Though the recession is negatively impacting most areas of the retail sector, grocery stores appear to be doing just fine. Not only are people eating out less in order to save on money, but they are also rethinking their relationships to national brands. As a result, larger grocery chains are moving to change the traditional model of “supermarket as warehouse for brands” and transitioning into expanding their line of store brands. And contrary to what most shoppers might think, they’re not just competing on the basis of price either.
Gone are the days when stores merely created generics or cheap knock-offs of leading brands, instead these retailers are developing products that offer premium ingredients like organics, attractive packaging and some new items that don’t even have direct challengers in their space. Grocers have also realized that this one more way to leverage the relationship they’ve established with their customers, who in most cases will be shopping at their stores regardless of whether or not store brands are being offered. NY Times explains:
Besides the weak economy, the growth of store brands reflects a historic shift in the balance of power between packaged food manufacturers and grocery retailers. As grocery chains have consolidated and grown bigger, they are increasingly able to stock their shelves with their own products, which bring higher profits and drive customer loyalty — all to the detriment of major food brands.