By Evie Liu
Private labels are no longer just cheaper knockoffs of national brands. At Walmart, Target, and Kroger, store brands are pitching healthy ingredients and innovative flavors to lure picky consumers.
Private-label growth has outpaced that of national brands since 2022, says the Private Label Manufacturers Association, citing Circana data. In the first half of 2025, U.S. private-label dollar sales rose 4.4% from a year ago -- led by a 13% growth in refrigerated food -- while national brands gained 1.1%. This has pushed store brands' market share to a record high of 21% of grocery purchases.
While affordability continues to be a draw for store brands, the battle goes beyond prices. For years, Costco Wholesale has hooked shoppers with its premium Kirkland Signature products, while Trader Joe's has built its identity on products that shoppers can't find anywhere else.
According to a 2025 study from retail consulting firm First Insight, 84% of consumers trust in the quality of store-brand products more or the same as national brands, and nearly three-quarters can't identify a private-label product when shown side-by-side images of store brands and national brands.
"Shoppers aren't loyal to brand names the way they used to be. They're loyal to price, quality, and marketing. This creates a highly competitive arena where the best -- yet not necessarily the most well-known brands -- will win," says First Insight CEO Greg Petro. "When a national brand stumbles, it opens up an opportunity for private labels to grow their market share."
Since 2019, Target's annual food-and-beverage sales have grown by more than $8 billion, to $24 billion as of 2024. Half of the growth came from private brands like Good & Gather -- products made without artificial flavors, colors, sweeteners, or high-fructose corn syrup -- indulgences line Favorite Day, and budget brand Market Pantry.
With its own team of trend analysts, food scientists, product designers, and sourcing managers, Target is adding hundreds of new items to its private brands every year, most under $5. Popular items launched this year includes Good & Gather Organic Peppermint Chocolate Coffee Creamer and Favorite Day Gingerbread Cookie Dough.
"Food-and-beverage-owned brands are not just a replacement for national brands. We spend a lot of time understanding what consumers need, designing into it," Jasmine Vasquez, Target's vice president of food and beverage for its owned brand division, said last year, noting that over 60% of Target's private-label items don't have a national-brand equivalent.
Last year, Walmart launched Bettergoods -- its largest private food brand in 20 years -- which features chef-inspired flavors, healthier ingredients, and products that accommodate different dietary demands, mostly priced under $5.
Scott Morris, Walmart's senior vice president of private brands, tells Barron's that the retail giant studies global culinary trends to identify emerging flavors that haven't yet found their way into mainstream products, and features them in simple formats that people are familiar with.
Some customer favorites include Beef Bulgogi Empanadas, Garlic Butter Dry Rub Chicken Wings, and Pistachio Nut Butter. "We want it to be approachable, so it doesn't feel like it's such a stretch that people don't understand what we're trying to sell them," says Morris.
Early data suggest that strategy is resonating. Morris says over 60% of the people buying Bettergoods have never bought private brands from Walmart before. CFO John David Rainey recently said 40% of customers who bought Bettergoods returned to buy again.
At Kroger, private-label growth has outpaced national brands for nine consecutive quarters. Interim CEO Ronald Sargent called private brands a "critical strategic asset" for the grocery chain that not only drives sales, but also helps build loyalty and carries better margins.
Premium and healthy products are particularly attractive as high-income customers try to save money without sacrificing quality. In September, Kroger added more than 80 high-protein meals and snacks -- from french toast sticks to jalapeño cheddar puffs -- to its Simple Truth healthy and organic line. That's the largest product expansion for the brand yet.
Other countries indicate that American retailers have room to expand store brands. Private-label penetration is above 40% in Europe, and 25% to 30% in Canada -- much higher than the 20% share in the U.S., says Angus McOuat, a McKinsey partner of consumer practice.
"Almost all of my clients in the retail space are looking to grow their private-brand business," he tells Barron's. "They want higher penetration, more products, and bigger teams to support it."
Private labels have been gaining share particularly in salty snacks and candy -- categories that were historically well protected -- as high prices force consumers to reconsider their purchases.
While national brands still have advantages in marketing muscle and emotional resonance, earning the premium is getting harder.
"It definitely raised the bar," says Nik Modi, co-head of global consumer and retail research at RBC Capital Markets. "Value equations are very complicated. What companies have been challenged with is, how do you get the combination right to create relevancy?"
At General Mills, sales of Pillsbury doughs rebounded from earlier weakness after the company improved product recipes, lowered prices, and launched marketing campaigns around its Pillsbury Doughboy mascot to boost consumer engagement.
The company's Cheerios Protein cereal has also been doing well -- now a $100 million business and bigger than any small competitors , according to the firm. Management says that while the product contains less protein than alternatives, it costs less and tastes better.
"That's our sweet spot," said CEO Jeffrey Harmening at an investor conference in November.
McKinsey's McOuat says that many packaged-food companies have been dissecting their portfolio to see which parts need to lower costs, which parts need to become more premium and innovative, and which parts they need to exit.
That might come in the shape of mergers, acquisitions, and asset sales in the coming months. "Companies need to focus resources and make decisions on what they want to be and what they don't want to be," says Modi.
Write to Evie Liu at evie.liu@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 17, 2025 02:30 ET (07:30 GMT)
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