Generic brand

Generic brand (also known as store brand, private label, or own brand) is a product sold under a retailer's own name rather than a national manufacturer's brand (Kumar N., Steenkamp J.B. 2007, p.4)^[1]. Great Value at Walmart. Kirkland at Costco. Market Pantry at Target. Simple Truth at Kroger. These aren't second-rate alternatives anymore. Some now match or exceed national brand quality—at 20-40% lower prices. What began in 1977 as plain-packaged cheap alternatives has evolved into sophisticated brand portfolios challenging household names for shelf space and customer loyalty.

The economics are straightforward. National brands spend billions on advertising; private labels spend little. That cost difference flows partly to consumers (lower prices) and partly to retailers (higher margins). Both parties benefit at national brands' expense.

Historical development

Generic products entered American retail in 1977, featuring stark white packaging, basic black text, and aggressively low prices. Quality was notoriously inconsistent—sometimes acceptable, sometimes awful. The positioning was clear: for price-sensitive shoppers willing to sacrifice quality.

The second wave came in the 1980s and 1990s. Retailers developed "copycat" products mimicking national brand formulations at lower prices. Same quality, lower price. Packaging moved from generic to professionally designed^[2].

The third wave brought premium private labels. Trader Joe's, Whole Foods' 365, Costco's Kirkland Signature. These products compete on quality, not just price. Some items command prices matching or exceeding national brands. The category segmented into good-better-best tiers.

Today, private labels hold 19.4% of global CPG market value, reaching 36% in Western Europe. The trajectory points upward.

Retailer strategy

Private labels serve multiple strategic purposes:

Margin enhancement. Store brands typically generate 25-35% gross margins versus 10-15% for national brands. Same shelf space, more profit.

Differentiation. When only you sell Kirkland Signature, competitors can't price-match. Customers seeking specific private label products must visit your store.

Customer loyalty. Shoppers accustomed to your private labels have switching costs. They've invested in learning which items they like^[3].

Negotiating leverage. Strong private labels give retailers power in negotiations with national brands. "We can replace your product with ours" becomes credible threat.

Price architecture control. Private labels anchor pricing tiers. Retailers control the "good" option that makes national brands look expensive.

Tiered portfolio approach

Major retailers now operate three-tier private label strategies:

Economy tier. Basic quality, lowest prices. Appeals to highly price-sensitive shoppers. Minimal marketing investment.

Standard tier. National brand equivalent quality at moderate savings (typically 15-25% below). The volume driver.

Premium tier. Equal or superior quality to leading national brands. May command price premiums. Drives store differentiation and margin^[4].

Kroger illustrates this approach: Value brand (economy), Kroger brand (standard), and Private Selection (premium). Different customers shop different tiers.

Consumer perceptions

Attitudes toward private labels have shifted dramatically:

A 2025 Ipsos study found 74% of consumers consider private labels "just as good" as national brands—up from roughly 50% two decades ago.

Quality perception gaps vary by category:

• Commoditized categories (milk, sugar, cleaning supplies): minimal perceived difference
• Complex categories (cosmetics, electronics): larger perceived national brand advantage
• Food categories: mixed, with increasing private label acceptance

Price sensitivity drives trial; quality drives repeat purchase. Inflation periods accelerate private label adoption as consumers experiment to save money^[5].

Manufacturing approaches

Private labels come from various sources:

National brand manufacturers. Ironically, many national brand companies also produce private labels. The same factory makes both. Economics favor running full capacity.

Dedicated private label manufacturers. Specialists like TreeHouse Foods focus exclusively on private label production across categories.

Retailer-owned manufacturing. Some retailers backward-integrate. Kroger operates 35+ manufacturing plants producing their own brands.

International sourcing. Global supply chains source products from lowest-cost producers worldwide. The retailer manages quality and logistics^[6].

Category dynamics

Private label penetration varies dramatically by category:

High penetration (30%+): milk, cheese, frozen vegetables, canned goods, paper products. Commoditized, functional purchases where brand matters less.

Medium penetration (15-30%): breakfast cereal, snacks, personal care. Some brand loyalty exists but price competition intensifies.

Low penetration (under 15%): carbonated beverages, baby food, pet food. Strong brand preferences, risk aversion, or technical complexity.

The pattern: where consumers care more about function than brand image, private labels thrive^[7].

National brand response

Brand manufacturers fight back through:

Innovation. Launch new products before private labels can copy. Stay ahead on features and formats.

Quality superiority. Maintain quality gaps that justify price premiums. Invest in R&D.

Advertising intensity. Build brand preference through marketing spend that private labels can't match.

Promotional spending. Close price gaps during key selling periods. Competitive pricing when necessary.

Category management partnerships. Work with retailers on category strategy. Make retailers' success dependent on brand success.

Some battles are lost. Others continue indefinitely.

Global variations

Private label development varies by market:

Western Europe (30-50% share): Most developed private label markets. Led by German discounters (Aldi, Lidl) built entirely on private labels.

United States (18-22% share): Growing but behind Europe. Costco and Trader Joe's drive premium private label growth.

Emerging markets (5-15% share): Earlier stage development. Modern retail expansion drives private label growth^[8].

Aldi's expansion into the US and UK brings European private label intensity to new markets.

Future trends

Several developments shape private label evolution:

Inflation acceleration. Economic pressure drives consumers to try lower-priced alternatives. Many don't return to national brands afterward.

Quality convergence. The quality gap continues narrowing. Blind taste tests increasingly favor private labels.

Brand investment. Retailers now invest in private label branding—advertising, packaging design, brand stories. Private labels become real brands.

E-commerce implications. Online shopping reduces shelf position advantages that private labels exploit in physical stores. New competitive dynamics emerge.

Generic brand — recommended articles

Brand strategy — Brand management — Marketing strategy — Pricing strategy

References

• Kumar N., Steenkamp J.B. (2007), Private Label Strategy, Harvard Business School Press.
• Lincoln K., Thomassen L. (2008), Private Label: Turning the Retail Brand Threat into Your Biggest Opportunity, Kogan Page.
• PLMA (2023), Private Label Yearbook, Private Label Manufacturers Association.
• Nielsen (2023), Private Label Share Tracker, NielsenIQ.

Footnotes

1. ↑ Kumar N., Steenkamp J.B. (2007), Private Label Strategy, p.4
2. ↑ Lincoln K., Thomassen L. (2008), Private Label, pp.23-45
3. ↑ Kumar N., Steenkamp J.B. (2007), Private Label Strategy, pp.78-95
4. ↑ PLMA (2023), Private Label Yearbook
5. ↑ Nielsen (2023), Private Label Share Tracker
6. ↑ Lincoln K., Thomassen L. (2008), Private Label, pp.123-145
7. ↑ Kumar N., Steenkamp J.B. (2007), Private Label Strategy, pp.156-178
8. ↑ PLMA (2023), Private Label Yearbook

Author: Sławomir Wawak