Estimated reading time: 7 minutes
Key Takeaways
- Own brands now account for *over half* of UK grocery spend, a share that keeps climbing.
- A typical basket of private-label goods costs **about 17 % less** than big-name alternatives, saving the average family nearly £900 a year.
- Blind taste tests from consumer group Which? show minimal quality gap on staples such as cheddar, tinned tomatoes and tea.
- Loyalty schemes and smart algorithms push own brands to the top of search results, reinforcing repeat purchase.
- Analysts at HSBC estimate every one-point rise in own-label penetration adds 15 bps to a supermarket’s operating margin.
Table of Contents
Economic Pressure and the Price Gap
UK food inflation may have retreated from its 2022 peak, yet prices remain *25 % higher* than two years ago, according to the Office for National Statistics. Research house Kantar calculates that filling a trolley solely with own-label products costs roughly 17 % less than branded equivalents. Multiplied across a family’s annual shop, that difference nudges £900—money households squeezed by mortgage and energy bills cannot ignore.
“Private-label has evolved from cheap substitute to first choice for value-savvy shoppers.” – Kantar UK Grocery Outlook 2024
Behavioural Shifts in the Aisle
A February 2025 survey of 15,000 shoppers by NIQ shows half now buy more own brand items than a year ago; among under-35s the share hits 62 %. Three motives dominate:
- Price transparency via comparison apps.
- Perception that quality has *genuinely improved*.
- Ethical edge—higher animal-welfare, lower plastic and local sourcing.
How Supermarkets Have Responded
Sainsbury’s has added more than 1,500 new own-label lines since 2021. Tesco re-fired in-store bakeries in 200 extra branches after tests proved freshness drives loyalty. Meanwhile, Morrisons price-matches 500 key items to Aldi twice weekly, and even premium-leaning Waitrose froze prices on 250 essentials through the spring import crunch.
Digital channels magnify the push. Algorithms on Ocado favour high-margin own brands in search results, while substitution logic offers a private-label swap when branded stock runs short.
Narrowing the Quality Gap
Blind tasting by Which? in December 2024 scored a leading supermarket’s mature cheddar at 78/100—just one point shy of the market-leading brand but at half the price. Food-science lab Campden BRI found nutrient density differences “insignificant” across 15 of 20 staple products tested, and where gaps existed, lower salt often favoured own brands.
Financial Impact on Retail Chains
When Tesco reported FY 2023/24 results, revenue rose 6 % but operating profit jumped 13 %, helped by richer own-label mix and lower wastage. HSBC analysts reckon each 1-percentage-point gain in penetration lifts a UK supermarket’s operating margin by ~15 bps under current cost conditions.
Investor Considerations
Equity investors see two levers: *volume resilience*—shoppers trade down within the same store instead of defecting—and *margin upside* from higher private-label mix. Bondholders like the steadier cash flows that follow.
Risk? A sudden commodity price slump could narrow the gap, or a quality scandal could dent trust. Retailers are therefore doubling down on audits, DNA meat testing and transparent sourcing.
Conclusion
Own brands have travelled far from “budget basics” to *hero products* that combine price advantage with credible quality and sustainability credentials. With disposable incomes still bruised and younger shoppers valuing transparency over nostalgia, supermarket-controlled labels look set to keep winning the trolley battle.
FAQs
Why are supermarket own brands cheaper?
Retailers cut out advertising costs and negotiate directly with manufacturers, passing savings to shoppers while still enjoying higher margins than on branded goods.
Has quality really improved, or is it just marketing?
Independent tests by Which? and nutrient analysis from Campden BRI confirm that many own-label products now match or beat brands on taste and nutrition.
Could the trend reverse if inflation falls?
A sharp drop in raw-material costs could reduce the price gap, tempting some shoppers back to brands, but entrenched habits and loyalty-card incentives make a full reversal unlikely.
Do own brands hurt or help suppliers?
Contract manufacturing for retailers offers volume stability but slimmer margins. Many suppliers hedge by producing both branded and private-label lines.
Are own brands always the sustainable option?
Not automatically, but supermarkets increasingly use own labels to pilot recycled packaging, carbon-neutral farming and shorter supply chains—initiatives they control more directly than big FMCG companies.
