What Is Private Label?

Private label is no longer a background trend in CPG. It’s the core competitive reality for any mid‑market brand that relies on retail distribution.

In 2025, private label products reached a record $282.8 billion in U.S. retail sales, representing roughly 20% of total CPG dollar share and growing at nearly 3x the rate of national brands. Unit share has climbed to nearly 23%, and the average consumer now buys private label across 72 categories, up from 65 just two years ago. Rabobank projects private label to reach 25–30% of total U.S. food and beverage share in the coming years.

For mid‑market brands, that growth is coming directly out of your shelf space, your velocity, and your margins.

Why Private Label Matters for Mid‑Market CPG

Your biggest customers are now also your most sophisticated competitors. Retailers:

• See your sell‑through data, pricing, and unit economics.
• Use that data to identify high‑velocity, high‑margin SKUs they can replace with store brands.
• View your gross margin as their opportunity - if they can make a comparable product, price it below you, and still earn more per unit, they will.

Many brands don’t recognize the threat until a store‑brand alternative is already on the shelf next to them, often with better placement.

How Retailers Decide Where to Launch Private Label

Retailers don’t roll out private label randomly. They run structured analyses across categories, looking at:

• Velocity: How fast each branded SKU sells.
• Gross margin: How much room exists between cost of goods and shelf price.
• Manufacturing complexity: How easy it is to replicate the product at scale.
• Differentiation: Whether the branded product has a moat (IP, formulation, brand equity, or experience) that’s hard to copy.

Categories with high visible margins and low complexity are the most vulnerable. If your pricing makes it obvious that you have substantial margin, you’re effectively flagging your category as a prime target for private label entry.

How Private Label Products Are Made

Most private label products are produced by third‑party contract manufacturers, though some large retailers run their own plants.

• Kroger has reported that roughly 40% of its private label products are manufactured internally across dozens of company‑owned facilities, with the remaining 60% outsourced.
• Retailers typically require strict NDAs, making it difficult to know who is producing the store‑brand product competing with you.
• In many cases, the same manufacturers that produce branded products also make the private label versions.

A well‑known example: Costco’s Kirkland Signature coffee is custom roasted by Starbucks - effectively putting a retailer’s brand on a premium manufacturer’s product at a lower price point.

The “Collapse of the Middle”

Private label is driving a bifurcation in many CPG categories:

• Ultra‑premium brands with clear differentiation, superior quality, and strong stories continue to grow.
• Private label thrives at the value end, offering comparable quality to mid‑tier brands without the cost of brand building, advertising, or heavy trade spend.

The brands getting squeezed are those in the undifferentiated middle:

• Not premium enough to justify a price gap.
• Not distinct enough in product or brand experience to be hard to copy.

Frozen pizza is a clear example:

• Ultra‑premium frozen pizzas are growing.
• Budget and mid‑tier private label pizzas are growing.
• Generic, middle‑of‑the‑road branded pizzas have been losing ground for years.

Real‑World Private Label Dynamics

Smucker’s vs. Trader Joe’s (2025).

J.M. Smucker sued Trader Joe’s, alleging that Crustless Peanut Butter Strawberry Jam Sandwiches were a copycat of Uncrustables, a line doing nearly $920M in annual sales. Smucker’s claimed Trader Joe’s copied the round shape, crimped edges, and blue‑toned packaging. Similarly, Mondelez sued Aldi in 2025, alleging Aldi’s store‑brand snacks too closely imitated Oreo and Chips Ahoy packaging. These cases highlight the rising tension as private label becomes more sophisticated in both product and branding.

Walmart’s Great Value empire.

Walmart’s Great Value spans thousands of SKUs across almost every grocery category. For a mid‑market snack brand trying to win or keep space at Walmart, you’re not just competing with other brands — you’re competing with Walmart’s own line, which delivers higher per‑unit margins to the retailer and therefore has a built‑in advantage in placement and promotion.

Target’s premium play.

Target’s Good & Gather, launched in 2019, was built to compete on quality and design, not just price. It now covers 2,000+ products and represents the premiumization of private label. This directly pressures mid‑market brands that historically positioned themselves as “a step up” from generic store brands; that space is now increasingly owned by retailer brands themselves.

The alcohol exception.

Private label is far less prevalent in alcohol because many U.S. states restrict or prohibit retailers from selling their own branded alcoholic beverages. That regulatory barrier means alcohol brands face a very different competitive landscape than categories like cereal, snacks, or non‑alcoholic beverages, where private label competition is intense and growing.

Private Label vs. White Label

These terms are often conflated but describe different models:

For CPG brands, private label is the sharper competitive threat because the retailer is intentionally investing in product development, packaging, and in‑store positioning to compete directly in your category.

How to Defend Your Brand Against Private Label

For mid‑market CPG brands, the most durable defense isn’t a patent or a lawsuit — it’s building a brand and product that a retailer cannot easily replicate.

1. Build a Distinctive Brand Story

Retailers can copy your formulation and undercut your price. They cannot copy:

• Your founder story and origin.
• Your values and mission.
• Your community and advocates.
• The emotional connection customers feel with your brand.

This is where mid‑market brands have a real edge over both private label and legacy conglomerates. A clear, resonant story makes your brand more than a commodity and gives consumers a reason to choose you even when a cheaper store brand sits next to you on shelf.

2. Invest in Product Quality and Innovation

If your product genuinely tastes better, performs better, or offers something meaningfully different, that gap is your moat.

Retailer private label programs are optimized for:

• Acceptable quality at scale
• Margin efficiency

They are rarely optimized to be best‑in‑class. Brands that survive private label encroachment are those where the consumer notices and cares about the difference.

3. Be Strategic About Pricing and Margins

Remember: retailers view your gross margin as their opportunity.

If your pricing makes it obvious that there’s substantial margin available, you’re effectively pointing to where the next store brand launch should happen.

This doesn’t mean you should:

• Race to the bottom on price, or
• Destroy your own unit economics.

It does mean you should:

• Be intentional about how your margin profile looks from the retailer’s perspective.
• Consider where you can justify a premium with clear differentiation.
• Avoid being a high‑margin, low‑differentiation target.

4. Monitor Your Category Proactively

Many mid‑market brands lack access to Nielsen, Circana, or other syndicated data, so they often discover private label encroachment after it’s already on shelf.

You can still be proactive by:

• Regularly walking key accounts and documenting shelf changes.
• Watching adjacent categories where the retailer has recently launched store brands.
• Noticing if a buyer starts asking unusually detailed questions about your costs, manufacturing, or formulations.

These are often early signals that a private label alternative is being scoped.

MorningAI helps mid‑market CPG brands build the kind of distinctive brand presence that private label can’t replicate. See how autonomous marketing works →