Store brands could make a name for themselves this year

Inflation today is nothing like it was in the 1970s, but neither are the private label food products of today (organic frozen pizza, anyone?). This bodes well for store brand products, which have seen a few years of drowsy market share growth.

According to Gary Stibel, CEO of New England Consulting Group, private label sales have always been correlated with inflation. This relationship was particularly clear during and after the Great Inflation of the 1970s, when consumers turned en masse to economic options. Retailers had another tailwind in 2008 on the double whammy of commodity inflation followed by a recession. The share of private labels has stagnated in recent years, with the exception of 2011, when another bout of commodity inflation pushed home food prices up 4.8%, according to the Bureau of Labor Statistics. According to Aga Jarzabek, research analyst at Euromonitor International, the growth in the market share of private label products in packaged foods in the United States has not been exceeded since that year.

A Target store in Vernon Hills, Ill., Said sales of its own brands grew about 36% in its first fiscal quarter.


Nam Y. Huh / Associated press

Last year, home food prices jumped 3.5% as consumers rushed to stock their pantries and suppliers struggled to catch up. But the effect on private label market share was rather low: The share of private labels in U.S. packaged foods rose 0.3 percentage points to 16.8% last year, according to data from Euromonitor International. For supermarkets in particular, private label market share actually declined in 2020, according to data compiled by NielsenIQ and the Private Label Manufacturers Association.

This may be due to a few variables specific to the pandemic. On the one hand, consumers tend to look to familiarity during times of uncertainty. A Deloitte analysis in 2020 found that the more concerned consumers were about their physical well-being, the more likely they were to buy brands they trusted. Second, consumers had more jingle in their pockets. Personal savings hit an all-time high in April 2020, when the first stimulus checks were issued, and has remained above pre-pandemic levels since.

What happens next may depend in part on how quickly consumers use their savings. While personal savings declined from its highs after stimulus payments, in April Americans still held twice as much savings as before the pandemic. It also depends on the severity of inflation this year. The most recent forecast from the US Department of Agriculture puts grocery price inflation this year at 1.5% to 2.5%, which is milder than in 2020 but high relative to everything what was observed in the five years preceding the pandemic.

Will the coronavirus pandemic cause long-term changes in the way we buy food? To better understand the challenges facing grocery stores, Alexander Hotz of the WSJ spoke with an industry insider, store owner and Walmart executive.

Still, there is reason to believe that private label growth will catch up this year, regardless of the sentiment of wealthy consumers. One reason is that the average consumer is likely to feel less secure compared to last year and more willing to try unfamiliar brands. Another factor is that private label products are no longer just cheap substitutes, some, especially the premium level, have become brands in their own right. Target TGT 0.21%

said sales of its own brands rose about 36% in its fiscal first quarter from a year earlier, the strongest growth on record. “These brands are not something our customers choose when they are at Target; they’re one of the main reasons they buy from Target, ”said Christina Hennington, chief growth officer, during the retailer’s first quarter earnings call.

Some current indicators point to a potential boom ahead. The biggest problem with private label manufacturers these days is capacity, according to Stibel, who notes that some have to turn down RFPs because they are too busy. And a recent survey by JP Morgan showed that consumers intend to buy more private label products compared to branded products this year.

The key years of private label are still ahead.

Write to Jinjoo Lee at

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