The Brandification of Private Labels: Beyond Budget

Private labels (PLs), also known as store brands, own labels, or retailer(-owned) brands, have been around in most consumer-packaged goods markets for decades. In 2023, PLs held an average global value share of 19.4%, a number that rises to 36% when singling out Western Europe (NIQ Broadbank 2024), and there is no indication that the ceiling has been hit. Gielens et al. (2023) recently projected an average growth of 16.9% share points across over 2,000 markets (category-country combinations), although not all markets are expected to gravitate toward the elevated PL shares that are seen in Western Europe.

Over the last four decades, over 700 papers have explored strategies to either increase PL share for retailers or protect national-brand share for manufacturers, with the price gap between PLs and national brands and the inherent characteristics of the product category being the most frequently studied drivers of PL share. Comprehensive reviews of these drivers have been offered by Keller, Dekimpe, and Geyskens (2022) and Sethuraman and Gielens (2014), among others.

Historically, PLs were seen as inferior to national brands and positioned as low-cost or budget-friendly alternatives. However, over the last decade, many retailers have started to strategically position their PLs beyond just price by also fostering emotional bonds with consumers. A survey from Numerator (2025) found that 59% of U.S. consumers believe PLs offer an above-average value for their price, indicating a growing appreciation of and emphasis on quality and brand attachment beyond mere affordability. This shift in consumer attitudes is evident across diverse segments. Younger shoppers are increasingly choosing grocery stores based on their PL offerings, demonstrating that store brands are now seen as genuine competitors rather than mere substitutes (De Jong 2024). Similarly, high-income consumers are prioritizing PLs at growing rates, with 70% of shoppers earning over $100,000 annually selecting their grocery store based on PL products (Sheehan 2024).

These changes have enabled retailers to prioritize their own labels over national brands. They allocate PLs more favorable in-store placements, such as Costco’s Kirkland Signature products, which are often placed at eye level or in high-traffic areas within the stores. In addition, retailers are promoting PLs through targeted discounts and loyalty programs. For example, Kroger regularly offers 10%–20% discounts on its Simple Truth organic PL line through digital coupons, while Walmart+ members receive exclusive savings on select Great Value products. This prioritization of PLs, often at the expense of national brands, is particularly visible in online platforms, where the practice of self-preferencing—where a retailer’s own brands are favored over third-party brands—has sparked significant antitrust scrutiny (Long and Amaldoss 2024). As a natural outcome of these strategic evolutions, some PLs, such as Costco’s Kirkland and Loblaw’s President’s Choice, have become trusted brands in their own right and are no longer viewed as mere budget options.

Following these evolutions, academic research on PLs has also shifted, moving from a value-based focus to a more quality-centered approach, where various elements of the branding toolkit are gradually being infused and explored. This transformation, known as “PL brandification,” has unfolded in three key steps: first, a focus on quality as the initial step toward PL brandification; second, differentiation as a critical next phase; and finally, the full embrace of PL branding as the third and most advanced stage in this transformation.

A Focus on Quality: The First Step Toward PL Brandification

Already more than twenty years ago, Corstjens and Lal’s (2000) seminal paper in the Journal of Marketing Research emphasized that product quality should be a critical factor in PL strategy. Their findings show that in markets where consumers are sensitive to quality and where inertia affects brand choice, a quality-focused PL strategy enables retailers to succeed. In contrast, a “cheap and nasty” PL approach intensifies price competition. Crucially, they argue that PLs must exceed a certain quality threshold to build long-term profitability.

After improving PLs’ objective quality, it is essential that consumers also perceive a reduced quality gap between PLs and national brands. Steenkamp, Van Heerde, and Geyskens (2010) demonstrate that in countries in the PL development stage, marketing tactics such as advertising and distinctive packaging are especially effective in managing the perceived quality gap between PLs and national brands. In contrast, in PL-mature countries, focusing on manufacturing fundamentals is more impactful, as the belief that national-brand manufacturers produce PLs is more effective in reducing the perceived quality gap than in PL-development countries. Not surprisingly, in mature PL markets like Spain, retailers are likely to heavily rely on national-brand manufacturers as their PL suppliers. This is evident as more than 70% of PL suppliers across all retailers in Spain are dual branders, producing both national brands and PLs (Ma et al. 2024). Another way to foster this belief may be through copycatting. Aribarg et al. (2014) show that copycatting increases consumers’ preference for PLs. Yet, when a well-known retailer name appears on a copycat product, this may inadvertently weaken the appeal of the imitating PL.

