Private labels have come a long way.
In the 80s and 90s, white label brands were known as store brands or generics. There were some areas where people felt comfortable making the switch, but it often felt like a huge step backwards.
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No child was thrilled when their parents brought home “Fruit Loops” or “Magic Stars” cereal. They were obvious knockoffs, and even though the taste wasn't that different, eating brand-name Froot Loops and Lucky Charms carried a certain level of prestige.
In other areas, products weren't even imitations, they were literally generic. Beer was sold in white cans labeled “beer,” and soft drinks were treated similarly. Yes, these products saved money, but the trade-off was clear.
Now private label brands have taken center stage. Retailers such as Target and amazon have developed extensive portfolios of owned and operated private labels, designed to offer both value and quality.
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Consumers have mixed opinions about white label brands
Numeratora data and technology company that provides services in the field of market research, has published its updated report Private Label Trend TrackerThe report shows that consumers have mixed feelings about private labels.
“Almost half (43%) of consumers surveyed buy private label products to save money, but not all are convinced that they offer the same quality,” the study says. “58% say that private labels offer better than average value for money, but less than 1 in 3 (29%) think they are as good as name brands.”
White label penetration is massive, at least in some categories.
“Nearly all U.S. households purchased a private label item in the past year. All U.S. households purchased a private label grocery item in the past 12 months, followed by Health & Beauty (99.2% of households), Household Products (98.9%) and Home & Garden (97.6%),” Numerator shared.
Customers of warehouse clubs are the largest buyers of white label brands.
“Club stores had the largest share of private label brands in terms of total units sold. Private label items accounted for 33.1% of the Club channel (e.g., Costco, Sam's Club), followed by Office (30.3%), Mass Retail (e.g., Target, Walmart, 28.0%), Home Improvement (26.8%) and Pets (25.5%),” according to the data.
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Walmart dominates in a key area
While the goal (TGT) and Costco (COST) have, in very different ways, made white label brands key parts of their offerings, Walmart's sheer size (WMT) It has given rise to a surprising fact.
“Five Walmart brands had more than 50% penetration in U.S. households over the past year, including Great Value (86% of purchases), Equate (75%), Mainstays (70%), Marketside (69%) and Freshness Guaranteed (67%). 47% of U.S. households purchased Pen + Gear at Walmart. Dollar Tree (DLTR) Aldi, Target and Costco rounded out the top 10 private labels by household penetration,” Numerator reported.
(Walmart will report fiscal second-quarter results on Aug. 15.
Costco's penetration into households is, of course, limited by the fact that it is a membership-based chain. Anyone can shop at Walmart or Dollar Tree, which ranked sixth with its namesake brand.
The fact that Target ranks ninth with its Up & Up brand and 11th with its Good & Gather grocery line is all the more impressive because, like Walmart, the chain uses dozens of private labels.
More Walmart:
- Walmart raises prices on key service
- Walmart launches a budget brand that customers will love
- Some Walmarts are making a surprising change to self-checkouts
Costco, which ranked No. 10, uses the Kirkland Signature name on all of its private brands.
Private label sales have been growing, at least in part, because of concerns about the economy and inflation pushing prices up.
“Total private label dollar sales increased 6% in 2023 and units increased 0.9%. Private labels gained share against name brands, increasing from 24.7% of total unit sales in 2022 to 25.5% in 2023,” according to a report from the market research firm Toward.
The trend has also been supported by retail chains that treat their own brands differently.
“Retailers are treating their brands like 'brands,' innovating with cleaner labels, premium offerings and marketing support,” according to the data firm.
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