Consumers ditch name-brand products as prices keep rising
It’s not just the eggs.
Over the past year, inflation, supply shortages and a muchpublicized bird flu have combined to push the price of groceries up an average of 9.5 percent. Egg prices are notorious at this point, having more than doubled since this time a year ago. And the cost of other staples, including bread and milk, has also risen, forcing some people to make a painful choice between paying for food or for other necessities.
At first, consumers tapped savings and spent pandemicera stimulus checks to help make ends meet, according to Justin Cook, a research leader with Deloitte’s Consumer Industry Center.
Now, shoppers are turning to a tried-and-true method to save on food: lower-priced store brands. About 40 percent of people globally say they’re buying mostly store-brand products instead of namebrand items, according to a January survey by Deloitte. Most major grocers say sales of private-label products have risen during the past year. To ride that wave, stores such as H-E-B, Kroger, Aldi and Randall’s have expanded their own branded offerings, branching into areas such as pet food, home goods and even clothing.
For Kristina Coen, an educator in Houston, her grocery list at H-E-B includes a variety of store brand products — bread, tomato sauce, tea, ice cream and more.
“They are priced well and are good products,” Coen said. “Plus, I trust the brand enough to try out new items.”
Sales of San Antonio-based H-E-B store brands have steadily grown for several years as the grocer continues to launch new products, according to Lisa Helfman, H-E-B’s senior director of public affairs. The private company
didn’t offer sales figures for its store brands.
Kroger’s store brands also have experienced sustained growth, with nearly $28 billion in sales in 2021. In 2022, the retailer launched more than 870 new storebrand products, from the grocery aisle to its home, health and beauty departments, according to Juan De Paoli, Kroger’s vice president of what the grocer calls
Our Brands.
Like their better-advertised and larger rivals, store brands also are paying more for shipping and raw materials, but they typically earn higher profit margins on their own products, making it easier to absorb the higher costs, according to Danny Edsall, co-leader of Deloitte’s
Global Grocery practice and principal with Deloitte Consulting.
While the privatelabel products may be cheaper than national brands, grocers and shoppers say they can be just as good, if not better. So while consumers may make the switch to a store brand initially for the lower price, once they try it, they’re likely to stick with the store brand — and try even more, according to research by Deloitte.
“We really strive to make our own branded products equal to or greater than the national product,” H-E-B’s Helfman said. “It’s not ever been a lesser-than item to get the unbranded product, but actually something that people can depend on, that they can fall in love with.”
Charlie Gustin, an attorney in Houston, agrees and says he buys
H-E-B brands because they’re “superior products.”
Some retailers contract with manufacturers of name-brand products to produce their store brand products, while others have their own manufacturing facilities. About 41 percent of Kroger’s own grocery products are produced within the retailer’s 33 food production plants in the U.S., while the rest come through partnerships with third-party manufacturers. H-E-B also operates several manufacturing facilities within Texas to produce a portion of its products.
But grocery stores don’t just make knockoffs of name-brand products — think Trader Joe’s Chili & Lime Flavored Rolled Corn Tortilla Chips that are similar to Takis. Retailers like H-E-B and Kroger also
develop unique products based on consumer preferences.
Within Kroger’s storebrand portfolio, the retailer offers several lines of products at different price points, De Paoli said. Last year, it launched Smart Way, an “opening price-point” line of products catering to customers seeking to cut their grocery bills.
H-E-B’s focus on Texas allows the grocer to form a product strategy based on the preferences of Texans, Helfman said.
“We just are so uniquely Texas, that’s the only place we operate within the U.S. So we’re constantly thinking, ‘How are Texans going to receive this? How do they want these products? What makes sense for them?’ ”