Free brands from retail companies like Kirkland or Members Marks have become preferred brands for many American consumers and represent about 21% of sales in the grocery industry in the United Statesvalued at 1.7 billion dollars.
As prices rise, private label brands, also known as generic brands, have become an even more attractive option for buyers fatigued by inflation looking to switch to more expensive brands.
store brands can be 10% to 50% cheaper. But the origins of private labels remain largely secret.
Retailers are often not forthcoming about the companies that make their brands, because the manufacturers they have little incentive to disclose that they are creating similar products to its brands under a different label that is sold at a low price.
Many leading national brand manufacturers create private labels for multiple retailers. In the late 1990s, it was estimated that more than half of the brand manufacturers also manufactured private products.
Although private label brands ostensibly compete with manufacturers’ national brands, manufacturers often have excess capacity on their production lines. To generate additional earnings, some will use that extra capacity to do private labels.
Other brand manufacturers will produce private labels as an incentive to retailers, hoping they will be rewarded with better shelf space and placement for their own national labels.
But there are some brands that are the exception and have no problem that this information is public. One example is Kimberly-Clark, the maker of Huggies, which produces Kirkland Signature diapers for Costco and Duracell makes Kirkland Signature batteries, according to Costco executives.
So does Henkel, the maker of Purex and Dial.
Private label brands often have profit margins that are 20% to 40% higher than national brands, because stores do not have to pay the costs of advertising, distribution or other of margin that are integrated in the prices of the main brands.
How to know which brands make each product
Product recalls are often the most revealing way to find out which brand manufacturers are behind specific private labels.
Last year, Dole recalled fresh salads and vegetables, including Walmart, Kroger and HEB private brands.
JM Smucker withdrew certain Jif peanut butter products this year, as well as store-brand items he made for Giant Eagle, Wawa and Safeway. Large companies like Conagra and McCain Foods have recalled products from Trader Joe’s.
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