The Relationship Between National Brand and Private Label Food Products: Prices, Promotions, Recessions, and Recoveries
by Richard Volpe
Economic Research Report No. (ERR-129) 31 pp, December 2011
What Is the Issue?
One of the most striking changes in U.S. food retailing over the
past two decades has been the rise of private labels (PLs), also
known as store brands. Retailers have expanded PL product offerings
across the supermarket, and PLs have increased in popularity, as
measured by both dollar sales and shares within product categories.
Since promotional competition between PLs and national brands (NBs)
has the potential to benefit consumers through lower prices and
expanded product choices, this report quantifies the magnitude and
dynamics of PL price discounts and then tests for NB/PL strategic
promotional interaction. Particular attention is paid to how the
2007-09 recession and subsequent recovery affected NB/PL
interaction, showing how price dynamics evolved from recession to
What Did the Study Find?
Retailers promote private label products (offer price discounts)
strategically in response to national brand pricing promotions to
protect PL sales during NB promotions. However, the extent of the
retailer response varies widely across supermarket departments and
is also affected by both the density of food stores and the market
share of supercenters within a market area.
• On average, PLs are priced about 23 percent lower than NBs, both
with and without promotions. This gap is smaller than that found in
previous analyses using older data, suggesting that these items may
have become more comparable in price and quality over time.
• NB/PL promotional interaction was strongest among processed,
storable products, but much weaker for produce, fresh meat, and
• In general, as market concentration increased within an area,
the intensity of within-store NB/PL promotional interaction also
• NB/PL promotional interaction lessened, however, as the market
share of supercenters increased, which may be due to supermarkets
focusing on everyday low prices generally, rather than on
promotions, when competing with supercenters.
• Promotional activity for NBs changed very little during the
recession, while PL promotional activity increased.
How Was the Study Conducted?
This study used 2008-10 data on prices and promotions for two
major supermarket chains that operate primarily in the Western
United States. The data were gathered directly from the corporate
web sites of the chains. The broad scope of the data, covering
thousands of the products available in each supermarket and over
250 product categories in every major department, allowed for the
study of NB/PL interaction across a wide range of product
dimensions. The intrastore promotional interaction between NBs and
PLs was analyzed using contingency tables and then regression
analysis was used to identify key determinants of NB/PL promotional
timing. Because the time series included a part of the recent
recession as well as the subsequent recovery, the analysis allowed
for NB/PL interaction to vary across these economic phases.