Introduction
Store brands tend to gain share in downturns and keep much of it when conditions improve, a ratchet effect that has pushed their share of US grocery spending steadily higher over two decades. According to the Private Label Manufacturers Association (PLMA) and Circana, US store brands reached a record 23.5% unit share and 21.3% dollar share in 2025, with store brand sales up 3.3% against 1.2% for national brands. The gap between unit and dollar share is itself telling: store brands sell more than a fifth of the units at a lower price per unit.
For national brands, store brands are both a competitor and a ceiling on pricing power. For retailers, they are a source of margin, loyalty and leverage. And behind them sits a separate industry of private label manufacturers and co-packers that make products to someone else's recipe and label. Understanding all three sides helps a banker judge how exposed a brand is, how a retailer earns its returns and what a private label manufacturer is worth.
How Store Brands Win Share
Store brands once competed on price alone, with plain packaging and basic quality. That model still exists, but most large retailers now run tiered ranges.
- Private Label
Products sold under a retailer's own brand rather than a manufacturer's, such as Walmart's Great Value, Costco's Kirkland Signature or Kroger's Simple Truth. The retailer controls the specification, packaging and price, and the products are usually made by contract or private label manufacturers, sometimes by the same companies that make competing national brands.
Most large retailers now sell store brands in three tiers:
- Value tier: the lowest price, aimed squarely at trade-down shoppers.
- Mainstream tier: a close equivalent to the leading national brand at a lower price.
- Premium tier: distinctive, often better-for-you or chef-inspired products that compete on quality as well as price.
Walmart's 2024 launch of bettergoods, which Food Dive described as the retailer's largest private brand food launch in 20 years, shows how far the premium tier has come: about 300 items, mostly priced under $5, built around culinary, plant-based and "made without" products rather than copies of national brands.
Store brands win share through several mechanisms. In a squeeze, shoppers try them to save money; many find the quality acceptable and keep buying. Retailers give their own products the best shelf positions and promote them in their apps and loyalty programs. And when national brands raise prices faster than store brands, the price gap widens and more shoppers switch. The broader shift toward value is covered in the article on premiumization and trade-down.
Which Categories Resist Store Brands
Store brand strength varies widely by category. The pattern follows how easily shoppers can judge quality, how much the brand means to them and how much innovation the category needs:
| Category type | Store brand strength | Why |
|---|---|---|
| Commodity-like staples (milk, eggs, sugar, flour) | Very strong | Little difference between products |
| Household basics (paper towels, foil, trash bags) | Strong | Function matters more than brand |
| Over-the-counter medicines and vitamins | Strong | Same active ingredients, shoppers compare labels |
| Snacks and confectionery | Moderate | Taste and habit protect the leaders |
| Carbonated soft drinks and beer | Weak | Brand image and DSD distribution |
| Cosmetics and prestige beauty | Weak | Emotional value and constant innovation |
| Baby formula and baby care | Moderate to weak | Trust and fear of a wrong choice |
Categories with heavy innovation resist store brands because retailers rarely invest in new product development; they follow once a product proves itself. Categories delivered through direct store delivery resist them too, because the national brands' route networks keep shelves full and fresh in a way a retailer's warehouse system cannot easily match.
How National Brands Fight Back
National brands are not passive. The most effective responses play to the things store brands find hard to copy:
- Innovation: new flavors, formats and better-for-you versions keep the brand ahead, because retailers usually copy only once a product has proven itself.
- Price pack architecture: smaller packs at entry price points narrow the visible gap without cutting the price per unit.
- Targeted promotions: promotions timed to the moments when shoppers compare prices most closely keep trial buyers from switching for good.
- Advertising and brand investment: sustained spending reminds shoppers why the brand costs more.
Some brand owners go further and make store brand products themselves, using spare plant capacity to earn a margin on the volume they would otherwise lose.
What Retailers Earn From Their Own Labels
Retailers push store brands because they earn more from them in several ways:
- Higher margins: a retailer typically earns a higher gross margin on its own label than on the national brand next to it, because it captures part of the margin the brand owner would otherwise keep.
- Differentiation and loyalty: a store brand cannot be bought elsewhere, so a strong label gives shoppers a reason to choose one store over another.
- Negotiating leverage: a credible store brand alternative strengthens the retailer's hand when it negotiates prices and promotions with national brands.
Costco shows how far the model can go. Its Kirkland Signature label accounts for roughly a third of its sales, and many members treat it as a brand in its own right. Hard discounters such as Aldi go further still, selling mostly their own labels. Store brands also carry risks for the retailer: it owns the reputation of the product, bears the cost of recalls and has to manage quality across dozens of suppliers. The retailers that rely most on store brands are profiled in the article on value retail, clubs, dollar stores and off-price.
Private Label Manufacturers and Co-Packers
Most store brand products are made by specialists that sell to retailers rather than to shoppers, and their business looks more like contract manufacturing than brand building.
The private label manufacturing model
Private label manufacturers produce goods to a retailer's specification and packaging, usually under supply contracts won through competitive bids. Their economics differ sharply from a brand owner's: they spend little on advertising, earn lower gross margins, run many products and short production runs, and depend on a small number of retail customers that can switch suppliers at the next bid. Scale, efficient plants and a broad product range are the main sources of advantage.
One of the largest US players in food has been TreeHouse Foods, which describes itself as a leading private brands snacking and beverage manufacturer in North America. Investindustrial completed its take-private of TreeHouse in February 2026 at an enterprise value of $2.9 billion, paying $22.50 a share in cash plus a contingent value right tied to litigation proceeds. The deal is a reminder that the business, though lower-margin than branded food, suits buyers who can run plants efficiently and bid well.
Co-packers
A related business serves brand owners rather than retailers.
- Co-Packer
A contract manufacturer that produces and packages products for another company's brand, using that company's recipe or specification. Co-packers let insurgent brands grow without building their own plants and let larger brand owners add capacity or new formats without capital investment.
Co-packers are essential to young brands, which rarely own factories, and they give larger companies flexibility when demand spikes. The relationship carries risks for the brand: a co-packer controls production quality and timing, may serve competitors and can raise prices when capacity is tight, so a brand that depends on one co-packer has a supply concentration risk that diligence should test. Many manufacturers serve both sides: a national brand owner may make store brand products to fill spare capacity, and a co-packer may produce both branded and store brand versions of similar products. The role of co-packers in buying and scaling young brands is covered in the article on buying insurgent brands.
What it means for valuation
Store brands affect valuations on both sides. A national brand in a category where store brands are gaining share faces a cap on pricing and a risk to volume, and buyers value it accordingly. A private label manufacturer, with lower margins and powerful customers, usually trades at a discount to branded peers, though its demand can be steadier in a downturn when shoppers trade down. The Valuation guide's article on retail and consumer valuation covers the methods; the consumer question is how much of a brand's premium shoppers will keep paying once a credible store brand sits beside it.
