The Customer Was Loyal

In 2019, Aldi operated roughly two thousand stores in the United States. Ninety percent of the products on its shelves carried no national brand name. By August 2025, the count was 2,567. Third-largest grocer in the country by store count, behind Walmart and Kroger. One in four American consumers shopped there, double the number from six years earlier.¹

The company opened 225 new stores in 2025, the most in its history, and announced 180 more for the year after.¹

If the customers were loyal to the brands on the shelf, Aldi could not exist. A grocer where ninety percent of the products carry no national brand name should have no customers. Instead it was the fastest-growing grocery chain in America.²

The belief is that the customer chose this brand and will keep choosing it. Repurchase rates are high. Churn is low. The brand has been on the shelf for decades. The word is loyalty.

In 2022, grocery prices in the United States rose at the fastest rate in more than forty years.³ The price gap between national brands and store brands, which had always existed, became impossible to ignore.

Consumers switched.

Private label dollar share set a record in 2022. And in 2023. And in 2024. And in 2025, when it reached 21.3 percent, the highest in the history of American grocery. Each percentage point of that shift represented roughly thirteen billion dollars moving from products consumers had been buying for years to products that carried the retailer's name.⁴

The brands expected the switching to reverse when inflation cooled. Inflation cooled. The customers did not come back.⁵

The test

Three conditions had sustained the word loyalty. When all three held, the behavior was indistinguishable from preference.

The first was the look of the alternative. Private label, for most of its history, looked like what it was: a cheaper copy of something else. White packaging. Block lettering. "Compare to" printed on the front. The aesthetic communicated one thing: this is what you buy when you cannot afford the original. The stigma kept the national brand in the cart.

The stigma eroded. Kirkland Signature batteries are made by Duracell. Kirkland coffee is roasted by Starbucks.⁶ Across hundreds of product lines, Costco contracts the same manufacturers that produce the national brand equivalents. These are not inferior products in budget packaging. They are the same products, from the same production lines, sold under a different name at a lower price.

By 2024, sixty-nine percent of American consumers told Circana they viewed private label as similar or superior in quality to national brands.⁷ The alternative was no longer invisible. It was on the same shelf, at the same eye level, with better packaging and the same ingredients listed on the back.

The second condition was price salience. The gap between a national brand at $4.29 and a store brand at $3.19 had always existed. But the consumer standing in an aisle, making a decision in under four seconds, compared the number on the front of the package, not the unit price on the shelf tag. When the difference was a dollar, it did not register as a decision. When inflation pushed the national brand to $6.49 and the store brand sat at $3.99, the gap announced itself.

The third condition was the retailer's role. For decades, retailers needed national brands to drive traffic. Consumers came to the store for Tide, for Cheerios, for Coca-Cola. The retailer stocked what people wanted. The alignment was straightforward: the brand drew the customer, the retailer provided the shelf.

All three conditions failed in the same period. The quality gap had been closing for years. The price gap became visible overnight. And the retailers, who by then had spent decades building their own brands, had no reason to protect the ones they used to depend on.

In 2025, store brand dollar sales grew 3.3 percent. National brand dollar sales grew 1.2 percent. In units, the separation was starker: store brands gained 0.6 percent. National brands lost 0.6.⁵

The consulting firm Simon-Kucher surveyed American consumers in 2024 and found that forty-two percent primarily or exclusively bought private label. Among households earning more than $100,000 a year, the figure was forty-nine percent.⁸

The surge of private label purchasing during the inflationary recovery wasn't a fluke. It was a reset. Simon-Kucher, 2024

The average consumer bought private label across seventy-two categories in 2024, up from sixty-five two years earlier. Twenty-eight percent of consumers who described themselves as loyal to national brands had tried a new store brand within the previous three months.⁹

The assumption had always been that private label buyers were price-driven above all else. In 2015, Eddie Yoon published research in the Harvard Business Review examining who actually drove the growth. The top fifteen percent of private label shoppers accounted for fifty to sixty-five percent of private label sales at a given retailer. They were not bargain hunters. Many were professionals with disposable income. Pharmacists were more likely than the general population to buy store-brand medication. Chefs were more likely to buy store-brand ingredients. Buying private label had become a signal of expertise, not of need.¹⁰

Imagine you go to a friend's house and see a ton of Kirkland and Trader Joe's products. That sends subtle signals that say, “Your friend is a smart person and makes smart choices. Maybe I should try more private label?” Eddie Yoon, Harvard Business Review, April 2015

The social signal had inverted. Private label went from what you bought when you couldn't afford the brand to what you bought when you knew enough not to pay for it.

