shoppers are largely creatures of habit but after two years of rising prices a broader shift to private label brands is underway inflation doesnt appear to be going down anytime soon although price increases have been subsiding since the june 2022 peak the consumer price index which measures a basket of common goods and services rose 05 in january and 64 year over year  according to data released by the labor department tuesday while rising shelter costs accounted for about half of the monthly increase food prices also remained elevated up 05 month over month and a 101 gain from january 2022 inflation has shredded household budgets over the past 2 years and not just when it comes to oneoff discretionary expenses or special occasions but for keeping up with daytoday bills until inflation returns to the 2 neighborhood pressure on household finances will continue bankrate chief financial analyst greg mcbride said in a note following the cpi release in fact some 60 of consumers said they are likely to cut back on spending over the next six months because of inflation a latejanuary survey by morgan stanley found one way to save is to trade down ditching a more expensive brand for a cheaper alternative about onethird of us consumers are switching to less expensive proteins and purchasing store brands according to deloittes global state of the consumer tracker on jan 29 the online survey is fielded every month and targets 1000 adults in each country research from consulting firm gartner mirrors that survey in a smaller sampling of us consumers last september 44 of consumers said they are trading down when it comes to food groceries and nonalcoholic beverages a tailwind for private label that is good news for store brands otherwise known as private label total store unit sales of private label have increased to 225 of overall purchases this year from 219 last year with most of the tick up happening in the back half of 2022 according to market research company iri while the growth is slow and is uneven across categories the positive impact on private label should pick up this year truist analyst bill chappell predicted the industry has a tailwind but i only think its going to get stronger in 23 he said a lot of people thought that when inflation hit a year ago it should have been boom times immediately for private label but … behavioral change takes time big box retailers like walmart and target  as well as warehouse clubs like costco all have private label brands that can help them weather consumer privots kroger is also a player in the space yet the biggest pure play on private label brands is treehouse foods  chappell said the company has a wideranging portfolio of store brand items from snacks and hot cereal to cheese and beverages on monday treehouse reported a miss on revenue 9962 million for the fourth quarter a 22 yearoveryear increase compared with the 1 billion expected by wall street analysts according to streetaccount despite the topline miss its earnings per share of 98 cents were in line with estimates today we are better positioned to capitalize on the strong market dynamics in private label snacking  beverages the macro environment continues to support a clear consumer shift toward value as demonstrated by private label unit share gains for 54 consecutive weeks in the categories in which we operate treehouse foods ceo steve oakland said in a statement  we believe ths higher margin private label categories have momentum and ebitda margins should continue to improve through the year as supply chain costs ease chappell wrote in a note monday following the earnings report he has a buy rating on the stock and a 60 price target suggesting 24 upside from mondays close the rating is inline with the average analyst rating on factset but his price target is higher than the average of 5133 per factset chappell said the company is perfectly positioned to capture the increasing use of store brands theyve had some challenges over the years and private label has had some ups and downs over the years but in a time where you have oncein40 year inflation and a potential recession this is the perfect time to own private label he said in interview with cnbc another name in the space is post holdings  while not a pure play the company produces privatelabel cereal and liquid eggs last week the company reported a fiscal firstquarter earnings and revenue beat thanks largely to its foodservice unit however during the earnings call the management team also noted its private label business was strong growing 135 in the quarter while chappell has a hold rating on post the stock has an average analyst rating of overweight according to factset where consumers are trading down its clear consumers in general are spending less in december personal consumption expenditures excluding food and energy increased 44 from a year ago  according to the commerce department thats the slowest annual rate of increase since october 2021 however recent data from bank of america show signs of strengthening with credit and debit card spending per household rising 51 yearoveryear in january still households that earn less than 50000 are feeling the pinch card spending per household only increased 09 from july 22 to january 2023 the firm found while the tradingdown trend is slowly picking up steam it hasnt been felt across the board at least yet several companies like kellogg and kimberlyclark have recently said during earnings calls that the consumer is resilient and that they