C&B Notes

Private Labels’ Large Impact

Private labels continue to grow in the U.S. and are increasingly disrupting branded products.  Domestic grocery looks more and more like parts of Europe, where house brands at retailers like Tesco (a former investment) long ago captured a large part of shoppers’ baskets.  In fact, private label products had a 52% market share in the U.K. in 2018.

Such private-label items have been around for decades. But retailers are now making more of them as they compete to keep grocery prices low, working to develop increasingly sophisticated products under their house lines and adding space for them in stores. Some retail executives say coming up with their own brands is also a way to draw in younger customers who aren’t interested in older brands. That is another blow to big food makers struggling to preserve sales of decades-old condiments, meals and other packaged foods. Store brands’ advance is putting pressure on giant food manufacturers that rely on big retailers to stock their products, further squeezing them as they struggle to keep up with shifting consumer tastes. “I feel like it’s the same quality,” Dawn Montgomery, a 35-year-old Decatur, Ga., resident, said of store-brand products such as pasta that she has bought from Amazon.com Inc. unit Whole Foods.

Kroger Co. , the largest U.S. supermarket chain, has almost doubled the number of products it sells under its own brands since 2005. Walmart Inc., the biggest domestic food seller, has invested in improving the quality of its store brands. Rival grocer Albertsons Cos. said it introduced over 1,100 private-label items in its 2018 fiscal year and that sales of those store brands made up about one-quarter of sales in its latest quarter, up from 23% in fiscal 2017…

Store brands offer higher margins. Retailers can promote them as comparable to products from major manufacturers, but don’t have to invest in expensive marketing campaigns.

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