Rabobank Predicts Explosive Private Label Growth … Despite Tepid Recent Performance

Another report has private label grocery brands gaining traction in the U.S. grocery market – although the most recent (2023) figure of 19% of sales continues the category’s less-than-1% annual growth in recent years.

“With a focus on quality and value, market share could grow to 30% by 2033,” says the rosy predictions from Rabobank. The report appears to focus on dollar, not unit, sales, the former of which could be exaggerated by recent inflation.

“Compared to branded products, the private-label price discount can range from 25% to 60% for key products,” says the report. “Despite this differential, growth in private label has been modest: Market share increased from 17% in 2014 to 19% in 2023, hindered by quality perceptions, a fragmented retail landscape, diseconomies of scale and strong brand loyalty.”

However, economic pressures, market dynamics and strategic industry shifts are creating a favorable environment for the meaningful expansion of private label in the U.S. “Consumers facing financial strain are increasingly turning to private-label options, as evidenced by rising sales and traffic to discount grocers. Retailer consolidation and the growing influence of major brands are also reshaping the market, potentially leading to more – and better-quality – private-label offerings.”

In addition to retailer consolidation – like if that giant Kroger-Albertson’s merger ever goes through -- retailers are launching new premium brands, such as Amazon Saver and Walmart’s bettergoods; domestic suppliers are investing in production; and international producers are increasing supply via exports and, in some cases, by expanding production into the U.S. market.

“Assuming a continued focus on quality and value, private-label market share in the U.S. grocery market could hit 30% by 2033,” the report concludes. “This expansion may be regional, however, with regional players adapting to local trends, such as using specific suppliers. Either way, the U.S. market appears poised for a substantial increase in acceptance of and demand for private label, mirroring European trends.”