Compete With Store Brands Without Cutting Too Deep
Retail giants such as Costco and Kroger continue expanding their private-label lines, with US store brands generating more than $236 billion in sales in 2023, according to the Private Label Manufacturers Association — nearly a 5% jump from the previous year. Founders of early- and growth-stage consumer packaged goods now face a harsh reality of private label competition: Shelves increasingly feature store-brand products with extremely low prices, tempting shoppers to trade down.
Many founders wonder if they need to slash prices just to survive. The answer is no. Matching or undercutting private-label prices leads most emerging brands into a margin-killing spiral. Instead, compete with store brands by proving why your product deserves shelf space. Build a pricing strategy that protects margins, highlight the unique value your brand delivers, and show retailers and customers why your product justifies premium pricing. This guide outlines how to do just that while avoiding a race to the bottom.
Understand Why Store Brands Are Winning
To compete effectively, you need to understand the playing field. Private label competition doesn't happen by chance. It happens because the retailers design it that way. Here's how retailers with private label offerings gain the edge over other brands.
They own the shelf: Retailers control placement, promotions, and endcaps, and they utilize this power to feature their brands over those of their competitors.
They pocket bigger margins. Every time a consumer chooses the store brand over yours, the retailer earns more profit.
They control the data. Retailers track what sells, what stalls, and exactly how shoppers behave in your category, giving them an inside advantage.
If you sell in commodity-heavy categories, such as pantry staples, dairy, or household goods, that structural edge makes price competition particularly brutal. But private labels rarely build emotional connections. They don't innovate. They don't inspire loyalty.
That's your lane and where compelling storytelling can help you win in a game of premium vs. value brands. Recognize that the deck stacks against you to see why a knee-jerk discount almost always backfires. Instead of cutting prices out of fear, enter the aisle with a strategy that plays to your brand's strengths.
Price With Intention, Not Fear
When faced with how to price against store brands, many founders feel the urge to match — or come close to — the lowest price on the shelf. This instinct, however, often proves fatal to their brands. Once you cut too deeply, your margins evaporate, and you risk signaling to buyers and consumers that you don't produce a premium product. Use these tips to build a CPG pricing strategy that protects your margins and retail business.
Anchor Pricing Around Your Margins
Start by defining the margin you need to sustain your operations, fund growth, and support trade spend. Work backward from that number, not from the cheapest sticker price in your category.
Use Thoughtful Price Architecture
Consider how your product fits across different pack sizes and channels. For example, value packs offer a lower price per unit without slashing the per-item margin. Likewise, single-serve or trial sizes introduce customers to your product without requiring a commitment to a higher price point. Additionally, tiered SKUs (good, better, best) enable you to serve different consumer segments without discounting your flagship product.
Frame Value Beyond the Sticker
Communicate cost-per-serving, price-per-use, or other metrics that help customers understand the real value of your products. For wellness or premium categories, explain how your products stretch further than they seem at first glance.
Avoid the Discount Trap
Frequent discounting may drive customers to try your products, but it also teaches them to wait for promotions. Pricing with intention means refusing to react to fear. Instead, lead with confidence in your product's value and maintain a firm pricing structure.
Create a Velocity Story Retailers Care About
Retail buyers may love the margin on private label products, but retailers love velocity just as much. If your product moves consistently, you're valuable to the retailer, even if you have a higher price point. Think of velocity as your ticket to building long-term relationships with retailers who care more about results than rock-bottom pricing.
The stronger your velocity story, the less pressure you face to discount your products. Here's how to compete with private-label products by building a clear velocity story.
Track the Right Metrics
Use the data you gather to position your product more effectively and gain a deeper understanding of your financial position. For instance, units per store per week indicates the average number of products sold in each location, while velocity compared to the set average shows whether you outpace competitors in your category. Examining the repeat purchase rate reveals whether customers maintain loyalty to your products over the long term.
Show Early Momentum
If you're a small or emerging brand, proving demand quickly can make all the difference in keeping your spot on the shelf. Focus on the rate of sales in your initial markets — specifically, the rate at which your product sells through and gets replenished. For example, if a store stocks 24 units of your product and sells them all in a week, that's one turn. Consistent turns tell retailers your product doesn't sit idle. It moves because it's priced for success.
Translate Data Into Leverage
When you can prove your SKUs move faster than average — even at a higher price point — you give buyers and retailers a reason to keep your products on the shelf. Remember, retailers don't want products that collect dust. Your product's velocity demonstrates that consumers will pay more when they perceive value. It also helps you negotiate better placement, as retailers feel more confident giving space to products with proven sales.
Position Your Brand Where Store Brands Can't Compete
Private labels may dominate in terms of cost, but they rarely excel in differentiation strategies in CPG. They don't build emotional bonds with communities, and that's where your offerings can win. Creating touchpoints with these strategies reminds customers they're buying into a set of values and standards that fit with their lifestyles.
Lean Into What Makes You Different
Showcase what you can deliver that no one else can, such as proprietary ingredients or unique recipes. Unique flavors or formats offer customers experiences they can't get from generic brands, while tying your brand to sustainability, social good, or transparency can bring your products in line with customer values. Building loyalty through active community engagement also helps you maintain a strong customer base.
Make Your Value Highly Visible
Don't assume customers will connect the dots. Spell out why your product's price is higher and why it's worth it. Use strong storytelling on packaging to showcase what sets you apart, such as century-old family recipes or rare ingredients from a single-origin farm. Educational content via QR codes shows customers how your products benefit them, while transparent sourcing lets customers know you support sustainable farming or displays the certifications you've earned.
Compete With Strategy, Not Panic
The rise of store brands isn't slowing, but that doesn't mean you have to gut your margins to stay in the game. The most innovative CPG founders compete with store brands through clarity, not fear. To do this, price with intention, anchoring your products on margins and value. Build a velocity story that convinces buyers you belong on the shelf, and position your brand in places where private labels can't follow.
Balanced Business Group helps founders stress-test pricing architecture, model margins, and prepare for tough buyer conversations with confidence. If you're ready to protect your margins and grow strategically, contact us today to start the conversation.
