Private Labels Gain Importance in the Consumer Goods Market

The sight on supermarket shelves has long been familiar to consumers: food, beverages, hygiene products, and cleaning supplies sit side by side as lower-priced retailer private labels next to well-known branded products. However, the market dynamics for fast-moving consumer goods (FMCG) are shifting. Private labels are no longer merely the cheaper option in times of rising prices. For many consumers, they are becoming a reliable choice when price, quality, and trust align. As a result, they are not only reshaping competition between products but also redefining the balance of power between manufacturers and retailers.

A recent study by Porsche Consulting, based on a representative online survey of 1,500 grocery shoppers in Germany, underscores this trend. The study covered food and personal care categories, actual switching behavior over the past twelve months, future purchasing intentions in the event of rising household income, and key drivers such as price-performance ratio, quality, trust in retailers, and so-called “red-line” categories. The central insight: brand loyalty is not disappearing—but it must now be earned anew in every category.

Brand loyalty becomes situational

Brand loyalty has long been the foundation of the consumer goods industry: awareness, habit, and trust justified higher prices and stabilized market shares. This foundation, however, is increasingly eroding. More than half of respondents have at least partially switched from manufacturer brands to private labels over the past twelve months. Around half of these consumers would remain with private labels even if their household income increased by 30 percent.

What emerges is a structural shift: consumers have learned that private labels deliver sufficient – or even superior – quality in many everyday situations. What once was a price-driven compromise is becoming a new routine. Loyalty is therefore less driven by origin or brand awareness and increasingly by repeated positive product experiences.

Households with medium to higher budgets, in particular, exhibit high switching rates. They do not turn to private labels out of necessity, but as a result of rational choice. For manufacturers, this means that premium pricing requires a demonstrable premium justification. For retailers, it underscores that private labels can also attract high-spending customer segments – provided assortment, quality, and price architecture are professionally managed.

Price-performance opens the door, quality keeps it open

Price-performance is the strongest driver of switching. In the study, more than 50 percent of consumers cite this factor as their primary reason for purchasing private labels. What follows, however, is critical: around 40 percent of respondents in the food category perceive the price of manufacturer brands primarily as a marketing premium. A similarly high share considers the quality or taste of private labels to be equivalent or superior.

In the personal care segment – covering products such as skincare, haircare, and hygiene – the same pattern emerges in terms of effectiveness, ingredients, and trust in the retailer.

As a result, the traditional brand promise is splitting into two components. Awareness remains relevant but is losing its power as a standalone justification for willingness to pay. Superiority must now be proven – through better formulations, transparent ingredients, clearer performance claims, or an experience that is tangible in everyday use. Heritage and advertising can support these elements – but they cannot replace them.

For retailers, price is not merely a discount lever, but an entry point into a trust-based relationship. Private labels must be affordable enough to encourage trial – and strong enough to remain in the shopping basket over time. For manufacturers, communication becomes effective when it highlights genuine product differentiation. Where consumers perceive only a marketing premium, the return on traditional brand investments declines.

Retailers become trusted brands

Private labels are not gaining traction solely because they are cheaper. They are succeeding because retailers themselves have become trusted entities. Consumers no longer experience retailers such as Rewe, Edeka, dm, Lidl, or Aldi merely as points of sale – but as curators of assortments. Retailers select, evaluate, structure, and consistently deliver an expected level of quality in everyday shopping. This trust transfers directly to their private labels.

The top 10 private labels in terms of consumer trust highlight the breadth of this effect. Alnatura leads the ranking with 22 percent of mentions, followed by Milbona, Gut & Günstig, Rewe Beste Wahl, and ja!. Rewe Bio, Edeka Herzstücke, K-Classic, dmBio, and Freeway also rank among the leaders. Notably, trust is not confined to a single price tier. Organic, premium, entry-level, and discount lines can all achieve credibility if they clearly align with the retailer and deliver a consistent, transparent value proposition.

For retailers, this represents a strategic mandate. Private labels should not be managed merely as margin levers or price anchors, but as a structured brand portfolio with clearly defined roles. Entry-level brands drive frequency and price perception. Premium and organic lines create differentiation and can retain high-value customer segments. Between these, a coherent structure is required – one that logically connects quality, origin, sustainability, and price. Retailers that manage these roles effectively can create private labels that generate sustained demand.

For manufacturers, the competitive landscape is shifting. Brands no longer compete solely with lower-priced alternatives, but with the retailer’s trust advantage. Manufacturers must acknowledge where retailers control the stronger customer interface – and strengthen capabilities that are difficult to replicate: research and development, sensory excellence, proprietary formulations, credible sustainability credentials, and emotional brand worlds anchored in tangible product substance.

Manufacturers must set clear priorities

The survey also shows that not all categories are equally affected. Nearly one-third of consumers no longer have a “red-line” category. For this group, switching to private labels is fundamentally conceivable across all categories. At the same time, categories such as coffee, oral care, deodorants, or haircare remain more protected, as taste, health, routine, or social visibility play a greater role. 

These differences must shape portfolio strategies. Where a manufacturer brand delivers a distinctive taste experience, or demonstrably outperforms alternatives, it should be actively defended. Where the difference is barely perceptible to consumers, harvesting, partnering, or exit strategies may be more realistic than further investment in reach. The key is to define a clear strategic direction for each category: defend, develop, collaborate, or deliberately deprioritize.

In this context, private-label production is not a capitulation for manufacturers – it can be a strategic decision. Companies with efficient production, procurement expertise, or quality leadership can leverage private labels as a volume and partnership model. This secures capacity utilization, strengthens retailer relationships, and provides access to growing segments. The prerequisite is clear guardrails: no dilution of proprietary brand positioning, strict separation of formulations and innovation domains, and transparent profitability targets by category.

Brand value is once again created at the product level

The implications for manufacturers and retailers are similar. Manufacturers must rethink brand value from the product outward. Retailers must manage private labels as brands. Both sides require greater clarity on the role of their products: Why do they end up in the shopping basket? What value do they deliver? How is this value perceived? And what price is credible?

For manufacturers, this means more portfolio realism. Three questions provide guidance: Is the product behind the brand unique? Does it deliver a product benefit that is tangible and provable in everyday use? Does it carry emotional relevance that cannot easily be copied by the retailer? Only if at least one of these questions is clearly answered does the brand justify continued investment.

Retailers face a different challenge: the more successful private labels become, the higher expectations for consistency, transparency, and innovation. Private labels must not remain confined to pure price logic. They must be actively managed across quality, assortment clarity, packaging, origin, and digital customer touchpoints. Particularly in premium, organic, or trend segments, this enables retailers to create differentiation without competing solely on shelf space or price.

Younger consumers illustrate why this depth matters. The study shows that Gen Z is not driven by price alone. In certain categories, they exhibit stronger brand preferences than older groups – but evaluate brands differently: authenticity, transparency, sustainability, and tangible product benefits outweigh pure awareness. Purpose without product proof is therefore insufficient. Brand relevance is created on the shelf, not solely in advertising.

The rise of private labels does not automatically displace every manufacturer brand. It primarily displaces offers whose added value is no longer recognizable. The future belongs not to the cheapest brand, but to the most credible role within a category: the retailer that translates trust into a strong private-label portfolio; the manufacturer that proves genuine superiority; or the production partner that enables private labels professionally and profitably.^1;2