality expectations. Alongside growing demand for ready-made products, willingness to pay more for premium or high-quality food is also climbing. For retailers, that means: anyone looking to compete in food service shouldn't pit convenience against quality – the two need to be considered together.

Grocery retail is facing a strained economic environment. Margins across European grocery retail remain under structural pressure: EBIT margin is stuck at just 2.8 percent, while the cost ratio (SG&A) has held at a record 19.7 percent of revenue since 2024. Labor costs are rising significantly faster than food inflation across Europe, further driving up the cost of expanding labor-intensive foodservice concepts in stores.

On top of that, structural headwinds are building on multiple fronts: discounters keep growing their market share, private labels now account for a 40 percent value share, and online retail – while growing more slowly than in previous years – remains a channel with its own momentum and its own customer loyalty. For grocers, that means intensifying competition for space, investment budgets, and customer attention.

Geopolitical challenges are mounting as well, pushing up energy prices and making supply chains less predictable and more expensive. That complicates the cost calculations behind fresh and convenience offerings, which are particularly sensitive to cost and logistics.

Against this backdrop, expanding food service is a double-edged proposition: on one hand, cost pressure, labor intensity, and geopolitical uncertainty are making the conditions for investing in new store concepts tougher. On the other hand, food service offers retailers a strategic path to new growth beyond the traditional shopping basket. In-store dining can also serve as a differentiator, helping retailers keep customers coming into stores amid growing competition. Investment in food service therefore remains a strategic bet: it offers access to one of retail's fastest-growing profit pools, but it also demands additional capital and operating costs at a time when many grocers are already fighting for every point of margin.

Sources: The State of Grocery Retail Europe 2026, McKinsey & Company / EuroCommerce