U.S. Retailers Go All-In on Private-Label Brands Amid Lasting Shift in Consumer Spending

U.S. consumers across all income brackets are increasingly turning to private-label goods, prompting major retailers to treat the value-driven trend as a permanent strategic shift rather than a temporary response to inflation. This move is reshaping the competitive landscape for grocery and general merchandise, creating new challenges for established national brands.

A Structural Shift in Consumer Behavior

Persistent inflation has accelerated a fundamental change in how Americans shop, with a growing focus on value that experts believe will outlast the current economic cycle. According to research firm NielsenIQ, value retailers saw sales grow 11.6% year-on-year from January through May, far outpacing the 2.3% growth seen at conventional retailers.

This trend is not confined to lower-income households. Retailers are now targeting the "trade-down" consumer, a group that includes both cash-strapped shoppers and wealthier individuals seeking savings on everyday items. Sarah Henry, managing partner at Logan Capital Management, told Reuters that inflation is merely "an accelerant to fundamental shifts already set to unfold," suggesting a deeper retrenchment in spending habits.

Retailers Embrace Private-Label Strategy

In response, leading retailers are elevating their store brands from a defensive tactic to a central pillar of their growth strategy. This represents a "structural commitment rather than cyclical opportunism," according to a note from RBC analyst Nik Modi.

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Key strategic moves include:

• Walmart: The nation's largest retailer is expanding its "bettergoods" food label to nearly 1,000 items, according to RBC. The company has stated the brand is successfully attracting new, higher-income customers.
• Aldi: The German discount chain plans to open 180 new U.S. stores this year and another 400 through 2028, building on its current base of approximately 2,700 locations.
• Kroger and Albertsons: Kroger executives have reported that private-label sales are growing faster than national brands. Albertsons, which attributed a recent poor quarterly performance to customers flocking to lower-priced competitors, aims to have private-label goods constitute 30% of its sales.
• Target: The company's owned brands already account for about 30% of sales, and it plans to add 600 new private-label food and beverage items over the next two years, a spokeswoman said.
• Dollar General: The discount retailer is rolling out new private-brand products and over 70 back-to-school items priced at $1 or less to appeal to value-conscious shoppers across all income levels.

Market Implications

The industry-wide pivot to private labels signals intensifying competition based on price and value, putting pressure on the market share and pricing power of traditional consumer packaged goods (CPG) companies. As Julie Barber, Walmart’s chief merchandising officer, told Reuters, "Shopping smart has become a mindset, not a customer segment."

This shift indicates that many consumers no longer perceive a significant quality gap between store brands and national brands, eroding decades of brand loyalty. For investors, the success of retailers will increasingly depend on their ability to develop and market compelling private-label portfolios that can capture and retain this new, value-focused consumer.