For SMEs, Distribution Remains the Key to Growth—But How Can They Turn Risk Into Opportunity in 2025?

Maintaining and expanding distribution remains the most profitable route to growth for small and medium-sized enterprises (SMEs). But in an uncertain economic environment, how can SMEs turn risk into opportunity? Here's an analysis published by DairyReporter.

Unique Challenges

SMEs face a distinct set of challenges compared to larger companies—but in many areas, they also hold key advantages. So what will drive growth for the sector in the second half of 2025?

In a recent webinar, Alex Lawrence, Senior Director of Strategic Insights at Circana, explored both the risks and opportunities that could fuel SME growth in the coming months.

The data focused on UK-based companies with annual sales under £100 million over the 12 months ending May 17, 2025, excluding private-label suppliers. Sales channels analyzed included major grocery retailers, the independent sector, convenience stores, shopping centers, and tourist retail outlets.

While the analysis centered on the UK, the insights are broadly applicable across markets. Here are four key strategies for SMEs to build effective growth plans as we enter H2 2025:

1. Get on Major Grocery Shelves

Since most shoppers buy food and drinks from grocery retailers, getting products onto the shelves of large chains is crucial, Lawrence noted.

In the UK, impulse purchases were the only SME sales category to grow in major grocery stores in the past year—ambient food showed modest growth (0.7%), while frozen and chilled foods declined by 3.5% and 1.1%, respectively.

In North America, access to large retailers is equally important. USDA ERS data shows that U.S. consumers purchase nearly two-thirds of their calories from large grocery stores.

ERS research (see “sources” below) found that 75% of food and drinks consumed by U.S. households come from retail stores—65% of that from supermarkets, hypermarkets, and other major grocery outlets. In contrast, small/specialty stores accounted for just 3%, and convenience/dollar stores for 6.5%.

2. Minimize Delisting Risk

In addition to growing distribution, SMEs must limit product delistings by retailers if they aim to sustain growth.

The key to reducing delistings? Sales performance. Circana notes that lower sales rates increase the likelihood of being removed from shelves.

In the UK, SMEs are overrepresented in delisted value, distribution, and SKUs.

“SMEs are disproportionately affected by delistings,” said Lawrence. “By contrast, large corporations—despite holding 48% of distribution—account for only 14% of SKU delistings, representing just 11% of the delisted value.”

“If SMEs can keep more SKUs listed for longer, that opens the door to huge opportunities—and creates a solid platform for growth in H2 2025.”

3. Expand Distribution Points

Placing your brand in more points of sale is another crucial strategy. Circana data shows that SMEs which lost distribution points ended up with a 21.4% lower share of distribution year-over-year. In contrast, large companies saw only an 11.6% drop.

“Large corporations outperform SMEs in distribution due to greater capacity,” Lawrence said. “SMEs must turn that disadvantage into an opportunity—and seize it to power growth.”

This difference is “significant,” Lawrence noted, adding that it directly impacts value sales performance: brands that lost distribution saw sales fall by 7.1%, while those that gained distribution grew 18.5%.

“The implications are serious—it’s hard and potentially very costly to recover sales through other means,” he added.

4. Embrace Scalable Data and Analytics

How else can SMEs grow? One approach is to adopt lessons from larger companies—even though the two operate under very different constraints.

Big companies typically have access to POS and retailer data, which is essential for understanding performance and the competitive landscape. They also invest in analytics to track elasticity, cannibalization, and incrementality.

“Today, there are affordable entry-level tools that give SMEs nearly the same analytical power,” Lawrence said.

But overall, the message is clear:

“If SMEs want to grow in the second half of 2025, the first step is to minimize delisting risk and capitalize on distribution opportunities,” Lawrence concluded.

Economic Headwinds Remain a Challenge

Globally, companies are navigating a similar set of uncertainties—from weak consumer demand to global trade disruption and evolving tariffs.

However, winning solely on price is not a viable long-term strategy, Lawrence advised. Instead, SMEs should focus on volume and preserving market share.

Promotions and discount depth will become increasingly important tools for attracting cost-conscious consumers as the cost-of-living crisis persists. Meanwhile, off-shelf display will become an even more critical battleground in the next six months.

Consumer Confidence: Mixed Signals

• United States: Consumer confidence rebounded in May, rising 12.3 points to 98.0, up from 85.7 in April, breaking a five-month streak of declines. June data is expected soon.
• European Union: Confidence dropped slightly in June to -15.3, from -15.1 in May, falling short of the market forecast of -14.5, per the European Commission’s preliminary estimate.
• United Kingdom: GfK’s Consumer Confidence Index rose by 2 points in June to -18, marking a second consecutive monthly increase, up from -23 in April and -20 in May.

Neil Bellamy, GfK’s Director of Consumer Insight, attributed the improvement to “more optimism about the economic outlook”—but warned that Middle East conflicts and ongoing trade tensions could continue to weigh on sentiment.

(Photo: Freepik)