Saving Money with Private Label Brands

Switching to private label store brands can save us 30%+ on our grocery bill!

In my previous posts, I’ve referenced private label brand products as well as national brands when checking prices.

Today we’re going to delve deeper into Private Label grocery and consumable brand products and how we can save a lot of money switching over to them.

What do I mean when I refer to a Private Label brand, Private Brand or Store Brand?

Shopify’s definition is: “product manufactured by a contract or third-party manufacturer and sold under a retailer’s brand name. This is in contrast to buying products from other companies with their [own] brand names on them.”¹

Private labels are available across many different product categories, including food, consumables, cosmetics, pharmaceuticals, and many others.

Looking around my place, I have lots of them:

• Great Value (Walmart) parchment paper, aluminum foil, freezer bags, ketchup, mayo, pepper and vinegar.
• President’s Choice (Loblaw) BBQ sauce, tonic water, soda and ginger ale
• No name (also Loblaw) basil, oregano, chili power and plastic wrap
• Kirkland (Costco) praline pecans (so good!), laundry detergent, fabric softener, toilet paper and paper towel
• Amazon Basics (Amazon, obviously) umbrella, pens and notepads

How popular are private brands?

According to this Forbes article (and the Private Label Manufacturers Association), “One out of every four products sold in the United States is private label or store brands”³

Costco’s Kirkland Signature brand is so big, it’s really like a national brand itself. The Kirkland brand was recently valued at $75 billion.³

Here are some examples of private brands you can find in Canada:

• Loblaws (and their banners) – President’s Choice (PC), No Name, Joe Fresh, Exact, etc.
• Walmart – Great Value, Equate, George, Ol’ Roy, Special Kitty, Parent’s Choice, etc.
• Metro (and banners)– Irresistibles, Selection, Platinum Grill, etc.
• Sobeys (and banners)- Compliments, S!gnal, etc.
• Amazon – Echo, Kindle, Amazon Basics, 365 (Whole Foods), Amazon Essentials, Mama bear, Amazing Baby, Happy Belly, etc.

While not in Canada, the Aldi stores in Europe and the US have a selection consisting of more than 90% private brand products.⁴

If you haven’t been to an Aldi, I strongly encourage a visit if you get a chance. With most of their product being private brands, you can save a lot of money shopping there!

How much can you save with private brands?

Often in the past, the private brands were mainly a lower, entry-level price point for products. These days, private brands often have different pricing and quality tiers.

For example, two of Loblaw’s private brands, No Name and President’s Choice are often positioned (and priced) very differently. No name tends to be the basic, low-price option, with PC positioned as a step-up and even more of a premium brand, with a higher price tag.

As such, the amount you can save is really dependant on which store brands you buy. As always, I prefer to consider quality and what I like as well as the price, instead of going right to the cheapest option.

Here are some random examples of cost savings comparing national brands to store brands.

31% to 74% savings in these examples!

How and why do retailers sell private label brands?

Retailers will review their product assortments to identify products where there is a strong selling national brand that could use some store brand competition.

Adding a store brand version of that product allows the retailer to provide another option to the customer, often at a lower price.

The retailer has more control over the private brand product, they typically make more money with it, and it makes them less reliant on the national brand.

How can private brand products be sold at lower prices?

• Lower quality – There could be lower quality components or ingredients. Just don’t assume this is the case as often the quality is comparable and sometimes better than national brands.
• Less Marketing – National Brands do a lot of costly marketing. Typically, Retailers spend significantly less marketing their private brands. They often rely on in-store traffic, and even the National Brand’s marketing to drive customers into the stores, who often then pick up a private brand instead.
• Bidding process – As many companies (including national brands!) are competing for the contract to make the private brand for the retailer, the cost tends to be driven down
• Packaging – Often the packaging is more basic than the national brands, although these days many private brands also have great packaging.

Besides cost factors, there are other advantages to private brand packaging, even for the low-end packaging. For example, Loblaw’s ‘No Name’ has consistency in packaging design, and a bright yellow colour creating a ‘line-look’ that customers can easily spot on shelves.

Another big benefit to retailers is in increased bargaining power over national brands.

Say for instance only kraft BBQ were available to the retailer, and therefore 100% of their BBQ sauce sales were Kraft. With the retailer being totally reliant on Kraft for BBQ sauce, they don’t have much negotiating power.

If the retailer creates a private brand BBQ sauce, like PC’s BBQ sauces, sales could potentially shift to 75% Kraft and 25% PC. Now the retailer is no longer as dependant on the national brand, which can give them more negotiating power for cost reductions, increased marketing funds, etc.

Why is it that some people only buy national brands, sometimes looking down at private or store brands?

Sometimes it’s the due to the ‘Marketing Placebo effect’ which makes us “tend to value expensive items over their cheaper counterparts…[your] brain “tricks” you into liking expensive things…we associate higher price with higher quality”⁵

This Business Insider article talks about a study where people thought more expensive wine tasted better than cheaper wine, even when the wine was switched, then switched back. “Almost 80% of our tasters preferred the more expensive wine – no matter which bottle they were tasting”⁵

Well, if that doesn’t tell us that we need to challenge our way of thinking when it comes to money, I don’t know what does!

While the lower priced item can sometimes be of lower quality, that’s not always the case. Often private brand product quality is just as good, or even better than the national brand.

In fact, often the national brands are the ones manufacturing the private label brands for the retailer!

For example, Costco’s Kirkland Diapers are made by Huggies, Kirkland batteries are made by Duracell and Walmart’s Great Value peanut butter is made by Con Agra (Peter Pan)! ⁶

Now that we better understand how private brands work, how much we can save and that often the quality is comparable to national brands (with some being made by national brands!), I hope you will try more on your next shopping trip!

Also don’t forget to pay close attention to your own price vs quality assumptions to avoid the ‘Marketing Placebo Effect’. We’ll talk more about that one in a future post.

Switching from National Brands to Private Brands can really help us all in Doing More with Our Money. At least try them, if you don’t like one, then go back to the national brand!

Thanks for reading, everyone!

References:

1 https://www.shopify.ca/encyclopedia/private-label

2 https://www.forbes.com/sites/louisbiscotti/2019/05/02/private-label-brands-roar-at-retail/#6cb3c8368990

3 https://www.forbes.com/sites/louisbiscotti/2019/05/02/private-label-brands-roar-at-retail/#6cb3c8368990

4 https://storebrands.com/aldi-private-brand-powerhouse#:~:text=ALDI%2C%20which%20offers%20more%20than,for%20premium%20and%20exclusive%20items.

5 https://www.businessinsider.com/sc/why-we-like-expensive-things-2018-12

6 https://hip2save.com/tips/store-brands-made-by-name-brands/