Why do store brand products often cost less than national brands?

Don't let a loyalty to national brands decimate your paycheck. Flickr / Marawder

Although millions of dollars in marketing is meant to convince you otherwise, store-brand products are often just as good as name-brand products and cheaper, too.

That's why more informed shoppers are more likely to buy store-brand, according to a 2014 study from the University of Chicago's Booth School of Business, which found that chefs tended to buy store-brand foods and medical professionals tended to buy store-brand drugs.

If this surprises you, it may be because store-brand products, sometimes called generics, used to be a class below name-brand, according to Tod Marks, senior projects editor at Consumer Reports.

"'Generics' is derogatory," Marks says. "It harkens back to the 1970s when the economy was struggling and a lot of stores came out with generic products. They were canned or packaged goods in nondescript, simple containers that said 'green beans,' or 'peaches.' They weren't very good, but they were cheap, and when the economy wasn't very strong they appealed to a lot of people."

The price-over-quality model has gone out of style, however, and today we have store brands like Whole Foods' 365 brand, Costco's Kirkland Signature, or Target's Archer Farms, all of which tend to get high ratings from consumers. 

Store brands, also known as private label products, "are made to high-level specifications put forth by the manufacturer," Marks say. They aren't necessarily meant to be exact copies of national brand products — often, they stand on their own (consider Trader Joe's, where the only products available are from the store).

One reason they're cheaper than their national brand counterparts is that they don't have the research, development, and advertising costs, so they're able to skim that off the price. By and large, Marks estimates, store brand grocery store products cost about 25% less than national brands.

Of course, some name-brand products are still worth it — but finding out when is tricky.

Looking back at that Booth study, it seems that store-brands make more sense for some products and less for others. Here's a chart of how likely chefs were to buy store-brands in different categories (most likely on top):

University of Chicago Booth School of Business

You'll see that professional chefs are more likely to buy the store-brand versions of a few products in particular:

  • Pantry staples, like salt, sugar, and baking soda
  • Dried, frozen, and canned fruit
  • Baking mixes
  • Frozen and canned vegetables
  • Spreads, like jams, jellies, and "dairy spreads" (not including butter)
  • Breads and baked goods
  • Cheese

Keep in mind that while chefs' choices might indicate categories with the most wiggle room, quality-wise, it's also a matter of personal preference. The cheese snobs among us may never be inclined to part from their brand-name favorites.

Another noteworthy category of grocery store purchases is paper products. Many shoppers find that store-brand paper products like toilet paper and paper towels aren't as effective, and therefore require more paper to accomplish the same job.

According to Marks, however, this has changed in recent years. "There was a time when store brands tended to maybe not be as good as national brands in things like liquid detergent, toilet paper, and paper towels," he says. "Now when we do toilet paper tests, like with White Cloud, sold by Walmart, the quality, strength, and softness was top-rated. It was every bit as good as Charmin Ultra Soft."

You may be able to save money buying store-brand spices. Flickr / sara marlowe

Where else might you choose to buy store-brand at the grocery store? Consumer Reports taste tests have come up with the following products:

  • Nuts. A 2013 Consumer Reports experiment found that cashews in particular hold up well when produced by stores. The year before, they found similar results for walnuts.
  • Condiments, like ketchup, mayo, and maple syrup. Consumer Reports also found that these store-brand products performed strong, and you'll notice the chefs surveyed have a similar opinion.
  • Whole-grain pasta. Whole Foods and Trader Joe's produce particularly strong versions.
  • Spices. Particularly if you're baking with spices or using a recipe with many ingredients, store-brand spices hold up just as well.

Even in these categories, however, not every store brand is going to be good, and in some cases you're better off with a brand name.

"Store brands are as different as sunrise and sunset," Marks says.

Savvy shoppers should be prepared to do systematic product testing at the grocery store. No matter how well-reviewed a store-brand product, if you don't like it, it's a waste of money.

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Generics Shopping Groceries


Why store brands are cheaper?

Discount grocery stores such as Trader Joe's and Aldi keep their costs low because they deal primarily in their own brands. Wegmans is an interesting example since it has a lot of its own brand loyalty, not only as a grocery store chain, but also for its Wegmans label.

What is the difference between a national brand and a store brand?

A national brand is a prominent or established product, while a private label or store brand is an exclusive product made or acquired for sale through a particular provider. Retailers commonly sell a mix of national brands and private label goods to take advantage of the benefits of each.

Why are generic brands better?

Generic drugs contain the same active ingredient as their brand-name counterparts. However, they usually cost much less than the brand-name version. Before the Food and Drug Administration (FDA) approves a generic drug, the medication must meet rigorous approval standards.

Are generic brands just as good?

Most consumers believe that generics are of a lesser quality compared to brand names. The quality of generic brands, though, is generally comparable to name brand products. Despite the difference in cost between name and generic brands, there is little taste or nutritional difference between them.