The FTC is trying to stop a mega-supermarket merger. Here’s why.
The Federal Trade Commission had filed a lawsuit to prevent the merger between Kroger and Albertsons because it would allegedly create a monopoly in the supermarket industry.
When the Washington Post conducted a blind test last year to find the best bottled marinara sauce, gourmet brand Rao’s Homemade won, priced at $10.59 per bottle.
The big surprise, however, was the runner-up: Trader Joe’s Tomato Basil for $1.99.
Private label has evolved from inferior generic alternatives to own-brand products that can compete with name-brand products on quality and price. And in today’s supermarkets, private label is on the rise.
Private label products accounted for 20.7% of all grocery sales in 2023, based on units sold, a record high. According to the Private Label Manufacturers Association, private labels generated $236 billion in sales last year, another record. By mid-July, the trade group reports, sales in 2024 are expected to exceed $250 billion.
Younger shoppers who grew up with private label foods have never experienced private label foods as synonymous with culinary misery.
“I think private labels are meeting a fundamental consumer need right now,” says Elizabeth Hasle, a 31-year-old from Seattle who is a fan of Costco’s Kirkland Signature brand.
“You can get three liters of olive oil for twenty dollars, and it’s really good quality,” she said. “That alone makes me happy.”
“The taste is better. The carbonation is better.”
Taylor Harms, 28, of Fresno, California, discovered store brands in college and has never looked back. His favorite product at the moment: Walmart’s own-brand bottled water.
“It costs about 89 cents a liter,” he said. “And for a comparable beer from a big name like Schweppes or Perrier, it’s much better. The taste is better. The carbonation is better.”
Decades ago, analysts say, private labels were literally the bottom shelf in grocery stores. Yes, they were cheaper. But they were also decidedly second-rate: anemic, tasteless alternatives to the better (and more expensive) name-brand products.
Today, many private labels compete not only with well-known brands, but also with upscale delicatessen brands such as Rao’s.
“I just think that people are embracing private label,” says Phil Lempert, a food industry analyst. “It’s always great to find something you like that you can save money on and that’s high quality. That’s the magic formula for private label.”
In another recent taste test conducted by the New York Times’ Wirecutter, store-brand frozen pizzas held their own against the country’s most well-known brands. Top picks with pepperoni included a $6 wood-fired pizza from Trader Joe’s and a $7 Good & Gather pizza from Target.
The development of private labels: “This is a huge change.”
“Our research shows that 85% of consumers rate the quality of private label brands as equal to or higher than national brands. That’s a huge shift,” said Jim Griffin, president of Daymon North America. Daymon helps supermarkets develop private label brands.
In the inflation-ridden 1970s, private labels offered a remedy against rising prices, but this often came at a significant cost to the palate.
“These were the yellow and black labels,” said Lempert, often rendered in Soviet script on labels with no art. “These were the lowest quality foods you could get, but they were really cheap.”
According to Lempert, the trend reversal began with pioneering chains such as Loblaw in Canada and A&P in the USA, which offered private labels that competed with branded products in terms of taste and undercut them in terms of price.
When Loblaw launched President’s Choice Chocolate Chip Cookies under its label, the company insisted on using real butter and twice as many chocolate chips as the leading brand. Loblaw’s Decadent brand became the best-selling cookie in Canada.
Trader Joe’s and Whole Foods Market evolved into nationwide private-label chains in the 1990s, promising gourmet flavors at discounted prices.
Almost every supermarket chain offers its own brand
Nowadays, it seems that every reputable supermarket chain offers a private label. In addition to the brands mentioned above, here are some of the best, according to Real Simple magazine:
- ALDI Simply Nature: “Not only affordable, but also organic, GMO-free and free from artificial preservatives.”
- Kroger Private Selection: “The goal is to provide shoppers with the best dining experience at reasonable prices.”
- Albertsons Signature Select: “Customer favorites include mac and cheese, bacon, wine, pasta sauce (shout out to the black truffle pasta sauce, which regularly sells out) and ice cream.”
Griffin said grocery chains are increasingly offering private labels on multiple levels. Walmart, for example, offers a Great Value line that competes with national brands. This year, Walmart also began offering Bettergoods, a gourmet brand for foodies.
With the new brand, “they are appealing to more affluent buyers than they did four or five years ago,” Griffin said.
That’s not to say every store brand is a commercial and critical success. Taste testers at the Washington Post lamented that Walmart’s Great Value Marinara sauce ($1.59), while undeniably a bargain, “didn’t properly cling to the pasta.” Reviewers at Wirecutter found Costco’s Kirkland Signature Pepperoni Pizza “too sweet” and permeated with a “slightly acrid flavor.”
Inflation creates a new incentive to look for private labels
Nevertheless, the high inflation of the past two years has given consumers a new incentive to look for private label products, analysts say – much like restaurant goers look for cheap meals at fast-food chains.
“Today’s consumers are savvy and most grew up with private label,” Peggy Davies, president of the Private Label Association, said in an email.
“A consumer who tries a private label product and has a positive experience with it tends to remain loyal to that brand,” she said. “This customer loyalty and increasing competition among retailers’ private labels for store loyalty is what is driving continued growth.”
More: Map shows all stores to be sold as part of the Kroger-Albertsons merger
Some supermarkets offer almost exclusively own brands. At ALDI, for example, 90% of the products are own brands. This focus puts additional pressure on the chain to maintain high quality.
“For us, it’s really the only option in the store,” said Scott Patton, vice president of national purchasing at ALDI. “It has to be good.”
A popular private label can strengthen customer loyalty at a grocery chain, which is not possible with a nationwide brand, said Lempert.
Trader Joe’s, for example, offers its own chili and lime flavored corn tortilla chips, which are among the store’s most popular products every year. And only Trader Joe’s carries them.
“Retailers look at these brand names and want to offer a better quality product at a better price,” Lempert said, “because you can’t get it anywhere else.”
