For nearly two decades, private label products have continued to gain ground among US consumers. Between retailers embracing store brands to differentiate themselves and increase profitability, economic difficulties in the US economy prompting consumers to try new things, and a new generation of consumers growing up with high quality private label offers everywhere, momentum has been unstoppable.
The Current State of Private Label Grocery
In the 2024 Private Label Report shared by PLMA and Circana Unify, we learned that US grocery store brand dollar sales reached $236 billion in 2023, up 4.7% versus 2022. For context, one of every five dollars spent on food, beverages, health and beauty, and other household goods was spent on store brands. While these numbers are impressive, the historical progress made in private label illustrates how fast this space has grown. In 2009, PLMA released a similar report on the state of private label. The organization reported store brand sales had reached an “all time high in sales volumes, revenue and market share last year” with total sales of $86.4 billion. In 15 years, private label sales in grocery have grown by 273%.
Store brands come from almost every category sold in grocery stores and other channels, and products can be found at most stores in the country. A recent snapshot shared by Numerator illustrates that store brands are more important to some retailers and in some channels. Retailers like Aldi and Trader Joe’s have built their businesses on high quality, differentiated and unique private label offers and gained strong loyalty from consumers across demographic backgrounds. Brands like Walmart’s Great Value and Equate, Target’s Up & Up, Kroger’s Simple Truth, and Costco’s Kirkland signature have household penetration numbers that national brands likely envy. Yet retailers refuse to be complacent. In the last six months, dozens of national retailers have announced that they are revamping existing store brands, launching new brands, or innovating and adding offers to new categories or departments.
The Consumer Perspective
Not only have retailers embraced private label products, but clearly consumers have well. Every American household has bought some type of product label product in the last year. At PDG Insights, we recently fielded a study exploring the private label consumer. Let’s start with the fundamentals.
Every American household purchases private label products of some kind at some point. Our current study said showed that 98% of American households typically buy private label in at least one major grocery category. Most are buying private brands in multiple categories. The average US consumer is buying private label in 8.3 categories today. The trend is similar regardless of age, income, ethnicity, or presence of children in the household. People might be buying different categories, but ultimately everyone is buying private label categories.
Top 10 Private Brand Categories Typically Purchased
(% of respondents)
©PDG Insights 2024 – Private Label Consumer Pulse Study
When looking at the top categories where consumers buy private label, they tend to focus on household staples. More than half of US consumers say they typically buy private label in canned goods, beverages, dairy, bread and bakery, and paper products.
Penetration varied drastically with age. Overall, younger consumers are buying less, but they are buying. Looking specifically at categories, beverages were the top category in private label for consumers under 35. While penetration was below 55%, other top categories included baking ingredients (48%), breakfast cereals (46%), dairy products (46%), and frozen foods (44%). In essence, the category mix is slightly different for younger households.
Households of those 35 – 54 and over 55 are both buying a significant number of private label products. It also appears that penetration seems to increase with age for core categories. The top categories do differ slightly as you look at households among those 35 to 54 versus those 55+. While top categories are outlined below, among households of those aged 35 to 54, we also see that more than half of households were buying breakfast cereal (54%), frozen foods (54%), snack foods (53%), and cleaning supplies (52%). This is consistent with the segment having a significantly larger average number of categories bought, which is likely connected to also having larger households with older children.
Top Private Brand Categories Typically Purchased by Age
(at least 55% of shoppers in each age group buy local)
©PDG Insights 2024 –Private Label Consumer Pulse Study
While those households led by those 55+ have fewer people and are much less likely to have children, penetration across key categories stays consistent or even increases over time. In essence, once purchase behavior is established, consumers do not revert back to national brands.
Why does this matter?
The opportunity for both retailers and manufacturers in the private label space is significant. Sales will continue to grow. In the top six European countries, the market share for private label products is nearly 40% of annual grocery sales. While it’s not clear that the US market will reach that threshold, historical growth in private label sales shows no sign of slowing.
For retailers, continuing to refine their current private label portfolio while also exploring new categories of products or even tiers of private label within the portfolio creates an opportunity to expand consumer appeal. Larger manufacturers have always had to navigate the internal question: “if you can’t beat them, then join them.” The balance between private label production and branded product production will be a continuing dilemma.
For small emerging brands, private label and exclusive brand opportunities could be your breakthrough opportunity. Collaborating with smaller retailers allows you to learn the ins and outs of working in retail while proving that your product appeals to consumers. With enough proven scale, working with large national and regional players creates the leverage to pitch your branded products as well. More importantly, with high quality products but limited brand awareness, producing private label products gets you revenue when you might not be able to get on shelf on your own to start.
PDG Insights fields ongoing thematic thought leadership throughout the year. This study was fielded by PDG Insights and sponsored by the team at FoodOn. Additional findings will be shared in the coming weeks. Please reach out to Diana Sheehan with PDG Insights to learn more about what is available or to explore consumer or shopper insights needs that you might have.