When the economy hit the skids a few years ago, we responded with tactics that have gotten us through previous recessions: We stopped eating out and traveling as much, curbed our discretionary spending and chose generic items for basics like groceries. But then something strange happened: We began to prefer many of those store brands. Increasingly, we’re willing to pay even more for them. What’s going on here? According to the Wall Street Journal, stores have raised the prices of private-label nonperishable food by 5.3%, compared to a 1.9% increase for goods made by national brands. Store-brand versions of perishable goods rose in price by 12%, compared to 8% for name brands. Although generics still cost an average of 29% less than name brands, stores are closing that gap quickly. The Journal says the number of exceptions to this rule — instances where store brands cost more than name brands — are growing.
A big part of the reason we like store brands more now and in some cases even prefer them over big national brands is that retailers have expended considerable effort branding their own lines of goods. Instead of a no-frills, drab label with only the bare minimum of information printed on it, brands like Target’s Archer Farms line of snack foods, beverages and other items have their own colorful logos and distinctive branding.
The article singles out Archer Farms as one example of a private-label brand that has done a particularly good job creating an upscale generic image and raising prices accordingly. For instance, its roasted almonds cost a penny more per ounce than the same product made by Planters. Target is employing the same cheap-chic aesthetic and emphasis on unique products that have served it well in other categories, like clothes and home decor.
Target isn’t alone, though. The Journal points out that soy milk at supermarket chain Kroger and disposable diapers at warehouse store Sam’s Club both cost more if customers pick the house brand instead of a name brand.
Although many generic groceries are made by the same companies that make the name-brand stuff, they make much less if the store slaps its own label on the box or bag before it hits the shelf. This trend may spell trouble for big manufacturers of name-brand groceries, if consumers have grown used to and developed loyalty toward store brands. Already, more than a quarter of shoppers in a recent survey said they bought store brand goods for reasons other than price. It’s also not such great news for penny-pinching shoppers, who might be finding that turning to generics won’t give them the same bang for their buck as it once did.