Key takeaways:
- Brands are funding significantly more promotions than private label rivals, yet retailer-owned products continue to gain market share across major grocery markets.
- The shift from BOGOFs and coupons to loyalty pricing and digital offers has handed retailers greater control over how promotions are targeted and deployed.
- Private label’s success is increasingly being driven by improvements in quality, innovation and value rather than price alone, forcing brands to compete on more than discounts.
Branded manufacturers are funding significantly more promotions than their private label rivals, yet retailer-owned products continue to capture a growing share of grocery baskets.
Figures from Circana show private label now accounts for a record 50% of unit sales across Europe’s six largest grocery markets – France, Germany, Italy, the Netherlands, Spain and the UK – even though around 34% of branded unit sales are sold on promotion compared with just 14% of private label sales.
The figures expose a contradiction at the heart of modern grocery retail. Brands are investing heavily in shelf promotions, loyalty pricing, app-based discounts and price-match schemes designed to retain shoppers, but private label continues to gain momentum. Manufacturers are spending millions defending volume and market share while retailer-owned products continue to post some of their strongest gains in decades.
Inflation and pressure on household budgets have undoubtedly helped accelerate private label growth, but retailers were investing in product quality, innovation, packaging and premium ranges long before the cost-of-living crisis pushed value higher up consumers’ priority lists. Consumers who once viewed private label as a compromise now see it as a legitimate alternative, while many are questioning whether branded products justify the premium they command.
Companies such as Nestlé, Mondelez International, PepsiCo, Kraft Heinz and General Mills have built their businesses on the power of brands, yet the latest figures suggest pricing and promotional activity alone may no longer be enough to protect their position. If brands are carrying the bulk of promotional spending while private label continues to gain share, the industry must ask whether its traditional pricing playbook is still fit for purpose.
The cost of constant discounting
Promotions remain one of the most widely used tools in grocery retail. Manufacturers fund temporary price reductions, retailers layer on loyalty-card incentives, and shoppers are presented with a steady stream of offers designed to encourage purchase. The assumption is that discounts create value, drive volume and help keep consumers loyal to established brands.
Circana’s Ananda Roy, senior VP of Strategic Growth Insights, believes manufacturers need to think more carefully about how they use those tools. “With margins already squeezed, national brands will need to take a deep dive into shopper and loyalty data, as well as pricing and promotion strategies if they are to compete and survive,” he said. “Saturating the market with promotions is not a long-term survival tactic.”
Promotional activity may still generate short-term volume, but the latest figures suggest it’s becoming less effective at building loyalty. Discounts can encourage shoppers to put a branded product into their basket today, but repeated promotions do little to convince them to return tomorrow at full price. In categories such as biscuits, confectionery, snacks, cereals and bakery, promotions have become so commonplace that many consumers simply expect them.
The promotional toolbox itself has also changed. Buy-one-get-one-free (BOGOF) offers, multibuy deals and traditional paper coupons were once among the most powerful weapons available to brands. In markets such as Sweden, coupons continue to play an important role through retailer loyalty programmes and targeted offers, while in the US digital coupons have become a central feature of grocery retail. Retailers like Kroger, Walmart and Albertsons increasingly rely on app-based promotions and personalised discounts to drive purchasing decisions.
At the same time, regulation has altered how promotions are deployed. In the UK, restrictions on volume promotions for products high in fat, salt and sugar (HFSS) have forced producers and retailers to rethink how they drive sales in categories such as confectionery, biscuits, cakes and snacks. While loyalty pricing and targeted discounts remain available, the restrictions have reduced reliance on some of the multibuy mechanics that historically helped brands drive volume and encourage larger basket sizes.
The shift towards digital and loyalty-based promotions has handed retailers even greater control over the promotional landscape. Traditional coupons and blanket offers were often brand-led. Today’s personalised discounts are increasingly retailer-led, with supermarkets deciding which products receive visibility, which consumers receive offers and which categories are prioritised.
