How Much More is Name Brand Vs. Generic?
As I’ve always said, food is one of the biggest costs that any household will have. A few weeks ago, I wrote about how much eating out costs when compared to dining in (spoiler: a lot!). But the savings don’t have to stop there. One of the easiest ways to save on groceries is to stop buying name brands and switch to generic.
Let’s start off by going on a grocery trip with my friend Tommy. She’s walking down the aisles getting things from her list and she’s looking for some pasta (she’s going to have pesto this week). In the pasta aisle, she sees a name brand box of pasta for $1.35. But right next to it is the generic brand for $0.77. Without too much thought, Tommy decides to get the name brand pasta. After all, it’s only a little bit more and is probably better quality. If it’s priced higher, it should be better, right?
A lot of people tend to follow Tommy’s behavior by purchasing name brands instead of consciously deciding what to purchase. But are name brands really worth the extra cost? Consumer Reports actually did a taste test with their staff and found that the generic brand was just as good or better than the name brand for 33 out of the 57 products they tested. Another study, done in association with the National Bureau of Economic Research, found that chefs are more likely than the average consumer to purchase generic food. If professional chefs don’t think name brands are worth the extra cost, why should you spend the extra money on them? The reasoning of name brands being more expensive because they’re higher quality isn’t always the case.
Buying generic is bound to save you money but how much exactly will it save you? Some items come in different sizes and not every item has a generic equivalent. Like when you compare meal options, you want to standardize your costs so you’re comparing apples to apples (or pasta to pasta). Dollars by themselves aren’t enough to compare options. You need to include the quantity you’re getting in order to have a fair comparison. To do this, convert your cost for the product into dollars per unit. For groceries, your unit is going to be ounces most of the time. Most grocery stores actually have the dollars per unit next to the price.
For example, on our last grocery trip, my wife and I needed some orange juice. There was a 52 oz carton of name brand juice for $3.54 and a 59 oz generic brand carton for $2.08. If we do the math, the name brand juice was $0.068/oz while the generic juice was $0.035/oz. The name brand was 120% more than the generic! We have tried both brands and the generic brand is good enough for us.
In fact, that’s how we feel about most of the items that we buy. Below, you’ll find a table with all the food items that we purchased last week. I decided to find out how much it would cost if we had purchased all our products using name brands versus using all generics. As I mentioned above, when comparing costs you have to take into account quantity in order to have a fair comparison. Since not all name brands and generic brands come in the same size, I first found the cost per unit for each item. Then I found the midpoint between the name brand and generic package sizes to come up with a representatively sized product and figured out how much a product of that size would cost. In the orange juice example above, the midpoint between 59 oz and 52 oz is 55.5 oz. Even though there isn’t a 55.5 oz carton of juice, using this size to determine the cost gives us a good representation of how much name brands cost compared to generics.
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Item Generic Name Brand Percent Less*
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2% Milk $2.24 $4.58 51%
Frosted Flakes $1.77 $2.31 27%
Frozen Blueberries $7.28 $9.98 23%
Frozen Chicken Breast $5.12 $9.88 48%
Frozen Waffles $2.20 $4.84 54%
Garlic N/A $0.84 0%
Ginger** N/A $0.03 0%
Green Onions N/A $0.78 0%
Italian Parsley N/A $0.98 0%
Italian Sausage $8.04 $13.10 39%
Orange Juice $1.96 $3.78 48%
Parmesan $2.36 $3.47 32%
Pasta, Orzo N/A $1.34 0%
Pasta, Rotini $0.77 $1.34 43%
Pasta, Shells $0.77 $1.34 43%
Peanut Butter $1.16 $2.47 53%
Red Wine Vinegar $1.69 $2.89 42%
Shredded Cheese $1.84 $2.58 29%
Spreadable Cheese Wedges N/A $2.48 0%
Strawberries N/A $5.44 0%
Toasted Oat Cereal $1.72 $3.52 51%
Tomato Sauce $0.46 $0.88 48%
Tortillas $1.33 $2.48 46%
Turkey, Sliced $2.36 $2.97 21%
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*Percent less is calculated as ([Name Brand Price]-[Generic Price])/[Name Brand Price]
**Yes, we really bought 3 cents worth of gingerFrom the table above, you can see that most of the produce items we purchased didn’t have any generic options so they have “N/A”. But for everything else, you can see that the name brand is always more expensive than the generic. In fact, on average, generic options are 40% less than the price of the name brands!
You might be thinking, “but not everything I buy has generic brands, I wouldn’t save that much if I purchased generics.” Remember, the above list is what Kelsey and I actually purchased. It’s not a list specifically made to showcase generic. Purchasing generics over name brands still saves you 35% even when you include products that don’t have generic options!
Though I’m a proponent of purchasing generic items, we don’t purchase all generics. I think the generic tortillas are as good as paper and the lunch meat is tasteless. With our actual preferences between generic and name brand, our costs were still only $59.05 for our entire grocery list versus $84.30 if buying all name brands. That’s $25 that we didn’t have to spend this past weekend. We go grocery shopping every week so if we assume we’d save $25 each week, that comes out to $1,300 per year that we’re saving! Not quite as much as you’d save by opening an IRA but still pretty good.
If you have a larger grocery bill, your savings are likely to be even higher. I can’t tell you which specific products to purchase generic and which ones to buy name brand since that’s a personal decision that you’ll have to make. If you’re looking at two different brands and can’t decide, one thing you can do is look at the ingredients. Often times, you’ll find that both generic and name brands have the same ingredients. If that’s the case, you’re probably better off purchasing the generic and saving yourself the money.
In fact, a lot of times the generic brands are made by the same manufacturers that produce the name brands! A previous recall for sliced bread revealed that Bimbo Bakeries USA is the manufacturer for name brands such as Sara Lee® and Bimbo®. But they also produce bread for Kroger’s® store brand as well as Great Value, Wal-Mart’s® generic brand. Conagra produces both Peter Pan and Great Value peanut butter. Costco’s generic brand, Kirkland, has an FAQ page which actually says that their generic pet food is produced by the national brand Diamond Pet Foods.
Another product with lots of generics is medication. In the US, the FDA requires all generic medications to have the “same dosage, safety, effectiveness, strength, stability, and quality” as name brands. So your generic medicine is exactly the same as the name brand. Pharmacists will purchase generic brands over name brands 90% of the time.
If I see a cheaper brand than what I normally get, I’ll try it for a week. Doing this each time a new product comes out has helped keep my grocery bill low. Next time you’re at the grocery store, look for generic options where you can save. The worst that could happen is you end up throwing the product away and losing a couple dollars. But if you find a product you like, you’ll end up saving thousands of dollars in the long run.
