In Europe, private brand accounts for 30% of grocery sales. In the U.S., the number is 19%. The gap is closing, however, and the coming shift in market share represents $100 billion in sales. The regional grocers that capture their share of private brand growth will be the ones that 1) commit to an identity; 2) develop a compelling flagship category or item; and 3) build the engine to scale. In this series, we discuss key considerations for each stage of growth.
It's time for regional grocers to expand their ambitions for private brand. National players will always win in apples-to-apples price comparisons, so the only way for regionals to compete is to change the game — to offer more "oranges." Private brand is one of the last ways regionals can create the differentiation they need, and it's one of the best investments they can make to set the business on a course for long-term growth.
While a strong private brand program should create value in all the predictable ways — lowering costs, increasing profitability, and providing negotiating leverage with national brands — the true magic happens when private brand plays a leading role in strengthening the customer relationship and provides a meaningful halo effect for the banner brand.
National retailers and brands focus on mass appeal so they can use scale to their advantage and drive volumes. Regional grocers, with a higher cost structure per unit, need a different approach. They can set themselves apart by curating an assortment and experience in which product discovery, formulation, packaging, marketing and merchandising decisions are made with their customers in mind. Private brand is the vehicle through which regionals demonstrate understanding and create connection.
There are no shortcuts to long-term private brand success. Outsourcing a program — whether by "leasing" third-party labels instead of developing proprietary ones, or by having a portfolio developed and managed externally — comes with certain benefits, but regionals who rely solely on those options limit the long-term potential of their program.
To leverage private brand to the fullest extent, organizations must go all-in. Making private brand a true strategic pillar requires a comprehensive approach and may involve changes to P&L ownership, vendor funding, macro space planning, organizational focus and more.
As they go through this process, grocers must exercise uncommon discipline across three phases of program growth: committing to an identity, pinpointing a flagship category or item that can serve as the exemplar of the brand, and building the engine to scale.
Committing to an identity
Private brand works best when it has a clear purpose. For grocery overall, there are three primary strategic approaches: Elevated Everyday, Purpose-Driven, and Price-Led.
The most effective path is to pursue excellence in one area and aim to be above average in the others. Trying to do all three equally often leads to internal confusion and external brand blur. National players have the resources to aim for mass appeal, but regionals often water down their brand if they attempt to be everything to everyone.
A caveat on Price-Led before we provide examples: National grocery players can make price leadership their primary strategy, but that is an uphill battle for regionals. While regionals should certainly be cognizant of how national players are pricing, they can't afford to engage in a race to the bottom. Doing so will cost them significant money and keep them from solving the customer problems they are better qualified to address.
Here's a more detailed breakdown of the three approaches, each of which could include multiple tiers of brands to address opportunities across the price architecture.
- Elevated Everyday
- What it means: Taste, quality and packaging that feels premium — but at an accessible price.
- Who's doing it well: Target, Wegmans, Hy-Vee.
- Why it works: Drives trade-up behavior and shopper loyalty while offering regional grocers a defensible point of differentiation.
- Purpose-Driven
- What it means: Regional relevance, clean ingredients, local sourcing, sustainability, innovation — products that reflect customer values.
- Who's doing it well: H-E-B, Sprouts, Trader Joe's.
- Why it works: Builds emotional loyalty and long-term retention, especially among younger and values-driven shoppers.
- Price-Led
- What it means: Lowest price on the shelf. Stripped-down packaging. Focus on commodity items.
- Who it works for: Walmart, Aldi, Costco.
- Why it doesn't work for regionals: This is a scale game. Without massive infrastructure and supplier leverage, regionals are fighting a losing battle on price alone — one that can dilute value proposition while eroding margins.
One of the biggest factors influencing the choice between Purpose-Driven and Elevated Everyday will be the existing market positioning of the grocer overall. For example, if an organization is already known for fresh food, regional pride, or health and wellness leadership, the private brand should reflect, leverage, and strengthen that position.
Aligning early on the purpose of private brand and where to win is essential. Answering those foundational questions is a strategic exercise that needs to be fact-driven and grounded in data, with preconceptions checked at the door.
Embracing a disciplined approach
There's nothing easy about building a private brand program strong enough to be a pillar of the business, but the rewards are significant. Dunnhumby's 2025 Retailer Preference Index shows that many of the most highly regarded regionals — H-E-B, Wegmans and ShopRite among them — are also best-in-class when it comes to private brand.
Grocers will need to prioritize ruthlessly as they develop the identity of the brand, make customer-led decisions, and decouple from any non-exclusive, third-party brands that do not drive customer acquisition or retention.
The bar for success is high, but so are the stakes. As the grocery space continues to evolve, many regionals are unsure how to compete in the long term. Private brand is a big part of the answer, and grocers need to act accordingly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
