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StoreBrands Gaining Market Share

07/31/2019

Store brands are displacing current suppliers among many food categories. These products are manufactured by suppliers or are derived from plants established by chains. Motivation for capital investment in facilities includes the need to maximize margins, secure a supply or to establish high standards of quality or food safety.

Recent examples of backward integration into production include the Liberty Premium broiler operation by Costco impacting Foster Farms and the 2018 Walmart Stores dairy, displacing Dean Foods. The Kroger Companies currently operates over 50 food plants.

During the past year store brands generated $20 billion in sales for The Kroger Company, equivalent to 20 percent of revenue. In 2018 Kroger stocked 15,000 private label items up from 8,000 four years ago. 

Studies have shown that consumers perceive store brands as being equivalent in quality to nationally branded products. This is to the detriment of food manufacturers and packers including Kraft Heinz, Conagra Brands, Campbell Soup Company and J.M. Smucker.

Traditional supermarket chains recognize the competitive advantage enjoyed by deep discounters such as Aldi and more recently Lidl, selling a disproportionate share of their products as store brands, enhancing margins.

According to Nielsen data circulated by the American Egg Board, combining private label and branded categories, volume in 2019 through June showed that within the combination, private label has attained a 71.6 percent share compared to 28.4 percent for branded eggs. Data on the respective changes in volume for the two subcategories confirmed an increase for private label of 2.0 percent and branded by 2.5 percent compared with the corresponding period in 2018. Comparing branded and private label eggs with respect to value, private label generated 60 percent of sales compared to branded eggs at 40 percent. Private label declined by 12.8 percent in dollar value and branded by 5.5 percent over the period. This data suggests that chains mark down private label to maintain sales but with respect to price, private label eggs reacts similarly to conventional shell eggs. In contrast, branded eggs are less sensitive to changes in volume and command a disproportionate value compared to private label.

The following store brands are offered by chains competing with national and local eggs :

  • Aldi – Gold Hen
  • Target – Simply Balanced
  • Costco – Kirkland
  • Kroger – Simple Truth
  • Albertsons/Safeway – Private Selection