For decades, private label was merely an afterthought in US grocery aisles – a secondary option consumers chose only when necessary. While they were cheaper and “good enough,” they never had the allure of their branded counterparts.
That narrative has changed dramatically.
Private Label’s Growth Surge
Recently, private-label dollar sales surged by 4.4% for the six months ending 15 June compared to the same period last year. Additionally, unit sales saw a boost of 0.4%, as reported by market data from the Private Label Manufacturers Association (PLMA).
Interestingly, private-label sales growth exceeded that of US national brands, which experienced a dollar sales increase of only 1.1% while unit sales declined by 0.6% during the same six-month timeframe.
In the first half of this year, private-label brands reclaimed market share in the US, achieving a dollar market share of 21.2% and a unit market share of 23.2% – both record highs.
The success of these store brands has led the PLMA to anticipate total private-label sales to reach approximately $277 billion by 2025, surpassing last year’s record of $271 billion, which marked a nearly $9 billion increase from 2023. Notably, unit sales increased by 1.1% in 2024, while numerous national brands reported flat or slightly negative volumes.
Private-label brands have consistently outperformed national brands in both dollar and unit sales growth for three consecutive years, reflecting a profound shift that centers on perception, quality, and innovation.
For retailers, store brands have transitioned from a side project to a critical strategy. Meanwhile, consumers now view them as intentional choices rather than fallback options. Consequently, national brands face a sustained challenge.
Why Private Label is Winning Right Now
The pandemic prompted consumers to venture beyond their usual brands, often trying new alternatives spurred by supply chain issues. More importantly, many did not revert to their original preferences. As inflation persists, the appeal of high-quality private-label brands has increased significantly.
Value that Feels Premium: Consumers remain price-sensitive; however, they now expect store brands to rival or even surpass the quality, packaging, and taste of national brands.
According to the FMI’s (Food Marketing Institute) 2024 Power of Private Brands report, 71% of US shoppers believe that private-label quality is on par with or better than that of national brands.
Trust in the Retailer: There is a direct correlation between perceived private-label quality and consumer trust in the retailer. For instance, a customer who loves the overall experience at Trader Joe’s is likely to embrace its branded products. This retailer halo effect is a powerful driver of growth in this category.
Retailer Control: Private-label products offer retailers enhanced pricing flexibility and margin protection. While national brand margins usually fall within the 25–35% range, private-label margins can easily exceed 40%, explaining why retailers are investing heavily in store brands.
The Five Big Trends Shaping Private Label
Premiumization at Scale:
Once infrequent, upscale store brands have become essential. Kroger’s Private Selection and Aldi’s Specially Selected lines exemplify this trend, offering indulgent flavors, sophisticated packaging, and restaurant-inspired formats. The emphasis is no longer on merely being “good enough” but on creating sought-after products.
Channel-led Innovation:
Retailers such as Costco, Aldi, Trader Joe’s, Target, and Whole Foods are redefining entire categories through their private labels. For instance, Kirkland Signature accounts for about 31-33% of Costco’s total sales, according to their recent annual report.
Target’s Good & Gather and Favorite Day brands are deliberately positioned as lifestyle options rather than mere budget alternatives. Furthermore, Aldi USA and Trader Joe’s – the so-called “private label forward grocers” – focus nearly exclusively (90% of their total SKU mix) on their own brands, proving that this approach is a formula for success.
The “Dupe” Effect:
Platforms like TikTok and Instagram have amplified the popularity of private-label “dupes” – near-identical alternatives to sought-after national brands at more accessible prices. Whether it’s Trader Joe’s rendition of a cult snack or Aldi’s version of a premium ice cream bar, the online buzz around these alternatives fuels demand and encourages repeat purchases.
Sustainability and Transparency:
Consumers increasingly expect private-label brands to adhere to similar or higher standards of sustainability, sourcing, and nutritional transparency compared to national brands. For instance, Whole Foods’ 365 line fully aligns with the grocer’s ingredient standards, and Walmart has initiated traceability programs for select private-label produce lines.
Data-Driven Product Development:
Thanks to point-of-sale data, loyalty programs, and direct customer feedback, retailers gain insights into shopper behavior that many CPG brands can only dream of. Walmart’s Luminate platform enables merchandising teams to promptly identify flavor trends and iterate on products quickly.
Consumer Perception: The Quality Gap is Closing
The longstanding stigma that private-label implies lower quality is fading. The 2024 Brand Score Study from Advent International-owned NIQ reveals that 60% of shoppers now trust store brands, with 71% rating them as equal to or better than national brands.
Younger consumers, particularly Gen Z and Millennials, are even more receptive to private-label brands. Having grown up in a world of well-designed retail brands, they prioritize quality, price, packaging, and ethics over allegiance to traditional CPG names.
What This Means for National Brands
Lean into What’s Hard to Copy: Retailers can replicate flavors, formats, and even packaging. However, they cannot easily imitate extensive R&D, proprietary technology, or established brand narratives.
Innovate Faster: The speed-to-market advantage of private labels is compressing the timeline between trend identification and product availability on the shelf. Consequently, national brands must accelerate their innovation cycles to safeguard new niches.
Defend Your Category Leadership: When private-label products infiltrate a category, the best strategy is to elevate – not cheapen – the offerings. Engaging in a price war with your own customer (the retailer) rarely results in success.
Consider Strategic Co-manufacturing: Some brands quietly produce private-label products for retailers to supplement revenue streams. When executed strategically (without sacrificing margins), this can strengthen relationships without undermining the core brand business.
Challenges and Headwinds for Private Label
Despite its burgeoning momentum, private label is not without challenges. Below are three critical risks:
Economic Shifts: Private-label market share typically flattens during periods of increased consumer confidence and discretionary spending.
Innovation Reliance: Many private-label initiatives respond reactively to trends established by national brands, which can leave retailers vulnerable if the trend pipeline diminishes.
Perception Fragility: A single negative experience can tarnish a shopper’s perception of an entire retailer’s private-label line, not just one product.
Change and the Road Ahead
Private label has confidently stepped into the limelight within the US grocery landscape. This sector’s growth is fueled by quality parity, retailer confidence, premium positioning, and agile data-driven strategies. For retailers, the benefits are clear: improved margins, enhanced customer loyalty, and greater brand control.
The message for national brands is equally urgent: adapt or risk losing shelf space. Private label is no longer a minor competitor; it now stands as a legitimate challenger across various tiers, from value to premium.
Nonetheless, while the upward trend is robust, it is not infallible. Factors such as economic fluctuations, inconsistencies in innovation, and perception challenges persist in the realm of private labels.
National brands, both large and emerging, still dominate a substantial portion of packaged food sales in the US. However, the past three years have shown a clear growth trajectory for private-label brands. This represents a pivotal historical shift in the US packaged goods and grocery retail sectors.
The brands, whether retailer or manufacturer, poised for success in the next five years will be those that balance margin with meaningful engagement, offering not just products, but convincing reasons for shoppers to trust and believe in them. While national brands have historically held the advantage, private-label brands are undeniably closing the gap.
