Walmart claims surprising title over Costco (by a wide margin)

Private brands have come a long way.

In the 80s and 90s, private labels were known as store brands or generics. There were some areas where people felt comfortable making the change, but it often felt like a big step down.

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No child was thrilled when their parents brought home “Loops of Fruit” or “Magic Stars” cereal. These were obvious knockoffs, and while the taste might not be that different, there was a level of cachet that came with eating branded Froot Loops and Lucky Charms.

In other areas, the products weren’t even knockoffs, they were literally generic. Beer was sold in white cans labeled beer and similar treatment was given to soda. Yes, these products saved you money, but the trade-off was clear.

Now private labels have grown. Retailers including Target and Amazon have developed broad portfolios of owned and operated private brands designed to deliver both value and quality.

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Target has worked to create private brands that have high quality appeal.

Image source: Shutterstock

Consumers are mixed on private labels

Numerator, a data and technology company serving the market research space, has published its updated Private Label Trends Tracker. The report shows that consumers have mixed feelings about private labels.

“Nearly half (43%) of consumers surveyed buy private label items to save money, but not all are convinced they offer the same quality. 58% say private label brands offer above average value for their price, but less than 1 in 3 (29%) believe they are as good as name brands,” according to the study.

Private label penetration is massive, at least in some categories.

“Nearly every US household purchased a private label item in the past year. All US households purchased a private label food product in the past 12 months, followed by Health & Beauty (99.2% of households), Household Products (98.9%) ), and Home & Garden (97, 6%)”, shared Numerator.

Warehouse Club customers are the largest private label buyers.

“Club stores had the highest share of private label based on total units sold. Private label items accounted for 33.1% of the Club channel (eg, Costco, Sam’s Club), followed by Office (30.3%), Mass (eg, Target, Walmart, 28.0%), Home Improvement (26.8%) and Pets (25.5%),” according to the data.

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Walmart dominates in one key area

While Target and Costco (COST) have, in very different ways, made private labels a key part of their offerings, Walmart’s sheer size led to a surprising piece of data.

“Five Walmart brands had over 50% penetration in US households in the past year, including Great Value (86% purchased), Equate (75%), Mainstays (70%), Marketside (69%) and Freshness Guaranteed (67 %). 47% of US households purchased Pen + Gear from Walmart Dollar Tree, Aldi, Target and Costco rounded out the top 10 private brands by household penetration.

Costco’s household penetration is, of course, limited by the fact that it is a membership-based chain. Anyone can shop at Walmart (WMT) or Dollar Tree, which took sixth place with its self-titled brand.

Target’s 9th place with the Up & Up brand and its 11th place with the Good & Gather grocery line is more impressive because, like Walmart, the chain uses dozens of private labels.

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Costco, which ranked 10th, uses the Kirkland Signature name on all of its private label brands.

Private label sales rose, at least in part, due to concerns about the economy and inflation driving up prices.

“Total private label dollar sales rose 6% in 2023 and units rose 0.9%. Private label gained share from name brands, growing from 24.7% of total unit sales in 2022 to 25.5% in 2023,” according to a Circana report. .

The trend has also been supported by retail chains treating their house brands differently.

“Retailers are treating their brands like ‘brands’, innovating with cleaner labels, premium offers and marketing support,” according to the data firm.