What: Private labels are growing in US groceries to the expense of international brands.

Why it is important: Private labels are not only all about price point, but also retailer’s brand expression.

Casey's General Stores, a Midwest-based convenience chain, has observed a shift in customer preferences from well-known brands like Frito-Lay to its cheaper store-brand options due to inflation and other economic pressures. Over the past year, the sale of Casey's in-house chips has risen, reaching 25% of all chip sales this summer. The CEO of Casey's, noted that as inflation increases, customers are more willing to try less expensive alternatives, especially if they are displayed alongside pricier brands.

This trend is reflected nationwide. Large food companies, which dominated market share during the pandemic, are now competing with growing private-label brands. The share of grocery dollars spent on private-label foods and beverages has increased from 18.7% pre-pandemic to 20.6%. Other research indicates that private labels are securing significant market shares in categories like canned vegetables, cheese, and coffee.

Economic pressures, including resumed payments on federal student loans, rising credit card and mortgage rates, and the end of increased food-stamp payouts, are pushing customers towards more economical choices. A study by McKinsey revealed that two-thirds of consumers were opting for cheaper grocery items in July, a trend especially pronounced among households earning under USD 100,000 annually.

Big brands have begun to react by offering sale prices on certain products. Still, the expansion of private-label goods signifies a larger shift in the grocery landscape, with competition intensifying due to mergers like that of Kroger and Albertsons and the US entry of discount chains like Aldi. The improvement in the quality of store-brand products and the positive reviews on social media platforms are driving their popularity.

Retailers, such as Aldi and Wegmans, are emphasizing the quality of their private-label offerings while also aiming to cater to a broad range of customers, from budget shoppers to gourmet enthusiasts. They are also looking to offer unique products not available from national brands.

In summary, rising costs and economic challenges are pushing consumers towards more affordable grocery alternatives. This has led to a surge in the popularity and market share of private-label products, prompting retailers to expand their in-house offerings and compelling established brands to reevaluate their pricing strategies.

In the US, rising prices make the fortune of food private labels