Shoppers Shifting to Private-Label Brands

Last Updated Jul 12, 2011 12:45 PM EDT

With the tough economy and expensive gas prices, grocery budgets continue to shrink. One of the more popular ways to save is to buy less; about 35% of shoppers in a recent survey by market research firm TNS said they're dropping items from their grocery list.

But almost as many shoppers -- about 30% -- are simply changing the items they put in their carts, opting for more affordable private-label brands (such as Target's Archer Farms and Costco's Kirkland Signature) rather than national brands like Tide, Kellogg's and Kraft.

In all, store brands raked in close to $90 billion of revenue in the U.S. last year, according to Nielsen. They now represent about 17% of the total market share, up from 15% in 2005.

The private-label habit, which consumers picked up during the thick of the recession, has yet to fizzle. It makes sense: Private-label goods save consumers about 30% per shopping trip, according to Consumer Reports: If you spend $500 a month on groceries, private-label products could help you save $1,800 a year.

Retailers also like them because they bring higher profit margins. And the old low-quality stigma has been debunked. In blind tests a couple years ago, professional tasters hired by Consumer Reports compared national brands with store brands in 29 categories -- and found that the store brand tasted "equally good or better" than the national brand in 23 of those. (In a separate supermarket survey by the Consumer Reports National Research Center, 70 percent of respondents said they were "highly satisfied" with the quality of store brands they'd bought.)
Retailers are also jazzing up their private-label offerings, even becoming more health-conscious in some cases. Here's a round-up of some of the newer, more interesting additions to the private-label market:

Healthier items at Walmart: The world's biggest retailer announced at the start of this year that it would make its "Great Value" store brand foods healthier by reducing sugar, sodium and trans fat over the next five years.

Private-label beer: Walgreen's recently introduced Big Flats 1901, its own private-label beer. A six-pack sells for $2.99, a mere 50 cents per can. Grocery chain Supervalu also sells its own domestic beer called Buck Range Light. A 12-pack goes for about $6.

Gluten-free foods at Kroger: With sales of gluten-freen foods and beverages up 30% from 2006 to 2010, it's no wonder some private label producers are focusing on this sector. Kroger carries many "gluten-free" private-label foods in its supermarkets; check its web site for a current list.

Private-label diapers: From Dollar General and CVS to Target and Walmart, private-label diapers are hot offerings right now, as parents seek low-cost alternatives. According to Billeater.com, store-brand diapers from Target save consumers up to 13 cents per diaper, compared with Huggies or Pampers.

Farnoosh Torabi is a personal finance journalist and commentator. She is the author of the new book Psych Yourself Rich, Get the Mindset and Discipline You Need to Build Your Financial Life. Follow her at www.farnoosh.tv and on Twitter/farnoosh
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    Farnoosh Torabi is a personal finance journalist and commentator. She is the author of the new book Psych Yourself Rich, Get the Mindset and Discipline You Need to Build Your Financial Life. Follow her at www.farnoosh.tv and on Twitter at @farnoosh.

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