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Consumers Choose Brand X

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Eschewing labels in favor of cheaper options.

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Major retailers say sales of house brand items are climbing as shoppers look to save a few pennies in a downbeat economy.

Wal-Mart (WMT), Safeway (SWY) and Kroger (KR) say their store brands have traditionally sold well and sales have recently increased.

The Food Marketing Institute, a trade group in Arlington, Virginia, says about 60% of shoppers say they now buy some store brands.

But these aren't the generic brands you remember from your school days. A stark gray can labeled "Peas" or "Asparagus" -- a tacit warning that the contents were bland at best and sometimes nearly impossible to eat -- have been replaced with stylish labels and better quality.

Kroger offers "Private Selection." Safeway offers "O Organics." Wal-Mart rolled out "All Natural".

Do Brand X disposable diapers beat Pampers (PG)? Probably not, but an increasing number of shoppers appear willing to experiment with the cheaper product.

Decreasing property values, rising unemployment and higher energy prices limit the ability of many Americans to spend. The economy is contracting, but technically it's not in a recession defined as two consecutive quarters of negative growth. But strict definition has little to do with perception and many people feel pinched.

That probably explains the increased interest in store brands. But it's unlikely that the shift is permanent. When the economy rebounds, you can bet that discretionary spending will rise.

But for now, it's batten down the hatches. Starbucks (SBUX), the world's largest coffee chain, says it will cut another 1,000 jobs as sales decline. On July 1st, the Seattle-based company said it planned to close 600 stores and cut as many as 12,000 jobs worldwide.

The economy contracted at the end of 2007 and grew less than expected in the second quarter of 2008 - 1.9% for the 3 months ended in June compared with a forecast of 2.3%. Checks sent to taxpayers through the economic stimulus program may have helped boost spending for the period.

Still, it's hard to imagine that a bump in the road -- a severe jolt for many -- will turn us into a nation of savers in the future, relishing the house brand relish.

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