Private Label Brands: How Store Brands and Manufacturers Work

When you walk down a supermarket aisle, you are often faced with a choice between a famous national brand and a more affordable alternative. These alternatives are known as private label brands. A private label is a brand owned by a company that sells the product directly but outsources the actual manufacturing to a third party. In this arrangement, one company produces the goods, and another company sells them under its own unique brand name.

One of the most common forms of private labeling is the store brand (also known as a house brand or own brand). These are brands owned by and sold exclusively at a specific retailer, such as a supermarket chain. While they are designed to compete with premium national brands, they often offer a significant cost advantage to consumers.

Two brands of aspirin. Left: a national brand made by Bayer. Right: a private-label brand. Note the price difference and similar boxes.

Key Facts

• Private labels are owned by the retailer but manufactured by third-party suppliers.
• Store brands are typically sold exclusively at the retailer that owns them.
• White-label products differ from private labels because the manufacturer sets the specifications and can sell the same product to multiple clients.
• Private label credit cards (PLCCs) are store-specific cards that do not carry a major payment network logo like Visa or Mastercard.

Private Label vs. White Label: Understanding the Difference

While the terms are often used interchangeably, there is a technical distinction between private-label and white-label products. In a private-label relationship, the client (the retailer) sets the specific product requirements and specifications. The manufacturer produces the item exclusively for that one client.

Conversely, a white-label product is one where the manufacturer determines the specifications. The manufacturer can then sell that exact same product to many different clients, who each apply their own branding to it.

The Mechanics of Store Brands

In the grocery industry, store brands like Walmart's Great Value, Kroger's Simple Truth, or Aldi's Specially Selected are staples of the shopping experience. While most of these products are outsourced to third-party manufacturers, some large retailers manage their own production. For example, in 2018, Kroger reported that approximately 40% of its private-label products were manufactured internally across 38 different plants, including bakeries and dairy farms.

The relationship between manufacturers and retailers is often discreet. Many retailers use non-disclosure clauses to keep their suppliers anonymous. However, some manufacturers are permitted to claim their involvement. A notable example is Costco, whose Kirkland Signature coffee bags state they are "Custom roasted by Starbucks."

νώμα (noma, "remembrance, memory"), a private-label trademark of Lidl for its Greek branch. Around 80% of the products in a Lidl store are private labels.

Interestingly, the same company may manufacture both a premium national brand and a budget-friendly store brand. While some products are identical in formula and only differ in packaging, others may use different recipes depending on the client's specifications. A 2007 recall involving Menu Foods Inc. revealed that over 100 different pet food brands—both premium and private label—were actually produced by the same single company.

Shelves in a Swedish grocery store showing both private label and international brands

The Evolution of Private Labels

Private labels have undergone a significant transformation since they emerged in the 19th century. Initially, they focused strictly on providing low-cost alternatives to national brands. During the first half of the 20th century, quality standards for these brands often declined as retailers prioritized low prices above all else.

This trend reversed in the latter half of the century. By the 1970s and '80s, private labels saw improvements in both quality and visual presentation. By the 1990s, they had become a legitimate threat to established national brands. This era also saw the rise of "premiumization," where retailers introduced higher-end, more expensive private-label options to capture a wider market share.

Generic Brands vs. Store Brands

The term generic brand is often associated with store brands, but they have a distinct history. Introduced widely in the U.S. in 1977, generic products typically feature very plain packaging, often listing only the product type (such as "Cola" or "Batteries") rather than a brand name. While the terms are sometimes used interchangeably today, "generic" can sometimes carry a negative connotation implying a lack of quality.

Private Label Credit Cards (PLCC)

The concept of private labeling extends into the financial sector through private-label credit cards, also known as store cards. These cards are branded with the retailer's logo and can only be used at that specific company or its affiliates. While they use networks like Visa or Mastercard to process transactions, the cards themselves do not display the payment network's logo.

It is important to distinguish these from co-branded credit cards. While a private-label card is restricted to one retailer, a co-branded card features the payment network logo and can be used anywhere that network is accepted, much like a standard credit card.

Summary of Brand Types

Comparison of Brand Categories

Brand Type	Ownership	Primary Characteristic
National Brand	Manufacturer	Premium positioning and wide availability.
Private Label	Retailer	Made to specific retailer requirements by a third party.
White Label	Manufacturer	Standardized product sold to multiple different clients.
Generic Brand	Manufacturer	Minimalist packaging, often just the product name.

Frequently Asked Questions

What is the main difference between a store brand and a national brand?

The main difference is ownership and distribution. A national brand is owned by a manufacturer and sold in many different stores, whereas a store brand is owned by a specific retailer and sold exclusively through their own channels, usually at a lower price.

Are private label products lower quality than name brands?

Not necessarily. While private labels were once associated with lower quality, the trend has shifted toward "premiumization." Many modern store brands offer high quality and, in some cases, are manufactured by the same companies that produce national brands.

What is the difference between private label and white label?

In private labeling, the retailer dictates the specific product requirements. In white labeling, the manufacturer determines the product specifications and sells the same item to various retailers.

Can I use a private label credit card anywhere?

No. A private-label credit card (or store card) is designed to be used specifically at the retailer that issued it. If you want a card that can be used anywhere, you would need a co-branded credit card.

What are generic brands?

Generic brands are products that typically lack a brand name and use very simple, plain packaging. They are often sold at prices lower than both national and private-label brands.