Small and medium-sized enterprises (SMEs) face distinct challenges compared to large companies – but there are many areas in which SMEs have the upper hand. What will drive growth in the sector in H2 2025?
In a recent webinar, Circana senior strategic insights director Alex Lawrence delved into the risks and opportunities to SME growth.
The data presented covered UK companies that made sales of less than £100m in the last 12 months (excluding companies that provide products for retail private label) and comprised the last 52 weeks up to up to May 17 2025; in terms of distribution channels, it included major multiple grocers, the independent channel ad minor multiples channel, forecourts and travel outlets.
While the webinar focused on the UK market, the insights shared below can be applied more universally.
Here are four key takeaways to inform SME growth strategies as we enter the second half of 2025 . . .
Get into major grocery stores
With the majority of shoppers purchasing food and beverage in grocery stores, getting your products onto major retailers’ shelves is paramount, Lawrence shared.
In the UK specifically, impulse purchases have been the only category in growth in SME food and beverage sales in major grocers over the past year in the UK – with ambient grocery seeing flat (0.7%) growth and frozen and chilled goods declining 3.5% and 1.1% respectively.
In North America, getting into large retailers is similarly important. According to USDA ERS data, US consumers purchase almost two thirds of their calories from large grocery stores.
ERS research (see ‘sources’ below for more information) found that three quarters of food and beverage consumed by US households came from retail stores, with 65% of that provided by supermarkets, supercenters and other large grocers.
In comparison, small and specialty food stores supplied 3% of that, and 6.5% came from convenience stores, dollar stores, and others.
Minimize de-listing
Along with growing and retaining distribution, it’s also critical for SMEs to limit the amount of products that get de-listed by retailers should they wish to achieve growth.
Here, driving sales is where the game is at, because a lower rate of sales increases the risk of de-listing, according to Circana.
Looking at the share of de-listed value in the UK, SMEs have big overtrades on all three measures of value share, distribution share and SKU count.
“SMEs are disproportionately losing out in de-listings,” Lawrence said. “Compared to the performance of larger corporations, the opposite is true – with 48% share of distribution, there’s just 14% de-list of SKUs accounting for just 11% of de-listing value.”
“If SMEs can retain more SKUs for longer, then that represents huge opportunities; it’s going to create platform for growth in H2 2025.”
Grow distribution points
Getting your brand into more outlets is also crucial for SME growth. According to Circana’s research, SMEs that lost distribution points ended up with a 21.4% smaller distribution share year over year; while large companies’ distribution only shrank by 11.6% in the same period.
“Large corporations are outperforming SMEs when it comes to distribution performance thanks to a capability advantage. SMEs need to address that, turn it from a risk into opportunity, and capitalize on those opportunities to fuel growth.”
Alex Lawrence, senior strategic insights director, Circana
That difference is ‘pretty significant’, Lawrence said, adding that this metric has an impact on the value sales performance of the two types of businesses. Specifically, brands that lost distribution experienced a drop in sales value of 7.1% - while brands that gained distribution increased sales value by 18.5%.
“The implications of that are really severe, because it’s very difficult to re-capture those sales through other enablers, and potentially very expensive as well,” Lawrence said.
Go big on data and analytics
How else do SMEs achieve growth? Well, there are lessons to be learned from how large companies achieve growth - despite the distinct differences between the two types of businesses.
For example, large companies typically have access to POS and retailer data, which is crucial to understanding performance and the competition. These businesses may also invest in data analytics to help them understand elasticities, cannibalization and uplifts.
“Today, there are entry-level tools that will give SMEs pretty much the equivalent capability but at a much more affordable price,” Lawrence said.
But overall, the message is clear.
“If SMEs want growth in H2 2025, the first thing that needs to be looked at is how do we mitigate the risk of de-listing and capitalizing the opportunities for distribution growth,” Lawrence said.
Economic headwinds remain
Small businesses globally share a similar set of uncertainties - from soft consumer demand to global economic upheaval underpinned by an evolving trade tariff landscape.
However, winning through price alone won’t be possible for SMEs, who would need to focus on volume and share retention, Lawrence suggested.
Promotions and deal depth will become increasingly important tools to attract consumers who would be looking to trade down as the cost of living crisis continues to bite.
And off-shelf display will become a key battleground and even more crucial over the next six months.
As for consumer confidence, it’s a mixed picture across the board.
In the US, shoppers were more upbeat in May after five consecutive months of decline. The Conference Board Consumer Confidence Index increased by 12.3 points to 98.0, up from 85.7 in April; the June reading is due out within the next week.
In the EU, consumer confidence decreased in June, dropping to -15.3 from -15.1 in May and missing market expectations of -14.5, according to a preliminary estimate by the European Commission.
And in the UK, the GfK Consumer Confidence Index increased by 2 points to -18 in June, marking its second consecutive monthly gain after readings of -23 in April and -20 in May. Neil Bellamy, consumer insights director at GfK, said this was driven by ‘improvements in how consumers see the economy’ - but warned that the Middle East conflict and ongoing trade tensions may continue to weigh on sentiment.
Source:
FoodAPS National Household Food Acquisition and Purchase Survey, Updated: 3/27/2025. Accessed 6/24/2025. www.ers.usda.gov/...and-purchase-survey
