Readers that know me know that I spent my entire career across working for MegaCorps, running branded food businesses. My job was leading a team to figure out the best way to get consumers to choose our soup, yogurt, or frozen pizza over our competitors – which include the low priced store brand. Despite having a fair amount of MegaCorp stock options yet to be exercised, I am today suggesting that you get to know store brand packaged goods as a modest way to cut your spending.
I may lose a few MegaCorp colleagues that are subscribers, but managing your spending is key to reaching financial independence and early retirement (FIRE) and food is the third highest annual budget category for most households after housing and transportation.
Store brand or private label products aren’t anything new. They represent a growing share of total consumer packaged goods sales (almost 18%) and the majority of Americans (70%) say that they are a good alternative to branded products. As brand marketer, I fought hard to ensure that our products delivered higher quality, better features, and more value than store brand competitors, but not all brands take the challenge seriously.
Here are a few things that the big brands know that they use to their advantage:
1. Store Brand Savings Seem Small – Yes, the savings on an individual private label purchase comparison seems small. It may be just a couple quarters more for a box of brand name cereal like the Kellogg’s Raisin Bran in the photo above versus the Target Market Pantry knock-off next to it. But this savings multiplied across 20-30 items in your grocery cart can mean $10-15 of savings each shopping trip. Trip after trip, year after year, the savings add up.
2. Quality Is Better Than You Think – Retailers make higher margins on the products that have their names on it than they do on the national brands. They also want you to be loyal to their store, so that motivates them to get the quality right. I attended the Private Label Manufacturers Association show in suburban Chicago a few years ago and was very impressed with the quality of the store brand products in most categories.
I can tell you that in numerous blind taste tests of MegaCorp branded products relative to store brand competitors I was regularly surprised at how well they could knock off our flavors, textures, and claims. When tastes are slightly different, preference is often only a result of conditioning – the more you eat something, the more you get used to it, and that becomes what you prefer.
3. Store Brand Goods Are Amazing Investments – When you buy a store brand product you may not think about it’s investment return, but a $2.54 box of Raisin Bran offers the equivalent of a 19.1% immediate return on your investment versus buying the $3.14 branded alternative. Where in this world could you get an immediate, guaranteed return on your investment approaching twenty percent? At that level of return, you should be looking for as many store brand products to work into your weekly spending as possible.
4. Think Beyond Grocery – Store brand products are most widely accepted in high-frequency, commodity categories like milk, bread, and breakfast cereal. That said, some of the biggest savings are available in categories outside of grocery where each product costs a lot more: laundry detergent, razors, cold medicine, vitamins, and beauty products.
While these products are generally no more difficult to engineer, consumers seem to avoid them because they are big buck purchases with higher potential consequences. I would suggest trying them and you might be surprised how similar they are. A two-pack of Target Brand multipurpose contact solution is over $5 cheaper than than the Opti-Free version at my store ($11.29 vs $16.99, or 34% savings).
Taken even farther, one can also get high-quality “house brand” apparel or hard goods like JCPenney’s Arizona Jeans, Macy’s Alfani or Club Room, Sears’ Kenmore, and Home Depot’s Husky Tools. Almost every retailer has exclusive, or private label brands offered. Amazon is quietly rolling out six new private brands for apparel with names like Franklin & Freeman (Men’s), Society New York (Women’s), North Eleven (Accessories), and Scout + Ro (Children’s).
Given the amount of branded products people consume every day and the amount they can save from private label, I’m surprised that store brand products are still relatively small in the US. Store brand products are much more developed in Europe, where they are typically purchased by a third of consumers – more than 40% in the United Kingdom.
I did some fun with math to see how much someone could save by switching 15 brand name products a week for store brand products and I was surprised it wasn’t higher. It added up to about $11K over a full 25 years. That would be $17K dollars if all of the saving would be invested at 8% a year.
Add in savings from store brand clothes, laundry detergents, healthy & beauty products, and even a Kenmore appliance when you need one and I would guess you could reach your early retirement number 6-12 months earlier than if you stuck to national brands. That assumes that the you find comparable quality and reliability in the products.
What are your views on store brand products – critical for your FIRE journey, or not worth the bother?
Image Credit: MrFireStation.com