Price Pressure and AI Erode Power of Europe's Biggest FMCG Brands

Europe's biggest grocery brands are losing ground. The latest State of Grocery Retail Europe 2026 report, prepared by McKinsey and EuroCommerce, finds that retailers' private labels are growing three times faster than manufacturer brands, while artificial intelligence investments at the vast majority of retailers still aren't translating into measurable profit. Wiadomości Handlowe (a Polish retail trade publication) described the phenomenon bluntly as an erosion of the biggest FMCG brands' power.

Private Labels Take Over the Shelf

The report's authors describe a mechanism that has steadily weakened big manufacturers' position for several years. Retailers that widened the price gap between their private labels and branded products in recent years gained market share. Those that narrowed that gap lost share. Private labels that invested in quality and innovation were two to three times more likely to grow their market share than other players in their respective countries.

This is no longer purely a price game. Data cited in the report shows that consumers increasingly see private labels as a credible alternative to branded products in terms of quality, innovation and shopping experience, not just as a cheaper substitute. That changes the rules for FMCG manufacturers who spent decades building an edge on brand recognition and trust, assuming price was just one piece of the puzzle.

For the first time in several years, we see a majority of consumers trading up - Daniel Läubli, Global Head of Grocery Retail, McKinsey

AI Isn't Paying Off Yet

The report's second pillar is artificial intelligence, which retailers see as a tool for regaining control over costs and margins. The problem is that the rhetoric still outpaces the results. As many as 83 percent of retailers are building AI capabilities or are in the early stages of deployment, but 70 percent of CEOs surveyed admit they haven't yet seen a measurable impact from AI on EBIT. Only 3 percent of companies reported an increase of more than 5 percent.

For FMCG manufacturers, that amounts to a double blow. On one hand, retailers are using algorithms for dynamic pricing, assortment management and personalized offers, giving them an information advantage over suppliers. On the other hand, private labels, developed by those same retailers, are competing ever more effectively for shelf space controlled by the retailer, not the manufacturer.

Margin Pressure Isn't Letting Up

Cost and margin pressure remains the number one issue for European grocery retail, cited by 77 percent of retail CEOs. Online sales grew more slowly in 2025 than the year before, 6.8 percent versus 7.8 percent, suggesting that earlier digital momentum is starting to fade and companies are looking for new sources of growth beyond their core business.

Stabilization does not mean relief - Christel Delberghe, Director General of EuroCommerce

Delberghe stresses that even though sales figures have stabilized, the financial situation of retailers and manufacturers hasn't improved at all. Rising energy, transport and labor costs are piling on top of falling consumer loyalty, as shoppers who grew used to cheaper alternatives during the high-inflation period, and some of them are simply not going back to the pricier brands.

What It Means for the Polish Market

For Polish retail chains and FMCG manufacturers, these trends aren't abstract. Private labels in Poland have grown faster than the category as a whole for years, and chains such as Biedronka, Lidl and Dino are investing heavily in developing their own product lines and in AI tools for price and assortment management. Polomarket recently announced the rollout of the Yieldigo platform for price optimization across 249 stores, and Wiadomości Handlowe's own research shows that nearly 90 percent of retailers in Poland now factor artificial intelligence into their strategy.

For domestic food manufacturers, this means rethinking how they differentiate their offer. Cutting prices alone stops working as a sales argument once retailers can counter with an even lower private-label price backed by algorithmic optimization. Experts quoted by trade media say the only durable answer is investing in quality, product innovation and building a customer relationship that goes beyond promotions.

What Comes Next

The McKinsey and EuroCommerce report is the sixth edition of this recurring study on the health of European grocery retail, so the next round of data won't arrive for at least another year. Until then, market watchers expect private labels to keep gaining share and AI deployments to gradually mature, even though, by the survey respondents' own admission, they currently cost more than they deliver in measurable profit. For big FMCG brands, that means the coming months will be about defending shelf space, not just defending price.