It's no secret that private-label grocery products can save shoppers money.But after visiting some stores in three areas of the country, SN's undercover shoppers found wide swings in the level of savings between different product categories and stores.For example, shoppers in upstate New York, downtown Chicago and two affluent towns in California will, on average, find that store brand vanilla ice

It's no secret that private-label grocery products can save shoppers money.

But after visiting some stores in three areas of the country, SN's undercover shoppers found wide swings in the level of savings between different product categories and stores.

For example, shoppers in upstate New York, downtown Chicago and two affluent towns in California will, on average, find that store brand vanilla ice cream in half-gallon containers has the highest price differential from the national brand, while an 18-ounce jar of private-label peanut butter or a 24-ounce bottle of private-label ketchup offers less of a savings in the store brand variety.

And SN found that the price of private-label lines can vary greatly based on geographic region, even among stores that share the same parent company.

The emerging snapshot taken from six categories surveyed in eight stores showed store-brand prices ranging from 20% to 30% less than the average national-brand price, with an overall average of 24% lower than the average price of comparable national brands.

SN compared private-label and national-brand prices on similar-sized products in the cereal, coffee, ice cream, ketchup, peanut butter and pasta categories. The primary store-brand product was then compared to an average price of national brands found in the same store, and the percentage differential was developed. Sale prices of national brands were noted, but in all cases, the regular everyday prices were used as the basis of comparison for the sake of statistical consistency.

The Safeway store had the lowest average-price differential at 18%, while Ralphs and Stop & Shop each registered 22%. The Jewel-Osco store, at 23%, the Wal-Mart Supercenter, at 25%, and Price Chopper, at 25%, were closest to the 24% overall average. Meanwhile, Hannaford was at 27% and Dominick's was at 28%.

Among the categories, private-label coffee, most in the 34.5-ounce and 39-ounce sizes, had the lowest differential, at an average 15% below the average price of national brands. Ketchup in the 24-ounce and 36-ounce sizes was next at 18%; followed by peanut butter, in the 18-ounce size, at 23%; cereal, ranging from 13.5 ounces to 20 ounces, at 24%; 1-pound spaghetti, at 35%; and half-gallon ice cream, at 38%.

SN tracked budget-priced and premium-priced private-label products, but there weren't enough of them in all but two categories to develop meaningful statistics. In the cereal category, premium products carried by Safeway, Dominick's and Jewel-Osco were at an average of only 6% differential from the average national-brand goods, and in the ice cream category, premium products were carried by Stop & Shop, Hannaford, Ralphs, Safeway, Dominick's and Price Chopper, and they were at an average 15% differential. When contacted by SN, representatives from Price Chopper and Kroger declined to comment on our study, claiming that by doing so they would risk revealing private-label pricing strategy to competitors.

While some of these chains appear to be doing a good job positioning their store brands as an equal alternative to the national brands, others still rely on price, which is not an effective strategy, said consultant Frank Dell, president, Dellmart & Co., Stamford, Conn. "There are opportunities here to increase sales and profits by better pricing," he said.

SN's report "truly confirms my research and the opportunities I believe are out there to have a significant impact on the business. Also, it represents an opportunity to distinguish a retailer vs. the alternative formats that are out there," Dell said.

Although the Safeway store in the survey was in one of the most affluent neighborhoods in the country, and the Safeway-owned Dominick's came in with much lower private-label pricing on the same products, that chain still represents one of the best practices in the store-brand universe, he said. "Safeway has publicly stated that private label is important to them. But running an 18% differential is proof positive that you don't need to discount this stuff that much," Dell said.

A recent survey conducted by the Gallup Organization, Princeton, N.J., and released by the Private Label Manufacturers Association, New York, found that more than half of consumers believe store brands are just like the national brands.