havent seen any trading down traditionally what weve seen with price increases is that theres not an immediate effect said greg carlucci senior director analyst for consumer goods at gartner it is still a little early to tell as far as the impact on the unit volume of a lot of companies the brands that can communicate quality and value may be able to prevent consumers from trading down from their products he said for now items like shortening and oil butter and fresh eggs have seen an uptick in store brand purchases according to iri data those are the areas that are seeing the highest inflation thats where youre going to see them lean into store brands said mary ellen lynch principal of iris center store solutions it will be the kind of the core products like the singleingredient products or simple products commoditytype products as opposed to those branded items where theres innovation or a particular flavor they really love or theyre not going to give up if and when the consumer takes it further it will be about the quality and consistency of the storebrand product she said the consumer has to trust it she said for his part truists chappell said the creep up in private label consumption is being seen in bread cereal and pasta as well store brands no longer taboo private label also isnt what it used to be at least in consumers minds said kathy gramling ey americas consumer industry markets leader americans forced to trade down due to supply chain constraints found store brands they enjoyed she said on top of that millennials and gen zs dont have the same strong identity with brands as their parents do she added this idea of i would never be buying private label if you call it a taboo or a stigmatism has long been gone now for many many quarters she explained becoming the brand of choice for retailers store brands can grow for those who make it a very key strategic component of their business lynch said the key for store brands is to kind of become the brand of choice she said walmart has the most share of the private label market among omnichannel retailers at 25 according to numerator  costco follows with 123 of market share and kroger has 88 sams club part of walmart has 7 share while albertsons has 4 and target has 3 kroger is in the process of acquiring albertsons for 246 billion for retailers like these private label brings higher margins walmarts store brands include sams choice and great value the latter of which is the most popular private label brand according to numerator in august the companys chief financial officer john david rainey said on an earnings conference call that the company has seen more pronounced tradedown activity private brand penetration has also inflected higher he said and in food category specifically the private brand growth rate doubled compared to q1 levels the big box retailer reports its latest earnings on feb 21 within the food and grocery category the increasing penetration of private label is helping a bit because it is higher margin said joe feldman a senior research analyst at telsey advisory group however grocery overall is a lowermargin business if you look at target or walmart or costco the mix of selling more grocery goods is overall still a little bit of a drag on your total gross margin feldman said eating at home isnt going away one of his favorite names is costco because it caters to a more affluent consumer and nearly twothirds of its business is grocery and consumables that people still need feldman said he has an outperform rating on the stock and 580 price target implying 145 upside from mondays close the warehouse giant has just one store brand kirkland kirkland brand has been a champ and they dont view it as a trade down feldman said they actually see it as a trade up even though it costs less he added their growth in kirkland has been a little faster than they normally would see in a given year just given where the environment is right now he also has outperform ratings on target and kroger as well as walmart another favorite theyre all very well positioned because the consumer is focused on just getting by week to week and getting food on the table for their family he said for investor jake dollarhide cofounder and ceo of longbow asset management walmart is the 800pound gorilla in the room they have put that weight behind technology delivery pick up and making it easier to check out of stores he said dollarhide has positions in walmart kroger target and costco his top pick on downtrading is kroger which is the closest to a pure play on private label grocery stores and has the most value he said paying your mortgage paying rent electricity gas automobile gas and eating at home are not going to go away he said if the s  p 500 declines for 2023 each name except for target has the chance to be higher on the year dollarhide predicted if the index goes up anywhere from 10 to 20 for the year all four names could do well he said explaining that it will mean there was a soft landing in the us economy and the federal reserve s ratetightening campaign didnt cause a recession the us consumer is going to continue to be strong he said that said even when inflation cools it doesnt necessarily mean consumers will ditch their store brands truists chappell doesnt see a reason why people would go back to brands after finding a private label they like private labels have gotten so much better … and so many more options he said theres more ways to trade down cnbcs michael bloom contributed reporting