Manufacturers fund promotions to protect volume, retailers come to expect that support, and consumers learn that waiting for the next deal is often rewarded. While sales may be preserved in the short term, pricing power weakens and margins become harder to defend. The latest Circana figures suggest brands are shouldering most of that burden without seeing a corresponding return in market share.
Retailers are promoting private label less frequently, yet retailer-owned products continue to gain ground. That imbalance raises a difficult question about whether the industry’s promotional spending is solving the problem or simply delaying it.
Retailers hold the strongest hand
Loyalty pricing has strengthened retailers’ position even further. Tesco’s Clubcard Prices, Sainsbury’s Nectar Prices and similar programmes operated by Carrefour, Kroger, Walmart and others have evolved into sophisticated ecosystems built around customer data, personalised offers and targeted incentives.
These programmes undoubtedly help shoppers save money, but they also provide retailers with an extraordinary amount of information about purchasing behaviour. Retailers can see which products consumers buy, which promotions influence decisions and how pricing affects loyalty. That level of visibility gives them a significant advantage over many manufacturers, which often have access to only a fraction of the same information.
Retailers are no longer simply selling branded products; they’re competing directly through their own-label ranges while simultaneously controlling the promotional environment in which those products are sold.
When a supermarket promotes a branded snack, biscuit or breakfast product, it may increase store traffic and generate sales. When it promotes its own-label equivalent, it can achieve the same outcome while often improving margins. Retailers therefore have every incentive to continue investing in private label across value, mainstream and premium tiers because the same promotional activity that drives traffic can also support products that typically generate stronger returns.
Aldi and Lidl demonstrated the strength of that model long before traditional supermarkets embraced it. Both retailers built their growth around private label, proving consumers were willing to move away from household brands when quality and value aligned. Many supermarkets have since followed a similar path by expanding and upgrading their own-label portfolios.
Retailers can now benefit regardless of which product consumers ultimately choose. Branded suppliers fund discounts and help drive footfall, while private label often delivers stronger profitability. Few manufacturers can compete with that structural advantage.
When consumers stop seeing the difference
Private label’s growth ultimately comes down to a simple but uncomfortable reality: many consumers no longer see the quality gap that once existed between retailer-owned products and branded alternatives.
Retailers have spent years investing in product development, premiumisation and innovation. Private label now spans everything from indulgent confectionery and premium bakery products to plant-based snacks, high-protein ranges and health-focused offerings. In some categories, retailers are moving as quickly as branded manufacturers and occasionally faster.
Brands positioned in the middle of the market face the greatest pressure. Premium brands can often justify higher prices through heritage, craftsmanship, quality credentials or consumer trust. Companies such as Ferrero and Lindt continue to command loyalty because many shoppers perceive a clear difference in the products they offer. Mid-tier brands, however, are increasingly squeezed between premium propositions and sophisticated private-label alternatives.
AI could intensify that pressure. Shopping assistants, recommendation engines and digital comparison tools are becoming more focused on value, functionality and relevance than on brand heritage. If two products satisfy the same need, algorithms are unlikely to place much importance on decades of marketing investment. Price, performance and consumer ratings may become more influential factors.
Manufacturers have traditionally relied on brand recognition, advertising and promotions to maintain competitive advantages. Consumers now have instant access to product comparisons; retailers possess unprecedented shopper data; and private label has become a credible competitor across almost every grocery category.
Private label isn’t gaining share because brands aren’t promoting enough. Circana’s figures make it clear that brands are already carrying the majority of promotional activity. Private label is gaining share because more consumers believe retailer-owned products deliver the quality, innovation and value they once expected only from brands.
The industry’s promotion paradox is that brands are carrying much of the promotional burden while private label continues to capture the gains. Promotions can encourage trial, generate short-term volume and create excitement around a product, but they cannot create meaningful differentiation where consumers no longer perceive it.
If private label can capture half the grocery basket while branded manufacturers dominate promotional spending, the next phase of competition is unlikely to be won through deeper discounts alone. Brands will need to demonstrate why their products deserve a premium in the first place.
