Retail Media Networks: Strategic Investment or Mandatory Tax on CPG Margins?

Your retail partners are asking for 25% increases in media spend. Your marketing director insists it's strategic. Your finance director suspects it's extortion. Who's right?

“The retail media explosion has fundamentally restructured the CPG advertising landscape in under five years. What barely existed in 2019 now commands 12% of total CPG marketing budgets.”

European spending reached €13.7 billion and is projected to hit €28.8 billion by 2028. Yet beneath these impressive growth figures lies a critical tension: are you investing strategically or simply paying rent to access your own customers?

The numbers tell a dramatic story. The US market alone is expected to exceed $100 billion by 2027. In Europe, retail media is expanding at 22.2% annually, nearly four times faster than the overall digital advertising market. CPG manufacturers will spend an estimated $31 billion on retail media in 2025, representing 15% to 30% of total advertising budgets.

This has become core budget. Three quarters of CPG marketers consider retail media networks more important to their 2025 media strategy than the previous year, and 64% plan to increase investment. The shift from traditional channels is stark: digital advertising declined from 22% of CPG marketing spend in 2019 to 15% in 2024, whilst retail media climbed from essentially zero to 12% in the same period.

This concentration creates a strategic dilemma. For CPG brands, this means difficult allocation decisions: do you consolidate spend with the dominant players where scale exists, or diversify across emerging networks where your competitors may gain advantage?

Whilst Amazon dominates globally, European retail media presents a more fragmented opportunity. Tesco has aggressively expanded its retail media offering, predicting retail media will surpass television advertising revenue by 2025 and deploying over 1,000 in store screens. The retailer secured partnerships with GroupM, the world's largest media buying business, covering on site, off site and connected store offerings.

Sainsbury's is advancing through its Nectar360 platform, launching Pollen in late 2025 as "the most advanced platform of its kind in the UK." Built in house and powered by AI, Pollen promises unified media planning, multi touch attribution modelling and generative AI to help small brands optimise creative in real time.

Germany, France and the UK account for nearly 60% of European retail media spend, but Central and Eastern Europe represents significant growth potential with forecasted ad spend of €17.5 billion in 2025, up 25.2% year on year.

“McKinsey research identifies a critical shift from 'pay to play' brick and mortar trade investments to 'pay for performance' retail media. Successful CPG companies are reallocating dollars from traditional trade budgets to measurable digital channels where attribution connects spend to sales.”

Yet many brands report that retail media feels less like investment and more like trade tax: a non negotiable cost of maintaining shelf space and search visibility. The tension manifests in CPG organisations where sales teams view retail media as necessary relationship maintenance whilst marketing teams demand performance accountability.

Industry data suggests retail media can deliver 4x higher return on ad spend compared to other digital channels when executed strategically. Kroger Precision Marketing, Amazon DSP and Walmart Connect lead performance metrics, with at least 80% of surveyed brands rating these networks "good" or better for ROI, measurement capabilities and data sharing.

Industry bodies responded in 2024. IAB and the Media Rating Council released standardised measurement guidelines in January 2024, whilst IAB Europe finalised its measurement standards in April 2024 following industry consultation. These frameworks establish consistent definitions for metrics, attribution approaches and data quality requirements.

Retail media represents the most significant reallocation of CPG marketing spend in a generation. European retail media will nearly double from €13.7 billion in 2024 to €28.8 billion by 2028. The channel provides unprecedented access to first party data, closed loop attribution and point of purchase influence in a cookieless digital environment.

But size doesn't guarantee strategic value. The question isn't whether to participate in retail media; that decision has been made by market forces. The question is whether your organisation invests with the discipline, transparency demands and strategic integration that distinguish performance driven marketing from expensive table stakes.

Your finance director is right to be sceptical of automatic 25% increases. Your marketing director is right that retail media access matters strategically. The answer lies in treating retail media as you would any significant capital allocation: with clear ROI expectations, transparent measurement and the willingness to reallocate budgets based on evidence rather than relationships.