In the constantly fluctuating game of consumer food pricing, where competition is still measured by the cent, supermarket companies are elevating in-house brands as they chase shoppers looking for ways to cut grocery bills.
While legacy food brands tend to inspire loyalty, in-house brands — often called private labels — help stores meet demand for more affordable products at a time when food and beverage inflation and high energy costs have kept prices high on the shelves.
"Consumers are really frustrated because their overall cost of living is increased [by] $6,000 a year over the last two years. … The only way for Minnesotans and U.S. and Canadian consumers to really mitigate inflation is by private label where the product is as good or better," said Burt Flickinger, global supermarket analyst at Strategic Resource Group.
As consumers grow more price-conscious, Aldi and Trader Joe's — whose private label brands are central to their stores — are in expansion mode, including in the Twin Cities. Aldi is expanding its reach even further with a new distribution center in Faribault, with plans to open hundreds more stores in the next few years. That means even more pressure on traditional supermarkets to expand their own brands.
A recent Star Tribune story comparing prices at a mix of Twin Cities grocery stores found the cheapest totals at Trader Joe's and Aldi. Representatives of some of the other included chains objected to the method, noting that their own store brands, sold alongside legacy brands, give shoppers cheaper options.
Twenty percent of U.S. consumer purchases are private label, Flickinger said; in Canada and Europe, he said, it's typically at least half the items in a shopper's cart. A report on private brands by FMI, a food-industry trade group, found that 60% of shoppers say they've been buying private brands much more or somewhat more over the past 12 months.
In April, Walmart, the country's largest grocer, added a new private label brand called Bettergoods to appeal to Gen Z and more affluent consumers. In the most recent annual report of the Private Label Manufacturers Association, released in March, more than half of Gen Z participants in a survey by the group said they "always or frequently" chose a store because of its store brands. Overall, according to the report, sales of private label brands are up 34% since 2019, including a 5% jump last year to a record $236.3 billion in sales.
Many of these goods are produced in the same factories as their name brand counterparts, Flickinger said.
Both Minnesota-based and national grocery chains with stores in Minnesota, including Lunds & Byerlys, Target, Hy-Vee, Cub and Walmart, have expanded private label offerings over the years.
At Minnesota-based Target, most items offered under various "owned brands" lines like Good & Gather and Favorite Day are under $5.
"We have gone from being a retailer that just sells food to a retailer that truly celebrates food. And in doing that, we have made Target a destination for food. Now, Good & Gather has played a key role in that at nearly $4 billion in sales," said Rick Gomez, Target food and beverage executive vice president, on a March investor call.
Target food and beverage sales are up by $8 billion since 2019, Gomez said on the call.
Hy-Vee stocks more than 50 private and value brands. Value brand That's Smart is designed to be less expensive and competitive with other retailers' value brands, Tina Potthoff, a Hy-Vee spokesperson, said in an email.
Potthoff said the strategy behind value brands is to give shoppers confidence that they can keep going to a preferred grocery store but also have access to quality items at prices lower than national brands.
"What is important is that there are options in the Twin Cities. Consumers don't need to shop a discount grocer to save money," Potthoff said. "The majority of grocery stores have choices and selections that can fit all budgets and lifestyles."
Lunds & Byerlys has seen cost increases from food manufacturers across nearly every category, said Curtis Funk, senior vice president of merchandising. The challenge has been finding ways to make sure it's not all passed on to customers, he said.
"It's just been really difficult as we've seen manufacturers take three and four different price increases since this all started," Funk said.
With four chefs on staff, the chain focuses on making good products rather than products that closely replicate mainstream brands. Marinara pasta sauce from Italy or the locally loved wild rice soup are two of the Lunds-branded offerings, which have expanded to include more than 5,000 items since the program's inception in 2004, Funk said.
Store loyalty programs like Target Circle or Lunds Extras have also been adjusted to lure in deals-minded shoppers. Target's Circle deals are now automatically applied at checkout for members. Lunds shoppers can clip coupons to their digital Extras account to scan at checkout.
The coupons in weekly ads in newspapers and on retailer websites are among the best ways to save cash, Flickinger said. Another shopping strategy he suggests is to shop every few days, rather than stocking up on bulk items on credit cards. Shop in person to avoid delivery charges and take advantage of sales, he added.
Funk said customers understand they'll have a different experience at Lunds or Aldi, both successful stores working hard to understand what customers value.
"We know who we are, we know what our customers' expectations are," Funk said, "and we're not going to deviate from that."
