Private label products have evolved from budget-friendly alternatives into strategic assets that drive competitive differentiation. In 2025, grocery retailers are expanding their private-label portfolios to meet shifting consumer preferences, leverage retail technology, and strengthen their market position.
John Clear of Alvarez & Marsal’s Consumer and Retail Group told The National Provisioner, “I predict that in the coming year, private brands will become a merchandising mainstay, an essential part of US grocery strategy.” Supporting this shift, private-label market penetration in the US is nearing 25%, signaling its transition from a value option to a core category.
Record Growth for Private Label Products
2024 marked the most successful year for private-label sales, reaching a record $271 billion. Noteworthy examples include:
- Kroger’s Smart Way brand, the fastest-growing store brand in 2023, continued to outpace national competitors, while its premium Field & Vine line highlights a move toward locally sourced products.
- Walmart’s BetterGoods offers chef-inspired, high-quality foods at competitive prices, underscoring the retailer’s push for elevated private-label experiences.
- Amazon Saver, a no-frills brand with most products priced under $5, reflects e-commerce’s role in making private labels more accessible.
Retailers like Dollar General and Costco are also expanding their private-label offerings, using affordability, quality, and exclusivity to drive customer loyalty.
The Private-Label Shift: Beyond Affordability
Private labels are no longer just cost-saving alternatives; they stand for quality, innovation, and trust. Retailers are creating distinct brand identities with premium product lines and strategic marketing initiatives. Costco’s Kirkland Signature exemplifies this success, becoming a multibillion-dollar empire known for unbeatable quality and supplier partnerships.
This shift reflects changing consumer priorities. Gen Z shoppers, in particular, value sustainability, ethical sourcing, and unique brand narratives. Retailers are responding with eco-friendly and organic lines, such as Target’s Good & Gather and Kroger’s Simple Truth, which align with these values while maintaining affordability.
Digital Transformation Fuels Private-Label Expansion
The rise of online grocery shopping has opened new channels for private-label growth. Many grocers now offer exclusive online-only products and personalized promotions through their digital platforms. Amazon seamlessly integrates private labels into its digital marketplace, while other retailers leverage data-driven recommendations to promote their store brands.
Retail media networks are further amplifying private-label visibility. Walmart, Target, and Kroger use advanced advertising platforms to target shoppers based on purchasing behaviors, positioning private labels as premium choices within their ecosystems. By using first-party data, grocers can suggest private-label alternatives to customers browsing national brands, subtly shifting purchasing behavior.
Innovation Drives Differentiation
Retailers are harnessing innovation to elevate their private-label offerings, positioning them as competitive alternatives to national brands while addressing evolving consumer expectations. Upscale private labels like Walmart’s BetterGoods and Whole Foods’ 365 Everyday Value rival gourmet and specialty brands, delivering premium products at accessible prices.
Leveraging AI, grocers analyze real-time consumer preferences, predict emerging trends, and accelerate product development to meet shifting demands. For instance, Mondelez International, the maker of Oreo cookies, utilizes AI to design new recipes, significantly reducing the time from concept to market. AI can also aid in automating product attribution by analyzing and assigning relevant attributes, such as ingredients and dietary restrictions, streamlining the development process.
Sustainability is also a core focus, with retailers investing in eco-friendly packaging, carbon-neutral supply chains, and plant-based options that align with consumers’ growing environmental consciousness. This strategic approach not only differentiates private labels from their national counterparts but also enhances customer loyalty by offering innovative products that balance quality, affordability, and social responsibility.
Challenges and Risks for Retailers
Despite their growth, private labels face several challenges that retailers must navigate to sustain success. National brands are pushing back with deeper discounts, enhanced loyalty programs, and exclusive in-store promotions aimed at retaining market share. As private labels move upmarket, maintaining the perception of quality while preserving affordability is essential to avoid alienating price-conscious consumers. Additionally, retailers must carefully balance their product mix to meet diverse consumer preferences and ensure long-term flexibility. Over-reliance on private labels can limit a retailer’s adaptability, especially if shoppers demand a combination of trusted national brands and private options. Addressing these challenges requires strategic pricing, consistent product quality, and data-driven assortment planning to maintain customer trust and competitiveness in a rapidly evolving market.
Looking Ahead: Private Labels as Industry Shapers
As retailers continue investing in private labels, competition with national brands will intensify. Success will depend on blending quality, branding, and marketing to meet evolving consumer demands. With channels blurring and digital platforms reducing foot traffic, private labels offer a strategic advantage in building loyalty both in-store and online. Retailers that can deliver premium experiences at accessible prices will redefine the future of grocery retail.
How will private labels impact the consumer experience in the future? Download our Grocery Report for more.
