National Brands Are Losing, But Not Because of Price
How retailers learned to out-innovate the companies they used to copy
McKinsey reported private brands reached a turning point in 2024 as consumers no longer perceive them as cheaper options. More than 80% of U.S. consumers rate the quality of private-brand food products the same or better than national brands, and nearly 90% feel that private brands offer similar or better value.
Store brand sales rose 3.9% to $271 billion in 2024, compared to just 1.0% growth for national brands. Private label unit sales are up 2.3% since 2021 while national brand sales fell 6.8%. This isn’t a price story anymore. It’s an execution story.
How big this has gotten
Global private label sales outpaced national brands by 2.5 times in 2024. Private label share of sales rose 1.4 points globally, though growth slowed from nearly 12% in 2023 to under 4% in 2024 in Europe. At HEB, private brands represent 34% of sales revenue, at Walmart 31%, Target 25%, and Kroger 28%. Six out of 10 consumers think private brands offer above-average value for price, four in 10 buy to save money, and 27% consider private brands as good as name brands.
This isn’t just a Western phenomenon. German respondents (61%) lead shoppers buying more private label than ever, but respondents in Saudi Arabia (59%), India (56%), and Colombia (56%) all exceeded the global average of 50%. NIQ RMS data from Q2 2024 showed private labels delivered +5.6% of value sales growth over 12 months, with Middle East/Africa (+34.3%) and Latin America (+14.2%) showing fastest growth driven by higher inflation levels. Italy’s private label market surged by €800 million in 2023 to €14.5 billion total value, though market penetration (31.7%) trails Spain (48%), Germany (39.1%), and Netherlands (43.3%). Countries like Romania, Greece, and Serbia are projected to hit 40% private label market share by 2025.
Why retailers are winning
Walmart’s Bettergoods and Target’s Dealworthy brands are fastest-growing of the year, each increasing sales volume by 200%. Bettergoods addresses consumers’ perceived value mixing price and quality, with many products costing less than $5, attracting higher-income households and Gen Z shoppers seeking better quality. Ahold Delhaize introduced over 500 new private label products in one year, while Lidl, Aldi, and Carrefour invest in high-quality products rivaling national brands. Private Label sales reached 19.5% of dollar share in the past year, up 3% YoY.
Retailers aren’t copying national brands anymore. They’re innovating faster. 70% of consumers have experimented with private label products, and 50% plan to continue in 2024. Private label success isn’t just product development. It’s omnichannel execution. More than one in five (22%) of shoppers now plan an in-store shopping trip combined with prior online order. 70% of shoppers use a mobile device before or during an in-store shop to research products. Retailers control the entire experience—discovery, research, purchase, fulfillment. National brands compete in a system they don’t control.
Private Label brands leverage advanced data analytics to understand consumer preferences and predict market trends, developing products that precisely meet needs. AI and machine learning in supply chain management streamline operations, reduce costs, and improve efficiency, enabling Private Label brands to deliver high-quality products at affordable prices.
What national brands got wrong
54% of global consumers say they’re likely to treat themselves by upgrading to premium-brand products, with Millennials (61%) and Gen Z (58%) exceeding that average. Yet 58% of global respondents say brand or store brand is irrelevant, choosing products based on necessity instead. The premiumization trend exists simultaneously with private label growth. Consumers want better quality at fair prices. They’re willing to pay more when value is clear. What they’re rejecting is the middle: mediocre products at inflated prices justified by brand heritage.
Three UK retailers drove over 70% of private label growth and over 86% of branded product growth, highlighting how a retailer’s reputation benefits all its products. When the retailer’s brand becomes stronger than individual product brands, the game has fundamentally changed. Look at UK premium retailer M&S, widely regarded as leader in at-home dining experiences with highly popular Dine-In meal deals. As an almost exclusively private label retailer, M&S focuses on quality, ranging both budget-friendly and premium lines across all categories. In 2024 shoppers could choose from variety of starters, mains, sides, desserts, and drinks to build a dine-in meal for 2 for £25. M&S expanded dine-in meals to incorporate more vegan and gluten-free options to widen appeal, offering shoppers a premium feeling without out-of-home cost.
National brands didn’t lose on price alone. They lost on execution, innovation speed, and understanding what consumers actually value. Retailers have worked hard to invest into private label strategies and shift perception beyond basic value-for-money options, introducing wider ranges while brands scale-back, rebranding packaging and messaging to appeal to wider range of shoppers. Countries are projected to continue private label market expansion, with more premium, organic, and sustainable options expected to boom. Retailers will invest in unique, in-house product innovations to stand out from competitors, with stronger contract manufacturing partnerships to scale faster. 53% of retailers expect private label to be their number one growth driver in 2024. 27% of shoppers indicate switching to private label is important to their cost-saving strategy.
The question for national brands: can they compete on the metrics that matter—quality, innovation speed, value delivery—or will they continue optimizing brand heritage while losing market share quarterly?