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Inflation is down, but one result of the battle with higher prices during the past several years – a growth in the popularity of private-label items in grocery stores – doesn’t appear to be going anywhere.
In fact, it might be getting stronger.
In 2023, private-label items were the “brightest light” in the grocery industry, in both food and nonfood items, according to the Private Label Manufacturers Association, an International trade group.
Sales of private label brands – also called store brands – were unchanged between 2022 and 2023, but national brand sales fell nearly three percent during that time. Partly because of that trend, private label items accounted for 20.7 percent of all items sold in grocery stores last year, the highest percentage ever recorded, the association reported.
Currently, one in every five food or non-food grocery products sold in the United States carries either the retailer’s name, or its brand name, and was supplied by a store brand manufacturer.
“For most shoppers, store brands represent quality and performance as good as or better than national brands, while offering substantial saving,” the association wrote on its website. “As a result, store brands have never been more popular.”
Private label items have become so popular that discount stores are starting to develop them.
Grocery Outlet announced Feb. 29 that it plans to launch its own line of private label products starting in the second half of this year, according to storebrands.com.
The Emeryville-based chain – which already sells a few private label brands – expects to have more than 100 such items on its shelves by the end of the year.
In addition to their popularity, grocers like private labels because they don’t cost as much nor does it cost as much to market them, said Nate Rose, senior communications director for the nonprofit California Grocers Association.
“You don’t see any ads for private labels on the Super Bowl telecast,” Rose said.
Consumers long ago figured out that private label brands offer a discount and that they don’t necessarily carry with them a drop in quality, said Rebecca Calvin, senior vice president and chief marketing officer for Stater Bros. Markets Inc.
Private labels account for more than 20 percent of Stater Bros.’ sales, outperforming the nation.
That statistic is not surprising, according to Calvin.
“Even though we’re in a period of stagflation, or we’re at a point where inflation is coming down, people are still being very careful about how much they spend,” Calvin said. “For them, private labels are definitely an option.
“And Stater Bros. is a little different from our competitors. We don’t always follow a name brand when we decide to do a private label.”
Private label brands – any product made or packaged for sale under the name of the retailer, not the manufacturer – have been around since the 19th century. They started as generic items that were often sold black or white packaging and have evolved from there.
Typically, a grocery store chain will develop a private label when there’s a successful national item that it wants to be identified with and believes it can imitate successfully.
That’s not always easy to do, and the process can take a long time.
“For years, no one tried to imitate Oreos,” Calvin said “It was very difficult to get the texture right and make something that was close to the original cookie. But eventually, Oreo’s got so much market share that retailers wanted something they could sell to their customers and get into the cookie category, so they found a way to do it.”
For years, private label grocery items were thought to represented a trade-off for consumers: they didn’t cost as much, but there was also a drop in quality compared with national brands. At the time, private label brands in most cases probably didn’t match the quality of national brands, but that started to change about 40 years ago.
“The grocery stores started to take control of their brands, and they started putting an emphasis on quality,” Calvin said. “If you want something to sell consistently, it has to be good quality no matter what it is.”
Some of the first private label items that appeared on grocery shelves – milk, butter, cheese, eggs – are what industry calls pantry items, and they’re among the most coveted items because nearly everyone buys them.
“If you can get people to buy those items, then you can get them to buy whatever they put in their basket,” Calvin said. “Ninety percent of households buy these items. That gives you very good household penetration.”
Private label brands appeal to every age group and income category. In a recent study, the private label association found that more than half of Generation Z shoppers it spoke with said they “always” or “frequently” choose where they shop for groceries based on store’s selection of private label products, and 64 percent say they buy private label brands “aways” or “frequently.
Private labels can also build loyalty, not only for the product but for the place where it was bought.
“Private labels create banner loyalty for the store,” Calvin said. “If you like a Stater Bros. private label product, the only place you can get it is Stater Bros.”
Calvin believes the popularity of private labels will continue to grow, even if prices stabilize and inflation is no longer a major concern.
“Even though inflation is down, people are as careful with their money as they’ve ever been,” Calvin said. “I think this is the new normal.”
