America’s grocery industry is experiencing a significant shift in consumer behaviour as shoppers increasingly turn to private-label products in their search for better value.
The change is benefiting retailers with strong own-brand programmes and putting additional pressure on national brands to justify their price premiums.
Reuters reported in July that the search for value had helped trigger a broader US private-label revolution. Consumers from different income groups are increasingly considering store brands as an alternative to established national brands.
The shift represents an important change in the traditional relationship between American shoppers and private labels.
For years, some consumers associated store brands primarily with lower prices and lower quality. That perception has weakened as retailers have invested in product development, packaging and quality.
Aldi has been one of the clearest beneficiaries of the trend because private label is central to its business model. But the movement extends well beyond the discounter.
Walmart, Costco, Kroger and other major grocery retailers are also developing and expanding their own-brand ranges.
For retailers, private label offers several advantages. It provides greater control over product specifications, pricing and margins while giving the retailer an opportunity to differentiate itself from competitors.
It can also strengthen customer loyalty.
A shopper who becomes attached to a retailer’s own-brand products has fewer reasons to visit another supermarket simply because it stocks the same national brands.
The economic environment is adding momentum.
American consumers have faced years of pressure from higher food prices and are increasingly comparing prices before deciding where to shop. Private label gives retailers a powerful tool for competing on value without relying entirely on temporary promotions.
This is particularly important as supermarkets attempt to defend market share against discounters and large-format retailers.
The battle is no longer simply about which retailer has the biggest promotional programme. Increasingly, retailers are competing over who can offer consumers an acceptable combination of price, quality and convenience.
For national brands, the development represents a serious challenge.
Brands must demonstrate why consumers should pay more for a branded product when an increasingly sophisticated private-label alternative is sitting beside it on the shelf.
The growth of private label could therefore reshape the American grocery market well beyond pricing.
It could influence shelf space, supplier relationships, product development and retailer strategy.
For consumers, the result is more choice. For retailers, it is another weapon in the increasingly intense US grocery price war.
And for major brands, the private-label threat is becoming harder to ignore.