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Inflation forces consumers to consider private labels rather than well-known brands.

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Shoppers are seeking more of their own brands to save money as inflation jumped to a new four-decade high in June.

“Inflation on consumer goods has opened the door for private labels to raise awareness and engage consumers through higher prices and smaller sizes,” Mark Kolenberg told FOX Business. Kolenberg is the CEO and founder of the Moral Code and Milwaukee Boot Company, luxury men’s footwear and accessories brands.

As a result, “it has suddenly allowed consumers who previously only considered branded products – simply out of habit or belief that branded products are better – now expand their considerations and now include private label products in their shopping patterns,” he added.

WHY IS INFLATION STILL LIKE THIS, AND WHEN WILL IT START TO STAY?

Gristedes & D’Agostino Chief Operating Officer Joe Parisi told FOX Business that many major chains have seen their private labels grow in recent months as shoppers look for additional ways to cut costs.

“As grocery inflation continues, shoppers are turning to private labels, not brand names, because they are looking for cost savings,” said the head of New York’s largest grocery chain.

Guleford Bobo, 75, undergoes free Medicare-covered at-home COVID-19 tests at CVS in the Navy Yard area in Washington, D.C. on 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 label, otherwise known as 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.

Ticker Safety Last Change Change %
CVS CVS HEALTH CORPORATION. 93.19 -1.41 -1.49%

According to a CVS spokesperson, these CVS Store-branded products rank number one in most categories and account for just under a quarter of all CVS sales.

The CVS Health line in particular “remains the best-selling brand in CVS Pharmacy retail stores, outperforming national brands in most of our healthcare categories,” the spokesperson said.

Rival drugstore chain Walgreens Boots Alliance also posted growth in sales of Walgreens-branded products.

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“Our forward momentum is supported by our own brand loyalty and multi-channel initiatives,” the Illinois-based company said in its earnings report last month.

pharmacy

Shoppers walk past groceries locked in security cabinets at a Walgreens store due to close in the coming weeks on October 13, 2021 in San Francisco. (Justin Sullivan/Getty Images/Getty Images)

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

Integrated healthcare, pharmacy and retail also plan to continue focusing on “expanding the range and value of our own brand.”

Ticker Safety Last Change Change %
WBA WALGREENS BOOTS ALLIANCE INC. 38.46 -0.46 -1.18%

RETAIL SALES UP MORE THAN EXPECTED IN JUNE WHILE AMERICANS AGAINST DANGEROUS INFLATION

Walmart is seeing a similar trend.

“Consumers are feeling inflationary pressure, as evidenced by rising penetration of private grocery brands,” Walmart CFO Brett Briggs told investors during a recent earnings call in April.

Walmart U.S. President and CEO John Ferner told investors that the world’s largest retailer by sales volume has seen consumers “trade from brands to private labels,” especially in the deli, meatloaf, bacon and dairy categories.

Ticker Safety Last Change Change %
TDC WALMART INC. 132.55 +1.91 +1.46%
TGT TARGET CORP. 158.66 +2.16 +1.38%

Minneapolis-based Target is also seeing significant private label growth.

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Target’s own brand portfolio of more than 45 own brands grew by 18% in 2021.

In her latest earnings report, Target’s director of business development, Christina Hennington, said that the company’s brand portfolio “continues to grow faster than total sales, as it has done on a quarter-to-quarter basis for many years.”

Target store in New Mexico

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

To stay competitive, Kohlenberg says, “Strong retailers and brands are realizing that private labeling can not just mean putting your name on a generic or generic product, but instead must offer the consumer multiple benefits and reasons to buy.”

He added that if private labels continue to bring quality and value to the consumer when compared to other brands’ products, then “they stand a good chance of retaining and retaining this customer” in the long term.

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