Buying store-brand products is an easy way to get a lot of bang for your buck. But there are some widely accepted myths and questions about private labels that keep consumers buying the more expensive name-brand products. We hope to dispel some of those misconceptions out there to help you embrace the money-saving power of store brands.
Do the lower prices of store brands mean lower quality?
Nationwide, consumers are exploring new ways to stretch their dollars in today's changing economy, which has led to higher sales of store brand products. Supermarkets have noticed the trend and are investing in their store-brand products like never before.
Supermarkets have a great incentive to offer high quality store brand products to win over customers. If consumers are looking for bargains, supermarkets want you to think the best quality for the best price can be found on their shelves. While supermarkets all sell the same big-name brands, their private labelled products are where they can edge out the competition. Plus, grocery stores make a higher profit margin from their private labels, since there are fewer “middle-men.” They have every reason, in today's economy, to make sure their store brand products are the best they can be.
Remember, supermarkets put their brand logos on their private label products. Would the supermarket want to lose you as a shopper by selling you something sub-par with their name right on it? Supermarkets need to ensure top quality in every store brand product they sell to keep you coming back.
So there may have been a time long ago when generic brands often just didn’t cut it, but those days are past. Store brand products often perform better in taste tests than familiar name brands, as you can often read in Consumer Reports. Always check the ingredients, but you’ll usually be pleasantly surprised.
Who makes store brand products?
We’ll never know for certain which manufacturer is behind a store brand product. Retailers keep that information close to the vest.
But we can infer a few things. First, we can assume that name brand producers aren’t also producing generic brands, because it would be against their interests to cannibalize their own sales. But those manufacturers with the buying power to get raw ingredients at the lowest costs are likely those who can give supermarkets the best prices. In other words, to make ketchup as cheaply as Heinz can, companies with similar buying power are likely behind store brand ketchups. So, while we can assume Heinz isn’t making private label ketchup, another producer with an established supply chain for tomatoes, like Campbell’s, might be.
What makes store brands so much cheaper?
Mostly advertising. Supermarkets don’t have to spend a dime advertising private label products. Name brand products, on the other hand, must continually advertise to convince consumers that their products are superior to other name brands and private labels alike. When you buy a name brand product, you are shelling out your hard-earned money for the embedded costs of their advertising.
Are store brand products different from store to store?
You may assume that a store brand product from a higher end retailer like Publix or Trader Joe's would be of higher quality than those from dollar stores. But in many cases, the products could be exactly the same, even made by the same manufacturer, just with a different sticker on the wrapper.
Many of the groceries we buy fall into the category of homogeneous goods, or products that are indistinguishable from one brand to the next, with the only differences being availability and price. The examples commonly used in economics books are gasoline and corn. The principle applies to many of the foodstuffs we eat every day.
For example, the ingredients of any can of green beans you can find on the shelf will have only 3 ingredients – green beans, water, and salt. You can buy the name-brand can for $1.50 or more, or the store brand for half that price. Similarly, you can buy a can for 50 cents at a discount supermarket, or pay a bit more for the can at a fancier chain. Often you’re really getting the exact same thing.
For more complex products, check the ingredients. You may be surprised to find that the store brand product at a bargain store is the same as the corresponding product at a higher end retailer, but for a lower price.
We’ll delve more into how private label products compare from store to store in our Part 2.