FOR MOST of its nondescript life, the humble store brand has played the role of poor cousin to more glamorous brand-name products. Its packaging was basic, even ugly; the quality, good enough. From cereal to cookies to canned beans, the store-brand product’s main allure was its bargain price.
But store brands, also called private label or “own brands,” are casting off their bland reputation and transforming themselves from dull to desirable. At Foxtrot, a fast-growing chain of trendy convenience stores, the house bourbon is handpicked by bartenders from the Violet Hour, a Chicago craft-cocktail bar, and its potato chips come in flavors like spicy dill pickle and Himalayan salt and vinegar. Online grocer Thrive Market specializes in well-priced staples like coffee and coconut milk with ethical and eco-friendly pedigrees.
Meanwhile, Whole Foods Market rebranded its standard 365 line with a more appealing, whimsical look, and Target, a pioneer of innovative private-label brands, has doubled down on fashionable foodstuffs with Good & Gather, a line that includes both basics and not-seen-elsewhere items like Peach Bellini Fruit Spread and Brownie Batter Dessert Hummus.
In short, store brands are no longer the cheap knockoffs you keep hidden in the back of the cupboard, but quite possibly the tastiest deals on the shelf.
“How we shop and where we shop is changing,” said Carman Allison, vice president of sales development at research firm NielsenIQ. “Retailers are investing in their private-label brands as they seek ways to differentiate themselves and meet evolving consumer needs.”
Store brands have always been big business—and for good reason. These more affordable products actually make stores more money. Margins on private-label food products average anywhere from 10% to 40% higher than sales of national brands. Still, it wasn’t until recently that a wide array of grocers decided to follow in cult grocer Trader Joe’s footsteps, upgrading packaging and offering products that aim to delight rather than simply suffice.
Two trends are fueling the shift. The first is a quest for customer loyalty. The number of grocery retailers in today’s market is dizzying: There are the traditional supermarkets, discount stores such as Aldi and Lidl, a host of “do-good” online grocers (Thrive Market among them), and the 800-pound gorilla in this space, Amazon.
Where shoppers used to make one big shop a week, the average consumer now goes to three or four different stores for groceries, according to Mary Ellen Lynch, a principal with research firm IRI. Sexy, exclusive store brands are one way to lure customers back. “The biggest motivation for us is having products no one else has,” said Mike LaVitola, chief executive of Foxtrot, which has stores in Chicago, Dallas and Washington, D.C., and plans to open 50 more outlets in the next two years.
Foxtrot’s products don’t mimic national brands but aim to outshine them in quality and design. The line’s ice creams, for example, come in highfalutin flavors like roasted bananas and caramel and cinnamon crumble. Some Foxtrot products, like the seasonal hot chocolate mix developed with Chicago pastry chef Mindy Segal, are collaborations with respected local food artisans that deliver top quality to customers and a halo effect to Foxtrot.
Other products bear no trace of the Foxtrot logo. In partnership with importer Skurnik Wines & Spirits, the Foxtrot chain bottled three French wines, including a rosé sold under the label Sun Lips. “You’d never know that was our private label, and that’s the point,” said Mr. LaVitola. Last summer, sales of Sun Lips were twice those of Foxtrot’s next-best-selling rosé. The chain reports margins on all private-label products of 10-15% above outside brands. No wonder Foxtrot’s store brands now make up about 30% of the store’s overall selection.
Thrive Market, too, is focused on offering premium store-brand products. For its customers—many of whom adhere to special diets such as paleo, keto and gluten-free—that means a lot of clean-label staples. Take coconut milk, one of Thrive’s perennial bestsellers. Most brands add the thickener guar gum to the product to give it a silky consistency. But paleo adherents object vociferously to the additive. So Thrive made its coconut milk, which sells for slightly less than the leading national brand, guar-gum-free.
As an online-only grocer, Thrive also has created brands to solve customer-delivery issues. Canned beans, for example, are a popular staple, but they are heavy and therefore carbon-intensive to ship. They also tend to roll around in the box and crush other items. Thrive’s house-brand beans now come in light plastic pouches.
Established grocers, too, are upping their game. In addition to its $2 billion Good & Gather brand, Target last spring launched Favorite Day, a line of 700-plus snacks and desserts such as frozen French macarons and crème brûlée. ShopRite’s Bowl & Basket brand, with its soft color scheme and slew of plant-based items, is another contender competing for higher-end buyers.
The rapid evolution of store brands can also be chalked up to the pandemic, which unraveled established shopping patterns. In the spring of 2020, Americans were faced with a sea of empty shelves; many tried store brands out of necessity. According to a September 2020 study from management consultant firm McKinsey & Company, nearly one in five shoppers said they bought more private-label products during the Covid-19 crisis than they had before. And 40% of those who switched to new brands said they were likely to continue buying them after the pandemic waned.
The numbers bear that out. According to NielsenIQ, private-label food sales were worth $123 billion in 2020, up 13.6% over the previous year. And though sales settled down in 2021 as supply chains came back online, Mr. Allison (the NielsenIQ analyst) said he expects to see retailers continue to innovate. Premium private labels appear to be here to stay.