Jonathan Ziegler, San Francisco-based managing director, Deutsche Banc Alex. Brown, New York, is based in the same region as the Safeway store visited. He confirmed the success of that chain's store-brand program. Citing personal experience, as well as that of his friends and colleagues, he said, "We all believe Safeway's private-label products are better than the national brands. Therefore, I think they can use it as a powerful tool to build proprietary customer loyalty."

The difference between the California Safeway and the Chicago Dominick's is probably attributable to the local exigencies, he said. "There is never any consistency among markets. Dominick's is run separately, and that's probably what their Chicago people are telling them to do," he said.

Meredith Adler, an analyst with Lehman Brothers, New York, singled out Safeway and Kroger as having "a real disciplined marketing approach to their private label," as well as Ahold stores. Pathmark is also on that path, but not A&P or Winn-Dixie, which she just visited.

Brian Dowling, spokesman for Safeway, Pleasanton, Calif., said the pricing of private label "depends on lots of different factors. We base price on cost issues, competitive issues. I can't comment on a specific area, but if you're shopping private label in our stores, you're getting a discount, and in most cases a significant discount from the national brand price."

The day may come when supermarkets will be able to charge more for their store-brand goods. "If they could somehow get people used to the fact that the quality is so good, they could charge a premium, but I don't think they are there yet," Ziegler said.

Supermarkets have to walk a fine line in pricing their private-label products, he said. "There are some price points where if it is too cheap, then it turns off the customer because they think the quality isn't as good. On the other hand, there has to be a savings vs. the national brand because you have to induce the customer to try it," Ziegler said.

The numbers in SN's study are misleading in one respect, said Brian Sharoff, president of the PLMA, because they don't take into account the almost-weekly promotions on national-brand items in any given category.

"In point of fact, for the pricing to be competitive, the national brand on any given day is less than these numbers." He said the typical differential is closer to 10% to 15% than the 18% to 30% in the SN study.

"Unfortunately, this is a snapshot and not a motion picture. You are not seeing the fact that on any given day the retailer is offering the consumer national-brand discounts in the form of coupons, in the form of promotional sales prices and in the form of television advertising that may build traffic," Sharoff said.

"The national brands have created their own problem in that they've trained people to buy on deal," said Craig Espelien, corporate director of store brands, Supervalu, Eden Prairie, Minn. "National brands are not interested in building store loyalty, just their own brand loyalty. That creates an environment where store brands can be used to build consumer ties to the store."

For example, he pointed to the example of Wal-Mart's Ol' Roy pet food as an example of how private label ties into store brand equity.

What Our Shoppers Saw

Safeway 2580 California Ave., Mountain View, Calif.

Ralphs Marketplace 815 Canyon Del Rey Blvd., Monterey, Calif. (owned by Kroger)

Dominick's 1340 S. Canal St., Chicago (owned by Safeway)

Jewel-Osco 1224 S. Wabash Ave., Chicago (owned by Albertson's)

Hannaford Bros. 1490 Route 9, Wappingers Falls, N.Y. (owned by Delhaize)

Price Chopper South Hills Mall, Poughkeepsie, N.Y.

Super Stop & Shop 1357 Route 9, Wappingers Falls, N.Y. (owned by Ahold USA)

Wal-Mart Supercenter 2400 Route 9, Fishkill, N.Y.


An end cap of Safeway Select ice cream (on sale) was almost empty on a busy Saturday afternoon.

A shelf-talker by Ralphs Deluxe Vanilla ice cream read "National Brand Quality."

Besides the Dominick's store brand, this store also offered Safeway Select products from its corporate parent.

This new two-level store placed a heavy emphasis on its loyalty card program.

Nut butter options included 16-ounce jars of organic almond or cashew butter at $6.49.

At $6.99, store brand coffee in the 34.5-ounce container cost the same as a few comparable national brand varieties.

This store had the least amount of ketchup offerings in the 24-ounce size than others visited by SN.

Many items reviewed in this store had faded, torn WIC shelf labels under the products.