Over the past few years, the food market has undergone profound changes, driven by the emergence of new consumer habits and increasingly hybrid retail solutions. In this context, we explore how manufacturer brands (branded products) and private labels can coexist and thrive in the same market to benefit producers, distributors, retailers, and consumers alike.

In the following sections, we will discuss the key challenges and opportunities that both brand and private label business models face. We will also share recent data and trends on consumer behaviors and preferences. Research confirms that both segments have unique strengths, indicating that a balanced coexistence of brands and private labels can serve the diverse needs of end consumers.

A global overview and competitive landscape

Today's market reveals two prevailing trends that appear to balance each other: on one side, private labels attract various consumer groups (not just for low prices but primarily for their solid value for money), while on the other, well-established manufacturer brands continue to benefit from strong brand recognition, heritage, and higher perceived quality.

The rise of private labels

A recent NielsenIQ report, "Finding Harmony on the Shelf", highlights a notable shift in how consumers perceive private label products. Specifically:

• Positive perception: 68% of respondents see private labels as good alternatives to traditional brands, and 69% feel they offer strong value for money.

• Demand for variety: 60% of global consumers say they would buy more store-brand items if a broader selection were available.

• Sales gains: Worldwide, private label share grew by 1.4 percentage points, although the pace of growth is slower than in previous years. In Europe, for instance, growth dropped from about 12% in 2023 to just under 4% in 2024, hinting that a period of relative balance may be ahead.

This data shows that private labels (also referred to as "store brands") continue to solidify their position, although the rapid expansion seen in earlier years has slowed. Consumers' shift toward store brands is largely driven by a focus on cost savings and increasing confidence in product quality.

The enduring power of brands

Manufacturer brands still play a central role, and they do so for several reasons:

• Brand equity: recognized names with a long history maintain prime shelf space and remain top-of-mind with shoppers.

• Marketing investment: brands often run long-term marketing and advertising campaigns, building emotional connections with consumers.

• Premiumization: NielsenIQ reports that more than half of consumers globally (54%) tend to choose higher-end (premium) products under various circumstances. This trend is particularly strong among Millennials (61%) and Gen Z (58%).

These findings underscore the relevance of brands, especially for consumers looking for higher perceived quality, special ingredients, or a premium position.

Inflation's influence and new consumption patterns

Food brands face future challenges in maintaining a strong premium quality perception while also aligning with emerging consumer trends around sustainability, wellness, and health.

Consumers, for their part, exhibit two seemingly contradictory yet often simultaneous behaviors: the desire to save money and get the most value for their budget, and the urge to treat themselves with more upscale items.

This dual focus - price awareness and premium indulgence - can support a market equilibrium in which manufacturer brands and private labels coexist in a kind of harmony.

Price sensitivity

According to McKinsey, about 75% of U.S. consumers and 85% of Europeans surveyed in 2024 reported cutting back expenses, with private label switching accounting for roughly a quarter of this trade-down behavior. At the same time, consumers' perception of private label quality is strong: it's not just a forced cost-based choice but increasingly a deliberate decision since these products are considered high-quality as well.

The McKinsey study also shows that over 80% of U.S. consumers rate private label foods positively, and nearly 90% view their value for money as similar or better compared to established brands. European figures are consistent (over 80% agree on quality parity).

As raw material costs and inflation rise, consumers are more price-conscious. To summarize:

• Private labels are viewed as a good deal, thanks to a strong price–quality balance and growing trust in their overall quality.

• Brands strive to differentiate by providing added value (sustainability, transparent supply chains, unique ingredients) to justify a higher cost.

In other words, there's a "balancing act": private labels offer a cost-effective option, while premium brands cater to those seeking a superior product experience.

Changing shopping habits

NielsenIQ also points to an increasingly hybrid approach to filling the shopping cart: people mix higher-priced items with cheaper ones in a balance of "trading up" and "trading down", aiming to maximize satisfaction while controlling costs. Additional findings reveal:

• 58% of respondents say they are open to trying new brands across different product categories, indicating lower loyalty to traditional options.

• Another 58% of global consumers note that the brand itself (whether a major name or a store brand) is irrelevant, choosing instead based solely on need.

This shows that the main question is no longer "brand vs. private label", but rather which product best meets a specific need at the time of purchase.

Innovation and differentiation

Consumers weigh both price and personal preferences when deciding how to balance their grocery budget. Here, product innovation and differentiation are critical.

Both private labels and national brands have distinct strengths they can leverage to attract and retain customers.

Private label innovation

Recently, private labels have made strides in offering innovative, high-value items (organic, free-from, gourmet, ready-to-eat, and more). Their competitive advantages include:

• Speed to market: retailers can control their store-brand product lines and test new offerings rapidly.

• Real-time feedback: by closely monitoring sales data, distributors and retailers can quickly detect emerging consumer needs and adjust their assortment.

• Local customization: private labels can adapt their products to the tastes and needs of particular regions or customer segments, such as creating dedicated product lines or adjusting shelf space and displays.

Brands: blending tradition and innovation

In parallel, manufacturer brands continue to invest heavily in research and development, bringing new products to market that meld tradition, flavor, and on-trend ingredients (e.g., plant-based proteins, superfoods, innovative formats). Current trends highlight:

• The importance of communicating innovation: brands that effectively share their product stories and quality details gain higher levels of customer loyalty.

• Balancing tradition with novelty: for certain products, like regional specialties, it's crucial to maintain an air of authenticity while responding to modern consumer demands (through innovative packaging, updated nutritional information, sustainable sourcing, and more).

• Premiumization remains a growth driver: many consumers choose premium brands to reward themselves, which can yield higher profit margins for companies.