However, the dissemination of these insights has not been uniform across the globe. While some regions have embraced quality-focused strategies, others have been slower to adopt these approaches. In particular, the quality gap between PLs and national brands remains significant in the United States and emerging markets. According to Steenkamp (2023), PLs have not yet achieved quality equivalence with national brands in these regions, limiting their competitive potential and consumer acceptance compared with more mature markets.

Differentiation: The Second Step Toward PL Brandification

As PLs evolved beyond their initial focus on price, differentiation emerged as a crucial strategy in shaping their competitive positioning. Choi and Coughlan (2006) were among the first to introduce the notion of differentiation as a key factor in explaining how PLs should position themselves relative to national brands. According to their framework, when national brands are differentiated, a high-quality PL should align itself closer to the stronger national brand, while a lower-quality PL should position itself closer to the weaker national brand. However, when national brands are undifferentiated, PLs must distinguish themselves from both stronger and weaker competitors. Importantly, PLs cannot afford to remain undifferentiated in terms of either quality or features if they wish to remain successful. As such, their work hints at two distinct paths for differentiation: vertical differentiation, which focuses on quality tiers such as economy, standard, and premium PLs, and horizontal differentiation, which emphasizes unique product attributes. We now turn to the academic work that further explores these two differentiation paths in greater depth.

Vertical Differentiation on Quality

Acknowledging the importance of quality differentiation, many retailers now offer multitier PLs, as illustrated in Figure 1 for two leading retailers, Tesco and Kroger. Standard PLs (depicted in the middle column) typically mimic mainstream national brands by offering comparable quality at lower prices, while premium PLs (shown in the right-hand column) offer superior quality at higher prices, often with unique ingredients, flavors, or packaging. In contrast, economy PLs (shown in the left column), focus on cost reduction by cutting back on expensive ingredients, allowing retailers to pursue enhanced quality without neglecting the economy-seeking segment of their shoppers.

Figure 1
Examples of vertically differentiated PL lines

Many retailers have fully embraced this shift, moving away from a single-tier PL approach. In the United Kingdom, premium PLs already account for 8.4% of total PL sales, while economy-tier PLs make up 4.7% (NIQ Brandbank 2024). This strategy enables retailers to capture a broader audience, from budget-conscious shoppers to high-end consumers seeking premium PL alternatives. Ultimately, this results in a product portfolio that is vertically differentiated in both price and quality, but it must be carefully managed to avoid unintended cannibalization (Amaldoss and Shin 2015; Geyskens, Gielens, and Gijsbrechts 2010).

While PL tiers help retailers cover the full price–quality spectrum, their introduction may also trigger cannibalization. Economy PLs may pull customers from both national brands and higher-tier PLs, while premium PLs can challenge premium national brands. Geyskens, Gielens, and Gijsbrechts (2010) suggest that to minimize cannibalization, retailers should counter the brand-type similarity effect by positioning PL tiers on different shelves or using stand-alone brand names instead of subbrands. Interestingly, national-brand manufacturers’ concerns about PL proliferation are often overstated. Geyskens, Gielens, and Gijsbrechts find that PL tiering can sometimes even increase national-brand choice share. Premium national brands should emphasize quality and avoid price cuts, while mainstream national brands should leverage mixed displays alongside other PLs and national brands to encourage favorable consumer comparisons.

What should the quality levels of multitier store brands be? Amaldoss and Shinn (2015) suggest that retailers align the quality of their different PL tiers with national brands to reach all types of consumers. This approach helps reduce overlap between their own PL products, but it increases competition with national brands. Although this added competition can affect profitability, retailers can manage it by carefully adjusting the prices of both their PLs and national brands. In fact, with their control over pricing, retailers can even position one of their PLs as the top-quality choice. However, when national brands dominate a category, retailers may allow a national brand to take the top spot, ensuring their PLs can still appeal to a wide range of consumers.

Horizontal Differentiation on Features

As PLs evolve, retailers are increasingly turning to horizontal differentiation to stand out in the market. A key approach involves incorporating nontraditional, intangible attributes such as organic, eco-friendly, health, and fair trade into their PL offerings. Figure 2, for instance, highlights how Carrefour prominently emphasizes the organic attribute within several of its food categories. Similarly, Tesco prioritizes the eco-friendly attribute in some of its nonfood categories, while Kroger underscores health through its Simple Truth product line, which is distinguished by the avoidance of unwanted ingredients.

