Private label store brands account for a growing portion of food sold at retail. Figures vary by country, retailer and category. Dairy and bakery, for instance, have a higher share of private label sales than others. In the United Kingdom, private label brands have an even higher share of the market, accounting for more than 45% of total grocery sales, according to data from Kantar Worldpanel. Other European countries, such as Germany and Spain, also have a significant share of private label sales in supermarkets.
In the United States, private label brands account for somewhere between 15% to 20% of all food sales, according to the Private Label Manufacturers Association (PLMA). This includes sales in supermarkets and other retailers such as club stores, drugstores, mass merchandisers and online retailers. Store brand market share has been steadily increasing as cost-conscious consumers seek out ways to save money on their grocery bills without sacrificing quality. At the same time, retailers have been investing heavily in their own private label brands, which further increases their appeal to shoppers.
According to a 2022 report from the Food Marketing Institute (FMI), more than 40% of U.S. consumers say they have been buying more private brands now than before the pandemic and three quarters of shoppers anticipate continuing to purchase more private labels in the future. This same report found that more than 90% of surveyed food retailers and manufacturers were planning to significantly or moderately ramp up their private label efforts in the next two years.
Private label brands, which are produced by contract manufacturers (sometimes referred to as co-packers or co-manufacturers) offer retailers several benefits, such as increased profit margins, greater control over pricing and product development, and the ability to differentiate their stores from their competitors. They also provide consumers with an alternative to national brands, often at a lower cost, while maintaining quality standards. Private label brands also allow retailers to respond more quickly to changing consumer tastes and preferences. They have the flexibility to quickly introduce new products, and even adapt existing ones to meet changing trends. This agility is a significant advantage over national brands, which may take months or even years to introduce new products or make changes to existing ones.
Retailers have to be careful managing their store brand business as they need to maintain good relationships with their customers and with large national brands. Powerhouse brands are an important source of revenue and customer demand and if retailers focus too heavily on private label brands and neglect national brands, they risk alienating those brands and losing the consumer as a customer altogether. Brands typically have strong marketing and advertising budgets, which can help drive traffic to the store and increase sales across all product categories and they can fight back against private label store brands by focusing on product innovation, branding, price promotions, strategic partnerships, diversification, and transparency.
One notable retailer, Trader Joe’s, has successfully built an entire business around private label store brands. Over 80% of the products sold at Trader Joe’s are unique and high-quality private label products that cannot be found at other retailers. The company sources its products from a variety of suppliers and manufacturers, both domestically and internationally, to create a range of exclusive products that are both affordable and of high quality.
Overall, the percentage of sales that private label store brands account for in supermarkets is likely to continue to grow in many countries as retailers invest in product development, marketing, and quality control to differentiate their brands and meet changing consumer preferences. In the end, it’s a juggling act for a retailer.