Digital transformation and sales channels

Any discussion comparing traditional brands and private labels must address the various channels through which these products reach consumers, including online outlets.

Despite online grocery shopping gaining traction, in-store shopping remains dominant for most people. In a PYMNTS study from July 2024, 88% of respondents said they prefer to shop in person for groceries, enjoying the in-store experience. This means supermarkets and specialty stores are still the primary battlegrounds where brands and private labels compete, considering shelf positioning, in-store promotions, and customer loyalty to a specific retail brand.

At the same time, e-commerce for groceries is no longer niche. A VTEX survey among U.S. consumers shows that 69% regularly buy food items online, and nearly half of those (47%) complete between a quarter and a half of their total shopping online, suggesting that purchasing food online is mainstream and part of normal routines. Europe also show increasing online grocery adoption at different rates, but the overall trend is up.

In this context, both traditional brands and private labels have room to grow:

• Private labels can gain greater visibility since online channels make an extensive product lineup more accessible and easier to browse. Combining both in-store and online strategies can amplify the reach of private labels.

• Manufacturer brands can benefit from specialty e-commerce platforms - especially if they are already known for quality - and reinforce consumer loyalty. They can also implement Direct-to-Consumer (D2C) strategies, selling directly to shoppers online to deepen engagement and gather immediate feedback.

Omnichannel strategies

An omnichannel approach is increasingly a key differentiator. Companies that seamlessly blend physical and digital channels are better positioned to:

• Gather and analyze unified purchase data across multiple touchpoints, fine-tuning both online and offline assortments.

• Offer options such as click & collect and home delivery, thereby providing a more flexible and personalized shopping experience.

• Align pricing and promotions, ensuring consistency and transparency for consumers.

Consumers now expect to shift freely among channels - for example, researching a product online, then buying in-store, or placing an online order for pick-up at a physical location. As a result, retailers are investing in both their digital shelf and the in-store experience.

VTEX data highlights the need for retailers to upgrade the online user experience, streamline deliveries, and unify loyalty programs across all channels to provide a cohesive experience. From this survey, 60% of online shoppers prefer home delivery over in-store pickup. Additionally, features like free shipping (68% of respondents) and digital coupons (65%) strongly encourage online purchases.

Such findings underscore the need for distributors and retailers to coordinate offline and online product ranges and promotions. An omnichannel approach also enables more integrated tactics: for instance, displaying the full array of a retailer's private labels online (possibly limited by shelf space in-store) or using online purchase data to tailor in-store promotions.

Coexistence and mutual growth

Ultimately, brands and private labels can coexist to fulfill consumer demands. Food and beverage distributors can offer both, enabling higher overall customer satisfaction. Achieving this outcome requires attention to several strategic factors:

1. Thorough understanding of consumers: keep track of preferences, spending habits, and price sensitivity, and adjust the product mix as needed.

2. Diverse product lineup: include various price ranges (premium, mainstream, budget) and product types (organic, free-from, gourmet, classic) to serve different consumer segments effectively.

3. Collaboration between manufacturers and retailers: sharing data and goals helps ensure more effective marketing strategies and prevents duplicate or overly similar product offerings.

4. Clear shelf presentation: organize brands and private labels so that shoppers can quickly identify each product's characteristics and value.

5. Sustainability and social responsibility: younger consumers in particular reward companies and brands that focus on environmental impact and ethical practices.

How can businesses respond?

Each stakeholder in the supply chain can adopt winning tactics, particularly producers (for both branded and private label items), distributors, retail chains, and specialized retailers.

Producers:

• Boost production agility: invest in technologies that enable quick adaptation to retailer requests and rapidly evolving consumer tastes.

• Partner with retailers to create top-quality, competitively priced private label products.

• Emphasize sustainability: provide transparent details on traceability, sourcing, and certifications, making it clear how you support environmental and social initiatives.

Manufacturer brands:

• Continually innovate and add perceived value: spotlight the quality, heritage, and history of the product to justify its premium price.

• Strengthen digital channels: enhance online visibility and consumer engagement, while gathering direct feedback on products.

• Show social responsibility: consumers want proof of sustainability programs, waste reduction efforts, and community support.

Private labels:

• Build a strong store-brand identity: create product lines that align with the retailer's core values, helping shoppers see them as reliable, trustworthy brands.

• Expand product variety with specialized lines (organic, free-from, gourmet) to satisfy the 60% of consumers who say they want a wider private label range.

• Track performance continuously: use sales data to improve your offerings, eliminating redundant items and introducing new products that match emerging trends.

Distributors and retailers:

• Curate the shelf thoughtfully: position brand and private label items in a complementary way, avoiding competition among nearly identical products.

• Train sales staff: employees should know how to present the benefits of each brand and private label to guide shoppers effectively.

• Create an omnichannel strategy that unifies online and offline promotions, assortments, and pricing, incorporating delivery and click & collect to drive loyalty.

• Share insights with partners: open information exchange throughout the supply chain helps address market shifts more effectively.

Conclusions

Recent research in the food sector offers a detailed perspective on the evolving relationship between manufacturer brands and private labels in a market that increasingly values both affordability and premium experiences. The data - highlighting private labels' growing sales share, positive price–quality perception (68%), a global inclination toward premium items (54%), and a 58% indifference to brand names - shows that there is ample room for both segments, which can thrive simultaneously.

Developing a winning strategy requires a strong focus on consumer insights and continuous innovation. By leveraging data analytics, segmenting product lines carefully, and embracing omnichannel strategies, businesses can achieve the right balance and effectively cater to a wide range of consumer demands.