There is a nice podcast on "Store-Brand Products" over at the "Economics of Everyday Things." It touches on many managerial economic concepts. There are multiple factors going into the store brands on the shelves.
1. Brand names may have excess capacity.
...some store brand products are actually made by the same companies that produce the name brand versions of those products. Take, for instance, Costco. Some of the Kirkland brand of coffee blends are made by Starbucks. Kirkland batteries? Duracell. And Kirkland diapers? Those come from Kimberly-Clark, the company that makes Huggies.
2. Brand names may be too expensive.
Bringing a store brand product to market usually starts like this: a national retailer like Albertsons has category managers who are in charge of specific kinds of goods. They might see that a certain name-brand tomato sauce is selling in big numbers, but it’s a little expensive — which means there’s an opportunity for a more affordably priced store-brand version.
3. Private label manufacturers often explicitly reverse engineer the existing product.
Retailers ask Winland Foods to reverse engineer name-brand products and create a new version.
BERINGAUSE: We have a large R&D facility in Chicago with a large group of food scientists. And we may have customers bring us something that they want us to develop. They may say we’d like an emulation or something better than a certain pasta sauce that is out there.
4. Private label manufacturers have little bargaining power
Marketing professor Kusum Ailawadi says that private label manufacturers don’t have much bargaining power when it comes to negotiating with retailers.
AILAWADI: Because nobody knows who the supplier is — the consumer doesn’t. So the supplier doesn’t have much leverage.
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