How Inflation Reshaped Private Labels & Amazon’s AI Ambitions

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The Rise of Private Labels: A Shift Beyond Price

Ongoing inflation continues to be a major factor behind private label growth in the U.S., but price alone is no longer the sole reason consumers opt for store brands. A new study from Circana highlights that private label sales are experiencing significant momentum, particularly in food and beverages, while other categories like health and beauty remain relatively stagnant.

The U.S. leads globally in private label dollar sales, with food and beverage dominating the segment. Younger generations, particularly Gen Z (44%) and younger millennials (39%), are the most open to trying store-brand products for the first time, followed by older millennials (29%), Gen X (27%), younger boomers (27%), older boomers (18%), and seniors (16%).

Private Labels: A Trend That’s Here to Stay

Despite inflation cooling down, private label sales in the U.S. show no signs of slowing. In 2023, private label sales hit a record $271 billion, reflecting a nearly 4% increase, according to the Private Label Manufacturers Association. Since 2021, unit sales of private labels have grown by more than 2%, while national brands have declined by nearly 7%.

Sally Lyons Wyatt, Executive VP at Circana, believes that private label growth will persist, but its next phase will come from different sources. “While value channels have recently driven private label gains, expect more grocers – both large and mid-sized – to invest more aggressively, making private labels a core growth strategy,” she noted.

A Numerator report from December revealed that nearly all U.S. households (99.9%) purchased at least one private label grocery item in the past year, with strong penetration in health and beauty (99.2%), household products (98.9%), and home and garden (97.6%).

Consumer behavior studies further highlight that private label growth isn’t just about affordability. A report from the Food Industry Association found that 55% of grocery shoppers increased their private label purchases last year, compared to just 28% who did so with national brands.

While price remains an important factor, it is no longer the only driver. “Retailers will continue to tier their offerings with more premium private label products that improve margins while also maintaining entry-level price points,” said Wyatt. She emphasized that innovation will play a crucial role in shaping the private label landscape, whether through new product launches, localization, or strategic partnerships.

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Amazon’s Alexa Gets an AI Overhaul

Amazon has revamped its AI-powered personal assistant, making Alexa more conversational, intelligent, and personalized. The new version, Alexa+, is designed to enhance daily task management using generative AI.

The upgrade includes improvements to Amazon’s large language models, introducing specialized “experts” that help Alexa+ handle more complex user requests. These include controlling smart home devices from brands like Phillips Hue and Roborock, making reservations on platforms like OpenTable and Vagaro, ordering groceries from Amazon Fresh and Whole Foods Market, and even setting reminders for Ticketmaster sales.

A Smarter, More Capable Alexa

Amazon is positioning Alexa+ as a more powerful personal assistant, expanding its capabilities across automation, entertainment, home management, and shopping. One of the key new features is its ability to process and take action on user-provided information, such as documents, emails, photos, and messages. Alexa+ can summarize content and complete tasks on behalf of the user through its advanced AI capabilities.

Another standout feature is its ability to self-direct internet navigation, handling tasks without requiring constant user input. This “agentic” functionality allows Alexa+ to take proactive steps to assist users in their daily routines.

Alexa+ is available for $19.99 per month, but Amazon Prime members will receive it as part of their subscription at no additional cost. The upgraded AI assistant will initially roll out to select Echo Show devices (8, 10, 15, and 21 models) over the coming weeks. Users can access Alexa+ via a new mobile app on the App Store and Google Play or through a browser-based interface at Alexa.com.

Amazon CEO Andy Jassy highlighted the company’s commitment to AI-driven innovation, stating in a LinkedIn post, “Across Amazon, we’re harnessing the transformative power of generative AI to reimagine the experiences we offer customers, and Alexa+ is the latest example.”

This move reflects Amazon’s broader strategy to deepen its investment in AI, both for consumer-facing products and enterprise solutions. Last year, Amazon introduced an AI-powered shopping assistant named Rufus and signaled its intent to further integrate generative AI into its ecosystem. Jassy has emphasized that AI will be a foundational element in Amazon’s future product development.

The Alexa team has undergone some structural changes, including layoffs in 2023 that affected several hundred employees in the U.S. and Canada. Despite these shifts, Amazon remains committed to advancing Alexa’s capabilities, positioning it as a leading AI assistant in an increasingly competitive market.