Inflation pushes consumers to think of private brands instead of brands

Shoppers are seeking more in-house brands to save money as inflation soared to a four-decade high in June.

“Consumer inflation has opened the door for private brands to gain consumer awareness and engagement due to higher prices and shrinking volumes,” Mark Kollenberg told FOX Business. Kohlenberg is the CEO and founder of the luxury men’s footwear and accessory brands Moral Code and Milwaukee Boot Company.

As a result, “it has suddenly enabled consumers who had previously only thought of branded products—out of sheer habit or belief that branded products were better—to expand their range of view now and now include privately branded products in their buying patterns, Added.

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Gristedes & D’Agostino chief operating officer Joe Parisi told FOX Business that several major chains have seen growth in their private labels in recent months as buyers look for more ways to cut spending.

“With grocery inflation continuing, customers are looking to private brands versus brand names because they are looking for price savings,” said the president of the largest grocery chain in New York City.

Guleford Bobo, 75, picks up free COVID-19 home tests covered by Medicare at CVS in Navy Yard in Washington, D.C., Monday, April 4, 2022. (Tom Williams/CQ-Roll Call, Inc via Getty Images) ((Tom Williams/CQ-Roll Call, Inc via Getty Images)/Getty Images)

CVS Health told FOX Business that it has 12 private labels — also called CVS Store Brand products — that are 20%-40% cheaper than competing brands in its store. Some of these labels include CVS Health, Live Better, Gold Emblem, Total Home, and Goodline Grooming Co.

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According to a CVS spokesperson, these CVS Store Brand products rank #1 across the majority of categories and represent just under a quarter of CVS sales.

CVS Health’s line, in particular, remains “the best-selling brand in the CVS Pharmacy front-store business, outperforming national brands in most of our healthcare categories,” according to the spokesperson.

Competing drugstore chain Walgreens Boots Alliance has also seen an increase in Walgreens-branded items.

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“Our front-end momentum has been boosted by our proprietary brand loyalty and omnichannel initiatives,” the Illinois-based company said in an earnings report last month.

Opposite

Customers walk past closed products in safety lockers at a Walgreens store that is scheduled to close in the coming weeks on October 13, 2021 in San Francisco. (Justin Sullivan/Getty Images/Getty Images)

Walgreens chief merchandising officer Luke Rauch told FOX Business that the company recognizes that the role that Walgreens-branded items can play “in the current inflationary environment is more important than ever.”

The integrated healthcare, pharmacy and retailer also plans to continue focusing on “increasing the breadth and value of our proprietary brand offering.”

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Walmart sees a similar trend.

“Consumers are feeling inflationary pressures, as evidenced by the increased penetration of private grocery brands,” Walmart Chief Financial Officer Brett Briggs told investors during his last earnings call in April.

John Woerner, president and CEO of US Walmart, told investors that the world’s largest retailer by sales has seen consumers “trade from brand to private label,” particularly in the deli, lunch meat, bacon and dairy categories.

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Minneapolis-based Target has also seen strong growth in its private labels.

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Target’s owned brand portfolio, which consists of more than 45 owned brands, grew 18% in 2021.

In its latest earnings report, Christina Hennington, Chief Targeted Growth Officer, said the company’s brand portfolio “continues to grow faster than total sales, as it’s been delivering quarter after quarter in years.”

Target Store in New Mexico

Target employee pulls red shopping carts into a Santa Fe, New Mexico department store. (iStock / iStock)

In order to remain competitive, “strong retailers and brands understand that private labeling not only means slapping your name on a generic or familiar product but instead must offer the consumer multiple advantages and reasons to buy,” according to Kohlenberg.

He added that if private brands continue to offer quality and value to the consumer over other brands’ products, they “have a good chance of sticking with and retaining that customer” in the long run.

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