The Rise of Store Brands: How Private Label Expansion is Reshaping the Food Retail and Consumer Goods Industries

The retail landscape is undergoing a seismic shift as private label brands surge in popularity, challenging the dominance of national brands and reshaping profit dynamics across the food retail and consumer goods sectors. Retailers like Walmart, Target, and Albertsons are leveraging private labels to boost margins, meet evolving consumer demand for affordability, and outmaneuver traditional CPG giants. Meanwhile, companies like General Mills and Conagra face mounting pressure as shoppers trade down to store brands. Here's how this transformation is playing out-and what it means for investors.

The Retailers' Playbook: Private Labels as a Margin Engine

Private label expansion is no longer a niche strategy-it's a core pillar of retail competitiveness. Walmart, Target, and Albertsons have all made significant strides in this arena, with their private label sales growing at a pace that outstrips national brands.

Walmart has long been a private label leader, but its recent performance underscores the category's profitability. In 2023, Walmart's private label dollar sales in the U.S. hit $225 billion, with gross margins for these products reaching up to 35%-significantly higher than the 26% margins for national brands. Despite a challenging macroeconomic environment, Walmart's private label brands achieved household penetration rates exceeding 86% in key categories like groceries and pantry staples. However, the retailer's overall net profit margin dipped to 0% in Q2 2025, highlighting the broader cost pressures it faces. Still, private labels remain a critical lever for margin resilience.

Target has turned its private label strategy into a growth engine. Its store brands, including Good & Gather and Favorite Day, generated $271 billion in sales in 2024 alone, with a 4.4% year-over-year increase in the first half of 2025. Target's aggressive innovation-launching over 600 new private label items in 2025-has helped it capture market share in categories like home goods and groceries. While its net profit margin dipped to 3.72% in Q3 2025, the company's focus on cost management and digital fulfillment has stabilized its margins compared to the inventory-driven challenges of 2023.

Albertsons is accelerating its private label push, aiming to boost sales penetration from 25% to 30% by 2025. The retailer's 2.2% identical-store sales growth in Q2 2025 and a 23% surge in digital sales reflect the success of its value-focused strategy. Though its net profit margin fell slightly to 1.2%, Albertsons' leadership attributes this to strategic investments in customer engagement tools and omnichannel capabilities, which are expected to drive long-term margin accretion.

The CPG Sector's Crossroads: Adapt or Be Left Behind

As private labels gain traction, national brand manufacturers like General Mills and Conagra face a dual threat: shifting consumer preferences and margin compression.

General Mills, for instance, saw a 13% drop in North American net sales in 2025, partly due to inflation-driven shifts in consumer behavior and the impact of the U.S. government shutdown on SNAP funding. The company has responded by lowering prices on key brands like Pillsbury and doubling down on targeted marketing to reinforce brand equity. Similarly, Conagra has grappled with a 1.5 percentage point volume decline, driven by inflation and tariffs on materials. Conagra's strategy has focused on maintaining stable pricing and avoiding deep discounts, while prioritizing growth in frozen and snack categories.

The PLMA projects that U.S. private-label sales will reach $277 billion in 2025 and climb to $462 billion by 2030. For CPGs, this trend signals a need to innovate or risk obsolescence. Companies that can differentiate their products through premium quality, sustainability, or brand storytelling may retain their market share, but those relying on price competition will struggle.

Investment Implications: Retailers Win, CPGs Face a Reckoning

The private label boom is a tailwind for retailers, offering a path to higher margins and greater control over product offerings. Walmart's and Target's private label strategies are particularly compelling, as both have demonstrated the ability to balance cost pressures with innovation. Albertsons, while smaller, is a sleeper play with strong growth potential in a fragmented grocery sector.

For CPGs, the outlook is more nuanced. General Mills and Conagra must navigate a high-cost environment while defending their brand equity. Investors should watch for companies that pivot toward premiumization or strategic partnerships with retailers to co-create exclusive products. Those that fail to adapt risk being squeezed by both private labels and discounters.

The Bottom Line

The rise of private labels is a structural shift in retail, driven by affordability demands and the erosion of brand loyalty. Retailers are winning by capturing higher-margin sales and tailoring offerings to price-sensitive consumers. Meanwhile, CPGs must innovate or face declining relevance. For investors, this means doubling down on retailers with strong private label ecosystems and scrutinizing CPGs for signs of strategic agility.

As the sector evolves, one thing is clear: the era of the national brand is fading, and the future belongs to retailers who can turn store brands into household names.