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Store brands become retail's secret weapon against tariffs
Retailers are supercharging their store brands to boost sales and keep prices low in the face of rising tariff pressures.
Why it matters: The popularity of private-label products could soar as tariffs threaten to drive national brand prices higher.
"Private label is growing faster than mainstream retail and part of the reason is that consumers can save money by switching," GlobalData managing director Neil Saunders told Axios.
"This has been happening for a long time and the trend might be accelerated if tariffs push up prices," Saunders said.
The big picture: Store brands are no longer the generic knockoffs of the past. They are a "destination driver" for many retailers, Sally Lyons Wyatt, global executive vice president and chief industry adviser at Circana, told Axios.
Private brand products cost 20% less than national brands, Lyons Wyatt said.
The price gap between private label and national brands has grown by 38% since 2019, according to data firm Numerator's Private Label Perceptions report.
Tariffs and store brands
State of play: Store brands aren't immune to tariffs, but large retailers have more control to minimize the impact because they have better leverage to negotiate terms with suppliers and reduce production costs.
Walmart CEO Doug McMillon told Axios in April that the retailer has more "visibility and control over what happens" with its store brands.
Retailers have been diversifying where their private brand products are manufactured and pushing for more American-made products.
What they're saying: "Private brand will continue to be a way that we show great value to customers," McMillon said.
Costco has been adding new products to its Kirkland Signature brand and seeing the brand's sales outpace the company's overall sales, CEO Ron Vachris said in a May 29 earnings call.
"In times of consumer uncertainty, our Kirkland Signature brand is uniquely positioned to provide our members with great quality and great values," Vachris said.
Aldi: "Nobody else is 90% private label"
Zoom in: A poster child for the private brand is discount grocer Aldi, where 90% of products are store-owned brands.
"Nobody else is 90% private label. If you have all these (national) brands, you're really at the mercy of what the brand says the cost is going to be," Scott Patton, Aldi's chief commercial officer, told Axios. "We get to control that. The private label is really our differentiator."
Patton said just 4% of Aldi's assortment "is impacted by tariffs."
"We do have some globally sourced items," Patton said, noting imported wines from Chile as an example. "So there are going to be some areas of the store that are subject to a tariff. That doesn't mean that we're going to take that tariff and pass it on the consumer."
Summer savings: Aldi lowers prices
The intrigue: Aldi announced Thursday that it is dropping prices on more than 400 products — nearly 25% of its in-store selection — to help consumers save this summer.
Patton said the prices have dropped on products throughout the store, including produce, meats like baby back ribs and grass-fed ground beef, chips, breads, yogurt, frozen items and the retailer's prebiotic Popz soda.
Consumers will see red price tags throughout the store to identify price drops.
Yes, but: Two Aldi categories that have had price increases are chocolate and coffee, Patton said.
Costco was "continuing to move more items to locally sourced production, which is allowing us to lower prices in those markets," CFO Gary Millerchip said last week.