Figure 2
Examples of Horizontally Differentiated PL Lines

In this respect, Maesen (2025) highlights the growing trend of introducing organic PLs. These PLs are horizontally differentiated from conventional standard PLs by offering unique qualities that only appeal to some consumers. By focusing on such attributes, retailers can compete more effectively with (organic) national brands and lower the risk of cannibalizing their existing PL lines.

As PLs increasingly benefit from horizontal differentiation, their new product lines are becoming strategic weapons not only to sustain their own sales but also to steal share from leading national brands. Over 80% of grocery retailers identify innovation as the top strategy for growing PL market share (Rafferty 2023). For instance, Target’s Good & Gather has introduced over 2,500 new PL products, while Kroger launched 680 new items in 2023 and Albertsons added more than 800 PL products in 2021. In Spain, Mercadona operates 23 “co-innovation centers” that test 11,000 products annually, showcasing a sophisticated, data-driven approach to product development (McOuat et al. 2024). Research by Gielens (2012) demonstrated that standard PLs, in particular, are more likely to compete directly with national brands, with their new product introductions effectively capturing share from both rival national brands and other PL tiers within the retailer’s portfolio.

PL Branding: The Third Step Toward PL Brandification

To transform PLs into true, competitive brands, retailers must take an additional leap beyond quality improvement and differentiation by fully embracing comprehensive branding strategies. Bronnenberg, Dubé, and Sanders (2020) highlight that while consumers expect PLs to perform well, they are still less likely to choose them over national brands due to their deep-rooted loyalty to established national-brand names. To fully capitalize on their PLs’ potential, retailers must therefore integrate more branding elements into their strategies. Doing so can help break through the aforementioned brand-loyalty barriers and create stronger, lasting consumer connections with PLs. Both brand naming and advertising play a crucial role in this transformation.

Naming PLs

To build effective PL brands, retailers must carefully choose brand names that enable consumers to more easily differentiate among various PLs. After all, the key to branding is that consumers perceive differences among brands within a product category. An important decision for retailers involves whether to align their PL brands with the store banner or use a stand-alone brand name. With store-banner branding, the link between PL product and retailer is explicit, enhancing the likelihood of positive spillover effects. Germany’s Edeka, for example, has its banner name in the naming of both its economy (Edeka Gut & Günstig) and premium (Edeka Genussmomente) tiers, consistent with the branding strategy used on its long-standing standard tier (Edeka). The Spanish retailer Mercadona, in contrast, opted to use the stand-alone name “Hacendado” for its standard PL products in the ambient and frozen food categories.

For the standard tier, Schnittka et al. (2015), using a survey in Germany, conclude that store-banner branding increases PL recognition and PL attitude. Geyskens et al. (2018) demonstrate the benefits of store-banner branding for standard PLs by examining a Dutch retailer’s strategic relaunch of its entire standard PL portfolio. Overall, the PL rebranding was a success, with PL sales soaring by 27% in the first quarter after rebranding, and profits also experiencing an increase. The rebranding initiative drove PL growth in product categories where PLs are traditionally weaker than national brands. By leveraging its banner name on its standard PL, the retailer effectively capitalized on its strong reputation.

For the economy and premium tier, Keller, Dekimpe, and Geyskens (2016) studied a large pan-European sample of over 220 PL-branding decisions made by over 150 retailers across more than 25 countries. They conclude that retailers benefit most from store-banner branding their premium PLs when they possess high brand equity or follow a hi–lo price format. However, for retailers with lower equity or an everyday-low-pricing strategy, stand-alone branding for the premium tier becomes more effective.

Importantly, even when using stand-alone branding, retailers can benefit from using a common (umbrella) brand name for all categories, rather than working with multiple category-specific brand names, as this may facilitate consumers’ mental categorization and credibly signal positive intercategory quality correlations. Keller, Geyskens, and Dekimpe (2020) studied three substantially different retailers that switched to an umbrella brand name for one of their (economy or standard) PL tiers. Figure 3 shows in this respect how SPAR, a leading Dutch convenience store chain, switched from a diffuse set of category-specific brand names to a single unified name, “OK€.” In all three instances, the rebranded PL tier’s intrinsic brand strength increased.

Figure 3
SPAR’s Rebranding of Category-Specific Brand Names to a Single Unified Name

Advertising

As a final frontier in branding, PL retailers can explore advertising to elevate their PLs. Historically, PLs relied on price and shelf placement to drive purchases, since advertising campaigns for a wide variety of PLs across various categories were seen as cost-prohibitive. Recently, however, Kroger invested $2.5 million in an advertisement highlighting its PL products. In this campaign, it seeks to complement its core focus on value and product features with stronger attitudinal and emotional appeals (see Figure 4, Panel A).

