Private Label Groceries Becoming Brands Of Their Own

Most price-conscious consumers choose to buy generic groceries to save money. But gone are the days when you’d buy a bag of potato chips in a plain white bag with basic black lettering. Today, those white bags don’t exist (for the most part), and most generic products are packaged in accordance with a private label’s own brand.

For example, Target sells a line of food under its Archer Farms and Market Pantry private label lines. The packaging is far from boring and the foods are far from plain. The people behind the private labels lines have invested in matching consumer attitude by creating eye-catching package designs and innovative flavors.

According to one Wall Street Journal article, these generic lines aren’t only focusing on the basic food staples. Again, look at Target, their private label lines include orange juice, pizza, and frozen ethnic foods. Nothing generic about that.

How Private Labeling Works

For years grocery stores have sold generic versions of packaged food alongside brand name equivalents.  Those generic products come from a few places:

  1. Manufacturer solely dedicated to private label products such as Ralcorp.
  2. A name-brand manufacturer that uses excess product or manufacturing capabilities to make similar products such as Hormel.
  3. A grocer that owns their own production facilities and makes their own private label line such as Kroger.

Whether a food product is generic or brand name, the same FDA standards apply. The difference in the products is sometimes in the ingredients and overhead.

Think about it. Jennie-O needs to advertise to sell its product, while a generic brand does not. Well, at least they haven’t in the past. As mentioned, many private labels are upping the ante with memorable design and large product lines to match consumer attitudes about generic foods.

Price Is a Driving Factor, but Private Label Is Not Always Cheaper

Private label groceries, on average, cost 29% less than their name brand versions. However, the cost of private label groceries is increasing as consumer attitudes toward private label brands improves. In the same Wall Street Journal article mentioned above, it was found that private label grocery prices increased by 5.3% in 2011 and the prices continue to rise.  As a frame of reference, the industry average price increase was only 1.9% in 2011.

In many cases, private label is not cheaper at all. Whether disguised by the volume of the food sold or simply priced high because of consumer attitude and demand, deal seekers often make the assumption the food is cheaper because of its private label status.

Who Buys Generic Food?

According to Scarborough Research, a nationwide market research firm, those with a college education and a white collar job are more likely to buy generic groceries than any other demographic. These individuals are also more likely to clip coupons and shop at Wal-Mart and big discount super centers such as Sam’s Club and Costco.

Are these people penny pinchers? Probably not.

It appears that these consumers spend quite a bit on groceries every week and try to stretch their dollar. The study found that most consumers who purchase private-label products spend $200 or more a week on groceries.

The bottom line on private label brands: Consumer attitude has improved. If you want to purchase less-expensive food products, always read the label to make sure you get the ingredients you are after, and always compare prices ounce for ounce.

This is a guest post by Allison Murray on behalf of market research company, Scarborough Research.  Scarborough measures the lifestyles, shopping patterns, television statistics, media behaviors, and national demographics of Americans.

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