The United States Private Label (PL) market for foods and beverages represents an estimated 20% of all retail grocery sales, and is expected to grow at a modest rate of a half percentage point of share per annum for the next several decades. Our study makes clear the drivers of this growth, variation by +64 categories, the approaches taken by the 12 major retail chains, and the profitability of PL manufacturers by category.
The drivers of PL growth are shown to be rising concentration of share among major chains (e.g. Walmart, Kroger, Albertsons) and share gains by discounters (Aldi, Lidl, etc.)
The share of PL by category varies from under 5% for snacks up to 60% for milk, and correlates with whether items in the category are standardized or have significant flavor/texture differences.
The PL branding architecture for each major retail chain is explored, from Walmart with one dominant PL brand, to Ahold with banner-specific offerings (Food Lion, Giant, Hannaford) supplemented by Nature’s Promise across all banners, to Albertson’s with five major PL brands across its banner stores, and very little PL offered under the banner names themselves. Aldi with 8 different major PL brands (and very little national brand presence) within a store has focused on benefits.
Operating profit margins for PL manufacturers vary by category, and while lower than national brands, follow the same pattern: lowest for commodities like milk/dairy (sub 5%) and higher for snacks with different flavor profiles (+14%) and distinctive sauces/salsas (17%).