The Rise and Rise of Private Brands

It appears that private brands are increasingly the preferred choice for consumers across the United States. Grocery giants such as Walmart and Target are seeing remarkable growth in this sector. But why are private brands becoming so popular?

Private Brand Market Overview

In recent times, private-label products have captured a significant share of the market. According to Numerator, 99.9% of consumers purchased at least one private-label grocery item over the past year. This staggering statistic underscores the widespread acceptance of private brands among American shoppers.

Not only are grocery items gaining traction, but health and beauty, along with household products, have also made substantial inroads. Specifically, 99.2% and 98.9% of consumers, respectively, have given private brands in these categories a go.

Popular Private Brands and Their Growth

Bettergoods from Walmart

Walmart, a behemoth in the retail world, launched its Bettergoods brand in May. This initiative aims to offer superior quality at competitive prices. Notably, Bettergoods includes a diverse range of products from frozen foods to snacks and dairy. According to Retail Touch Points, the focus is very much on delivering exceptional value, enticing even higher-income households and the younger Gen Z demographic.

Michael Della Penna, the chief strategy officer at InMarket, noted the importance of understanding what drives customer purchases. By doing so, retailers can elevate their strategy to better engage and retain their clientele. Walmart’s private brands are clearly a hit, with over half of all grocery baskets containing a private brand item.

Target’s Dealworthy

Target’s foray into this space is marked by the Dealworthy brand, launched in February 2024. It appeals to those looking for affordability without compromising on quality. The range includes nearly 400 everyday essentials—at prices starting under a dollar. Rick Gomez, who oversees food and essentials at Target, emphasized the importance of value, a key consideration for shoppers today.

Performance of Other Major Retailers

It’s not just Walmart and Target making waves. Aldi, alongside its parent company Trader Joe’s, places immense reliance on private branded products. These contributions amount to an impressive 80% and 70% of their total sales, respectively. Even Costco’s Kirkland brand holds a significant share, contributing 35% to total company sales.

Retailer	Private Brand Contribution to Sales
Aldi	80%
Trader Joe’s	70%
Costco (Kirkland)	35%
Sam’s Club (Member’s Mark)	34%

Why Are Private Brands Flourishing?

The key reason behind this seismic shift is the quest for value. With rising inflation, consumers are keen to stretch their dollar further. According to Numerator, a good six out of ten shoppers believe private brands present better value for money. And it’s no longer about settling for less; for many, these brands offer quality on par with or even exceeding well-known names.

Furthermore, McKinsey & Company reveals that this improvement in perception marks a turning point for private brands in the U.S. Americans increasingly view them akin to how Europeans do, recognizing both value and quality in these offerings.

Industry Insights

Retailers have invested heavily in advancing their private brand capabilities. This approach often borrows from the traditional CPG manufacturing sector. The result? Increased margins, profitability, and enhanced customer allegiance. More brands are investing in innovation and quality, aligning themselves with consumer demands and expectations.

Editor’s Note: For more on trends and insights into private brands and their impact on retailers, do explore The Supply Side segment of Talk Business & Politics. This section delves deeper into the intricacies of the retail world, providing an array of perspectives. It’s proudly sponsored by Harvest Revenue Group.

It’s clear that private brands are more than just a trend; they are becoming a staple in households. From affordability to quality, they offer consumers myriad reasons to stay loyal. As more households embrace these options, their growth trajectory remains strong.