Name brands might face fiercer competition from private labels this holiday season

As consumers flock to grocery stores during the holidays to stock up for festive gatherings, they’ve historically reached for their favorite name-brand products. But this holiday, with inflated prices and new retailer innovations, private-label products might start to give them a run for their money.

NielsenIQ predicts US private label dollar share of US CPG to increase to 19.6% in Q4, up from 19.3% in 2022 and 18.4% in 2021. This trend comes as 27% of survey respondents said they plan to buy more private label products to save $$ this holiday season and 40% of consumers view private label products as being of higher or equal quality compared to name brands.

Private labels have seen a strong year, with dollar sales across all US retailers growing 8.2% to $108 billion in the first six months of 2023, according to the Private Label Manufacturers Association and research firm Circana. While they have yet to outperform name brands during major holidays, private labels could have a “fierce moment,” to end the year, Lauren Fernandes, director of global thought leadership at NielsenIQ, told Retail Brew.

Brand new: The consumer price index in October was up 3.2% YoY, with CPG products at 3.1%, per NielsenIQ. However, prices for center-store items—things like canned goods, spices, and baking products—are even more elevated at 5%, Carman Allison, VP of global thought leadership North America of NielsenIQ, noted. Those are a lot of items consumers use during the holiday season, and are “highly substitutable” (i.e., holiday guests probably won’t notice a difference), Fernandes said, so consumers may opt for more private-label center store items this month.

• And a lot of consumers are willing to make that switch, as a recent holiday survey from private-label developer Daymon found that only 18% of shoppers stick to the same name brands for their holiday cooking.

Private labels are also upping the stakes on innovation, Fernandes noted. Several retailers rolled out Thanksgiving dinner deals using their own private labels. In September, Target announced a slew of new owned-brand holiday products, from Christmas Tree Shaped Bark to Mint Hot Cocoa Spoons, and noted half of its seasonal items would be priced under $5. And in October, Sprouts debuted 30 exclusive holiday products, such as white chocolate and peppermint popcorn and a collection of holiday bark.

Keith Blackmer, director of category strategy of Sprouts Brand, told Retail Brew via email that the retailer aims to create products that are “unique and differentiated at a great value,” a strategy it’s employed both for core and seasonal items.

“Sprouts is confident that our strategy of offering high-quality products that are unique and differentiated at a great value, has allowed us to stand out in a competitive environment by resonating with both existing and new customers,” Blackmer said.

Coming into your own: However, despite the pressure from private labels, Fernandes said name brands shouldn’t actually look at their rise as a competition.

“It's more of a ‘How do you position and hone in on the unique value and differentiators that your product is bringing?’ so that you can actually strive to coexist rather than compete with private label options,” she said.

• Emphasis on factors like efficacy, pack size, and particular label claims that private label counterparts don’t have could set them apart, she noted.

Retailers that have lost share to value stores and name brands that are seeing consumers trade down to private labels are also fighting back with more promotional activity, which is up 10% over the last year, Allison said. Those efforts might soften a private-label surge during the holidays, he noted.

Still, it’s beginning to look a lot like a strong holiday season for private labels.

“If there were to be a year that private-label kind of does move the needle more so during the holiday, then I think this year is shaping up to be a very strong one,” Fernandes said.