Store brands, private labels, national brands and generics – what’s the difference?

If you’re not quite sure what’s going on with the all of the name brand, generic, store brand and private label items you’re seeing in grocery stores these days, you’re not alone. As this trend continues to grow, it’s a good idea to know what’s what when it comes to your food, snacks, household items and pet foods, and whether or not you can really save money without sacrificing quality by purchasing non-brand items.

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Whats Available?

You can find generic items in the bakery, deli, canned goods and boxed item aisle, freezer section, produce section, pharmacy and meat and seafood department. You can also buy household goods, pet foods and just about everything else you regularly buy.

Brand Names

Brand name items include products such as Green Giant and Del Monte vegetables, Coke and Pepsi, Kellogg’s and Post cereals and Eveready and Duracell batteries. These companies spend considerable money on advertising, coupons, promotions, celebrity endorsements and other promotions and must add every promotional dollar they spend to the price of the product.

Store Brands/Private Label

Store brand items are those that are sold under a chain’s name, and they are not available in other stores. Private label items are made for a store, but don’t carry the store’s name. These products are made for the grocery chain by a dedicated food manufacturer, meaning the grocery store does not have a manufacturing plant to make its own goods. Store brands usually come with some promotional spending, such as in-store signage, special mentions in circulators or special packaging.

Generics

Generic items are those that are sold with virtually no advertising or promotion, and even limited label design. These products might be made by food manufacturers who sell them to multiple chains, varying the label slightly. They might feature fewer conveniences, such as pop-top can lids or resealable packages.

Who Makes Non-Brand Items?

Grocery stores that sell generics and store brands do not buy their own farms and open their own canneries. They buy from food companies that don’t have their own brands and make products for many companies – sometimes even competitors. Non-branded food items are made by companies that specialize in food production, packaging and distribution, using most, if not all, of the same quality control and manufacturing procedures as large brands. These companies often make specific knock-offs of branded items, which are put on the shelf right next to the original. You’ll notice this most in the cereal aisle.

Why Sell Cheaper Items?
Why would a grocery store want to sell a generic box of cake mix for $1 when it can sell a brand name mix for $1.80? Because grocers know that some people will always choose the lowest-cost items available, and some shoppers will never buy generics. Offering brands and generics means a store can attract both of these customers.

What About the Quality?

Can you really tell the difference between name brand spaghetti and generics? How about green beans? If you do some blind taste testing of items such as pasta sauces, cereals and milk, you’ll be surprised that you might prefer many generic versions of your favorite foods, and you most likely won’t be able to tell the difference between items such as General Mills Cheerio’s and the generic version called Oaty Oats.

How Much Can You Save?

Generics and house brands can cost up to 75 percent less than branded items, but that doesn’t mean you can cut your monthly grocery bill by that much across the board. This is because you will naturally want to buy some of your favorite brand items no matter how much less expensive generics are. And, some items might not be available in generic or store brand versions.

If your family spends $500 a month on groceries, you might not be able to cut your bill by 50 percent, based on what products you buy. However, if you only decrease your spending by one-third, you’ll save close to $2,000 annually – which doesn’t include your credit card interest. If you carry your grocery purchases on a credit card with a 20 percent APR for one year, you’ll save another $200 by purchasing non-branded items. Using a few coupons, waiting for sales, using a loyalty card, buying in bulk and joining a buyer’s club will save you even more.

Let’s say you can save $2,000 per year on groceries without reducing the amount of food you buy, or reducing the quality of food you buy. If you had started doing this four years ago, you’d have more than $9,000 in your bank account today, based on how you invested your $2,000. If you put that $2,000 into a 401(k) with a match, you can more than double that figure!

Do You Need to Buy Bulk, Use Coupons or Join a Club?

While coupon clipping, bulk buying and joining a buyer’s club can help you save an extra $1,000 per year or more, you don’t need to do more than buy generics and wait for your favorite items to go on sale to significantly reduce your grocery spending each year.

How to Get Started

The best way to decide whether buying generics, store brands and private label items is the best way to go for you and your family is to start small. Buy a few food and non-food items such as milk, toilet paper, bread, lunchmeat or salad dressing. If you like these items, start looking for more options as you walk the aisles of your grocery store, comparing prices. Be prepared, you will occasionally find a generic item (e.g. refried beans or tomato sauce or cookies) you don’t like, but for the most part, staple items will often taste as good or better. If items you’re looking at buying aren’t the same size, look for the shelf tags that show you the cost-per-ounce to find out which item is really cheapest.

A big key to remember about buying off-brand items is that saving money isn’t about the 50 cents or $1.00 you save on items, it’s about the percent savings. Remember, saving 30 percent off a $500 monthly grocery bill is $150 X 12 months X credit card APR.

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