The shelf

The retailer is not a neutral stage on which brands compete. The retailer is a participant with a direct financial interest in which product the customer reaches for.

National brands earn the retailer an average gross margin of 26 percent. Private label earns 35 percent.¹¹ The private label product costs the consumer less and earns the retailer more. There is no version of the arithmetic in which the retailer prefers the national brand on the shelf.

The margins are higher because the cost structure is different. No brand marketing spend to fund. No slotting fees to negotiate. No intermediary between the manufacturer and the shelf. The savings split between the consumer, who pays less, and the retailer, who keeps more on every sale.

No company has understood this arithmetic better than Costco.

In fiscal year 2025, Kirkland Signature generated approximately $90 billion in revenue, roughly one-third of Costco's total sales.¹² If Kirkland were a standalone company, it would rank among the ten largest consumer packaged goods firms on earth. Its annual revenue is nearly double Coca-Cola's.¹³

Costco caps its markup at 14 percent on national brands and 15 percent on Kirkland. The membership fee is the profit center. Merchandise is sold at near-cost. The margin that every other retailer captures, Costco gives back to the customer as a lower price. That price is the reason nearly 93 percent of North American members renew every year.¹⁴

Most supermarkets carry thirty thousand products or more. Costco carries about four thousand. The rest are brands the customer decided, by renewing, they did not need.¹⁴

The model has been stress-tested twice. During the 2008 financial crisis, consumers across most retail formats cut spending. Costco grew. During the 2020 pandemic, when supply chains broke and shopping patterns shifted overnight, Costco grew again. Both times, the same response: consumers did not leave when budgets tightened or uncertainty spiked. They arrived.¹⁵

The United States, at 21 percent private label share, is not at the leading edge of this shift. It is closer to the beginning.

In European markets where private label has had decades longer to mature, nearly half of every grocery dollar goes to a product with no national brand name. In Switzerland, more than half.¹⁶ The trajectory in North America is the same. The timeline is different.

The hold

Not every brand lost share. Some held. In every case where loyalty survived, the mechanism was structural.

Coca-Cola serves 1.9 billion drinks per day across more than 200 countries. The company operates through 225 bottling partners and more than 950 manufacturing facilities. The distribution network took 130 years to build.¹⁷

Blind taste tests have been conducted since 1985. The product itself is not consistently preferred over competitors.¹⁸ What Coca-Cola owns is not the taste. It is the fact that a Coke is available within arm's reach of virtually any person on earth. Private label soda exists. It has never reached meaningful share of the carbonated soft drink category. Not because consumers love the taste of Coke more than they love their money. Because Coca-Cola is in every vending machine, every convenience store, every gas station, in every country that has a road. The distribution is the moat.¹⁹

The test is different when the moat is not physical infrastructure but an ecosystem. Apple's iPhone retention rate is roughly 90 percent. Eighty percent of iPhone owners also own at least one other Apple device. iMessage, iCloud, AirDrop, the Apple Watch, AirPods: each additional product raises the cost of leaving. The retention rate does not measure affection. It measures the expense of switching ecosystems.²⁰

There is a third version of the test. What happens when the brand holds the price but loses the customer. Procter & Gamble raised prices roughly 10 percent year over year in early 2023. Fiscal year organic sales grew 7 percent: nine points from higher prices, negative three from lower volume, one from mix. Revenue held. The customer base shrank.²¹

P&G's chief financial officer told analysts that the private label share shift against P&G's brands was "only about a quarter of a point."²² The framing was reassurance. The math was a company earning more from fewer people.

In every case where loyalty survived, the mechanism was visible. A distribution network that took 130 years to build. An ecosystem that costs thousands of dollars to leave. Pricing power applied to a shrinking customer base. None of these are emotional attachments. They are structural positions that make switching expensive, inconvenient, or impossible.

Not one brand in the data held its customer base on emotional attachment alone when a comparable alternative appeared at a lower price.

Genuine differentiation exists. A product that performs differently, an ecosystem a customer cannot leave, a distribution network no competitor can replicate. These are positions more durable than a name on a package. The test is whether the advantage survives the appearance of a credible alternative at a lower price. Where it does, the loyalty is real. It is also, in every documented case, structural.

What most brands call loyalty is the other kind. The alternative was invisible, or looked cheap, or cost nearly the same. The retailer had no incentive to surface a competitor. When those conditions held, the behavior looked like preference. When any one of them changed, the behavior changed with it. The relationship between the consumer and the brand was not a relationship. It was an equilibrium. The equilibrium broke.

The customer was loyal. The word is still on the earnings call. The customer is somewhere else.