The Supply Side: Private brands thrive amid inflationary pressure

A study by Attest suggests inflation changed consumer behavior, with 73% of respondents preferring private-label brands even as the economy improves. The study found that 90% bargain hunt when grocery shopping and 41% visit multiple stores to find the best deals.

According to the Attest survey, cheaper pricing is four times more likely to attract shoppers to a story than special offers and promotions. The report comes on the heels of the Food Industry Association’s survey that found 41% of shoppers bought more private brand foods during the past two years compared to pre-pandemic years. Private brand penetration rose 1.6% in the recent quarter, according to research firm IRI.

Walmart, the nation’s largest grocery chain, has said it will continue to invest in private brands to establish significant price gaps against national brands alternatives. Walmart execs recently said they are happy with the price gaps between private and national brands. Walmart CEO Doug McMillon recently said the retailer is pushing to lower costs on food and bring down prices in lower-margin grocery categories. Walmart said it continues to see substantial share gains in grocery, with nearly half coming from higher-income households.

In May, Walmart CFO John Rainey told analysts that the retailer had seen a shift to private brands versus branded products as consumers seek to stretch their budgets. He said the change started last year and accelerated again in early 2023.

According to Numerator, Walmart is already a stalwart in private brand consumables garnering about 60% of the market share for grocery, household, health and beauty. Target is at 15.1%, and Publix is at 13.6%.

“Customers continue to seek value given the impact of inflation,” Walmart U.S. CEO John Furner said on a call with analysts in May. “Food inflation has been the most stubborn of the categories.”

McMillon said inflation in dry grocery and consumables is “persistent and way too high” and likely to persist. He said consumers hear inflation numbers are coming down to 3% to 5% in dry grocery and consumables, but that’s on top of 15% price increases last year. He said prices are still up more than 20% in some categories over the past two years.

In early July, the Northwest Arkansas Business Journal compared prices of Walmart’s private brand, Great Value, versus national brands on groceries.

The categories shopped were dry grocery, meat and dairy, household consumables and health and beauty. Fresh fruits and vegetables were not included in the price comparison. There were 35 items in the baskets. The private brand basket totaled $152.13, $100.65 cheaper than the $252.78 basket of national brands.

The dry grocery items included a loaf of bread, Cheerios, peanut butter, grape jelly, potato chips, tortilla chips, hamburger and hot dog buns, bottled water and dill pickles. A sub-basked filled with Walmart’s Great Value line of products totaled $22.54. The comparable items in the national brand basket cost $44.50, about 98% more expensive than the store brand. Consumers buying the Great Value basket would have saved $21.96 on the 10 items.

Those items with the most significant price gaps included potato chips, with savings of $7.15 and $3.28 saved on bottled water.

There were 67% savings on the large box Great Value Honey Nut O’s over the General Mills branded Cheerios. Consumers would have saved 75% buying the Great Value Dill Slices compared to the Vlasic brand. The Great Value loaf of bread was less than half the cost of Wonder Bread. There was a 70% price gap between Great Value creamy peanut butter and Jif. There was a 75% savings on the Great Value hot dog and hamburger buns compared to the Wonder brand. The Great Value tortilla chips were half the cost of Tostitos.

The price gaps narrowed in the meat category. This sub-basket contained 12 frozen hamburger patties, boneless chicken breasts, chicken legs, bacon, brats and pork chops. The total cost of the store brand meats was $43.92, a savings of $25.98 or 59% over the branded meats from Tyson Foods, Smithfield, Johnsonville and Oscar Mayer. The most significant gap was in frozen beef, with Great Value costing half of the other brands in the freezer case. The closest price gap was for a package of brats with a savings of 55 cents between Great Value and Johnsonville.

Eggs, milk, butter, cheese, ice cream and whipping cream under the Great Value brand was 65% cheaper than the national or regional brands. This sub-basket of Great Value items totaled $18.29 compared to $30.07 in the name brands. Great Value eggs were 170% cheaper than Eggland brand, a savings of $2.10. The price gap on a gallon of 2% milk was $2.04 between Great Value and Hiland Dairy. American cheese slices in the Great Value brand were half the cost of Kraft singles. Great Value ice cream was 85% less expensive than Breyers.

A sub-basket of nine household consumables contained laundry and dish cleaning products, paper products, sandwich bags and foil. The Great Value basket was 58% cheaper at $55.46 compared to $87.60 for the branded items. The most significant price gaps were in the laundry products. Great Value detergent was $7.67 compared to $12.97 for the Tide brand. Great Value softener costs $8.87, a savings of $7.65 over Downy. The private branded items averaged about 50% cheaper than the national brands of Cascade, Clorox, Dawn, Charmin, Ziplock and Reynolds.

The smallest sub-basket was in health and beauty with toothpaste, shampoo, conditioner and ibuprofen. The Walmart store brands were 75% cheaper than Crest, Pantene and Advil. The savings on the store brands in his category totaled $8.79. The most significant gap was between Walmart Equate ibuprofen and comparable Advil, a savings of more than $7.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.