Walmart Pushes Customers to Private Labels as Suppliers Raise Prices

Walmart is pitching its private-label goods to consumers as its suppliers continue to raise prices.

With the cost of transportation, packing and raw materials all dropping, “retailers like Walmart will say ‘hey you already had three rounds of price hikes last year, why are you giving us another?'” Burt Flickinger, managing director at retail consulting firm Strategic Resource Group, told Reuters Friday (Feb. 10).

Rod Little, chief executive of Edgewell Personal Care, told Reuters it would be difficult to pass new price hikes onto retailers. Walmart is the largest customer of Edgewell, maker of Schick razors, the report notes.

Little said Walmart’s message was this: “From here, our consumer is challenged, we’re going to be looking out for consumers, so you’re going to have to have really good reasons if you’re going to price up from here.”

The Reuters report points out Walmart has an edge here, as its store brands — Great Value and Equate — compete with packaged goods giants like Procter and Gamble and Unilever.

Of the store-brand packaged goods purchased online in the U.S. in the final quarter of 2022, 43% came from Walmart’s website, the report said, citing data from research firm Numerator.

As noted here last week, private labels give major grocery chains an advantage over their smaller competitors when it comes to lowering prices. In addition to Walmart, Kroger has also reported higher sales in this category, as consumers swap brand loyalty for cost-cutting.

“Smaller grocers that don’t have private-label sales to fall back on have mostly responded to inflation’s pressures by marking up prices, as fresh food price increases have disproportionately affected them,” PYMNTS wrote.

Meanwhile, recent weeks have seen brands split on the question of private labels. Some say inflation is easing, leading consumers to adjust their spending accordingly. Others say 2023 will continue to be challenging, leading shoppers to tighten their belts and trade down.

In the former category is spices and seasonings giant McCormick, which said in late January that shoppers are returning to name brands.

CEO Lawrence Kurzius said the company has seen trade-down “moderate” and that the company’s lower-priced Lawry’s line has had consumers “trading up from private label.”

On the flip side, consumer packaged goods (CPG) maker Colgate-Palmolive is seeing trade-down flatlining in some categories and growing in others. CEO Noel Wallace noted that, as toothpaste sales held up against lower-priced store brands, many of the company’s home care products were seeing tougher competition.