Moreover, the rise of social media and new retail advertising platforms offers fresh opportunities for cost-effective advertising. For example, Kroger actively leverages its Instagram account to prominently feature its PL products in an engaging and entertaining manner while also providing additional product information (see Figure 4, Panel B). This approach reflects a broader trend among leading retailers, who are increasingly using digital channels to tell the stories behind their PLs. These narratives often highlight key aspects such as ingredient sourcing, production methods, and product origins, enabling brands to deepen consumer engagement and build trust while distinguishing their offerings in a competitive market. Such efforts help create stronger brand awareness and build emotional connections. Yet, the academic study of advertising’s role in PL branding remains largely unexplored, opening new avenues for research in this area. Szymanowski and Gijsbrechts (2012), for example, found that a retailer’s PL is not entirely private, in that consumers use their positive experiences with one PL to upgrade their beliefs about rival retailers’ store brands. It would be interesting to study to what extent messages with different content, or through different media (see also Danaher et al. 2020), may help to better appropriate advertising’s branding benefits.

Figure 4
Examples of Kroger’s Advertising Campaign Dedicated to Its PLs

Conclusion

The transformation of PLs into fully-fledged brands, holding significant equity on their own account, unfolds in three steps prioritizing (1) quality, (2) strategic differentiation, and (3) full-scale branding.

First, quality remains the foundation of successful PL strategies. Retailers must ensure their PLs consistently meet or exceed consumer expectations to foster long-term loyalty. Beyond objective quality improvements, bridging the perceived quality gap is equally critical. In markets where PLs are still developing, advertising and distinctive packaging are effective tools to enhance perceived quality, whereas in PL-mature countries, leveraging consumer beliefs that PLs are produced by trusted national-brand manufacturers plays a more significant role.

The second step in PL brandification is to differentiate with purpose. Retailers achieve this through a two- or three-tiered approach, structuring PL portfolios into economy, standard, and/or premium tiers to cover the price–quality spectrum. At the same time, they may harness the power of horizontal differentiation by embracing attributes like sustainability, fair trade, and ethical sourcing. This approach positions PLs as compelling alternatives to national brands while curbing the risk of cannibalizing existing products.        

The third and final step in PL brandification is to choose the PL’s brand name wisely. Aligning the naming strategy with each tier’s objectives is crucial—while a banner-aligned name reinforces trust and strengthens the retailer’s overall brand image, a stand-alone name can provide greater flexibility, particularly for premium tiers seeking independent positioning. In addition, the naming strategy should align with the store’s format. In a hi–lo pricing model, store-banner branding is particularly effective for premium PLs, leveraging positive spillover effects from the retailer’s reputation. Conversely, in everyday-low-price formats, stand-alone branding for premium tiers helps create a distinct premium perception without overly relying on store credibility. Retailers should also evaluate the benefits of umbrella branding, as using the same brand name across an entire PL tier can reduce consumer uncertainty and enhance the overall sales performance of the PL brand.

As PLs continue to evolve, several research gaps warrant further exploration. First, the role of advertising in PL brandification remains an open question. It is unclear how different advertising strategies—such as storytelling, influencer partnerships, or targeted social media campaigns—affect consumer perceptions of PLs. Further research could explore how advertising effectiveness varies by PL tier. Understanding the long-term impact of PL advertising on PL equity would provide valuable insights for both retailers and researchers.

Second, while prior work has examined individual elements such as tiered pricing and store-banner branding, there is limited understanding of how these elements interact with shelf positioning, promotional intensity, and category management to influence the PL brand’s equity. For example, does a premium PL benefit more from prominent shelf placement than a standard-tier PL, or do price promotions have a stronger impact on lower-tier PLs? A more integrated perspective on these dynamics could help retailers optimize their PL strategies to maximize brand equity.

Finally, the rise of e-commerce and algorithm-driven recommendations raises new challenges and opportunities for PLs. Online environments enable new forms of self-preferencing, where retailers promote their own PLs over national brands, a practice that has drawn increasing regulatory scrutiny. Future research could explore the effects of digital shelf placement, targeted advertising, and algorithmic bias on PL success, shedding light on how these strategies influence consumer decision-making and retailer performance in an increasingly digital landscape.

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