No matter if we’re talking about cereal, cough syrup or batteries, products featuring nationally recognized name brands tend to cost more than their generic store-brand counterparts. But the assumption that higher price means higher quality is fading.
The Great Recession brought with it new opportunities for supermarkets and drugstores to reach out to consumers who grew increasingly eager to save on everyday purchases. One of the simplest strategies to trim bills has been to switch to cheaper brands — or rather, generic “no-name” brands sold only at specific chains.
These products, also categorized as store brands or private-label goods, include Archer Farms, available only at Target, Whole Foods’ 365 Everyday Value line and eponymous labels at CVS and Publix, among other stores. By late 2010, surveys indicated that 93% of consumers had changed their grocery-shopping habits because of the economic downturn, and many of them did so by trying out more store-branded goods, sampling everything from generic shampoo to generic frozen pizza.
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For the most part, consumers have been impressed by the no-name brands, with many of them scoring well in blind taste tests. (The taste tests referenced were for things like orange juice and soup, not shampoo — though it’d be really impressive if any shampoo scored well in a taste-off.) Consumers have also gotten clued in to the fact that many “generic” store-brand foods are actually made by the same companies that produce the higher-priced name-brand stuff. The foods have been known to come out of the same factories, with the same ingredients inside and everything, with the only difference being the label. The result is that often, switching to a store brand is an easy way to save 30% or so, without sacrificing quality.
Because store-brand sales are often more profitable than those of national brands, major chains have been putting more effort into bringing generics to the marketplace. It’s been reported that the growth of store-brand sales at Safeway has been outpacing national brands by a ratio of 3 to 1, while nearly one-third of the new items introduced at Kroger stores are house-brand products.
As store brands inched up in popularity, private-label prices rose as well. Even so, it’s still common for store brands to cost 25% to 30% less than their name-brand equivalents at full retail prices.
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What’s the latest on store brands? A new “Private Label” report from the Integer Group offers some insights. Here are some highlights from the study:
Women are especially likely to check out store brands. Most shoppers scope out both private-label and name-brand products before making purchases: 77% of all consumers report doing so. But women are far more likely to compare store and name brands — 9 in 10 are known to look at both options before making selections.
Guys are cool with generic health-and-beauty products. Unsurprisingly, women care more than men when it comes to products that go on their skin and in their hair. While 74% of women report a preference for name-brand health-and-beauty merchandise, just 56% of men say they like name brands better.
Brands make a big difference with laundry detergent. Of the eight product categories covered in the study (including batteries, ice cream, milk, cereal, and cookies and snacks), consumers think brand names are most important when it comes to laundry detergent: 69% prefer name brands in the category.
But not so much with medicine and milk. Only 26% of consumers report a preference for name-brand over house-brand milk. As for aspirin, cough syrup and other over-the-counter medicines, 68% of shoppers say they actually prefer the generic store-brand versions — presumably because they know the ingredients are virtually identical to pricier name brands.
Race plays a role in name-brand preference. African Americans are more likely to report a preference for name-brand detergent (76%), cereal (72%), cookies (68%) and ice cream (62%), compared with whites (68%, 61%, 56% and 50%, respectively). More whites, on the other hand, go for name-brand batteries — 65%, compared with 57% for African Americans.
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Coupons and sales help boost name brands. Many of the shoppers refuse to switch to private-label products because of their impression that, with a little timing and strategy, generics aren’t much cheaper. Of those who stick with name brands, 45% say they do so at least partly because they can find coupons for their brands (up from 35% in 2010), and 41% say their brand is often on sale (up from 36% two years ago).
Fewer people assume a brand name means top quality. This is truly the biggest takeaway — and a cause for concern among manufacturers who think they can be successful simply because they have a nationally known brand. In 2010, 57% of consumers agreed with the statement “Brand names are not better quality.” More recently, the figure inched up to 64%.
And if brand names do not represent better quality, why would it be worth paying more for them?