Online grocery sales in Europe are set to overtake the U.S. within five years, with online sales in Europe making up 5 percent of total sales, creating a £30 million market.

While online sales currently make up only 0.1 percent of food retail sales in Europe, this is expected to increase 20-fold in the next two years alone, making online sales the key battleground for food retailers, according to "Online Grocers Diversify," a report issued yesterday by Forrester Research.

Currently, online shoppers consist mainly of young, well-educated urban types who earn 50 percent more than their offline counterparts.

Forty percent of the online shoppers have children at home, and even though 13 percent of the customers receive incorrectly completed orders, 90 percent recommend the service to others, according to the Forrester report. Forrester interviewed 35,000 European households for the report.

Out of the 40 food retailers surveyed in Western Europe, five were already pure online companies, while 35 were traditional grocers. Fifty-four percent of the traditional grocers had already established online sales, while 77 percent claimed they would have such a service available by the end of the year.

The U.S. is showing growth in the online grocery market as well, but it is not expanding, according to Matthew Nordan, Netherlands-based senior analyst with Forrester. "The European market is currently less than a third of what the U.S. market is worth," he said.

But the current big player in the U.S., Peapod Inc., which has been in the market for 10 years, currently makes up more than two-thirds of the online grocery market in the U.S. "In Europe, there is more of an interest in brick and mortar [getting online]," Nordan added.

The U.K. leads Europe in online groceries, with large supermarket chains Tesco and Iceland driving the market last year. The survey concludes that Britain will still lead Europe in 2005, with seven percent of sales taking place online.