Grocers with House Brands Profit from Recession

Store brands are saving many grocers from suffering from the downturn as much as they otherwise might, says Forbes.com's Joshua Zumbrun.

Price-conscious consumers are looking for bargains, and the increased presence of house brands means that grocers like Wal-Mart, Safeway, and Kroger benefit because they don't have to pass along as much of the gross profits to manufacturers. In fact, their own margins are usually higher on these cheaper items.

Also helping: lower gas prices, which Pam Goodfellow, an analyst at BIG Research, says are the main variable affecting grocery spending (after food prices themselves, we must presume).

But, Zumbun says, grocery shoppers are still flocking to house brands even though gas prices have fallen fast lately. A Food Lion spokeswoman told Forbes that this is because shoppers got used to the falling prices.

It could also be that the quality of house brands has gone way up. Gone are the days when "house brand" automatically meant "nasty." Safeway and Kroger, in particular, have invested heavily in house brands in recent years. Now those investments are paying off.