Kroger (KR) Private Label Push Blocks Brand Price Hikes

On September 7 and 11, 2026, AVI Limited (AVSFY) and Kroger (KR) described the same shift from opposite sides of the grocery shelf. AVI said its prior-year growth came mainly from pricing while volumes fell; Kroger said it is using supplier cost reductions and private-label expansion to hold shelf inflation down [1][2].

The shelf no longer passes every cost increase through

Food manufacturers have traditionally answered higher ingredients, diesel, or freight costs with list-price increases that retailers then pass to shoppers. This route helps manufacturers recover costs and lifts retailers' nominal identical sales. Kroger is now interrupting it. The company said it will accept justified supplier increases, but it wants suppliers to remove costs first and reinvest the savings in value while protecting margins [2].

Private label gives the retailer a substitute on the same shelf. Kroger plans to expand its opening-price-point SmartWay line from about 130 items to roughly 1,000 over the next year and a bit. Its private-label penetration has already risen by about 50 basis points, while Private Selection sales grew 14% [2]. When shoppers can choose a lower-priced substitute, a branded supplier's increase can cost units or shelf space.

One side suppresses inflation while the other loses volume

The two companies' figures connect the mechanism across the shelf. Kroger expects internal inflation of 1% to 2.5% in the second half, still below CPI, and expects year-over-year FIFO gross-margin growth despite greater diesel and freight pressure [2]. Management also said faster private-label growth can reduce reported sales while helping profit, so lower nominal sales growth does not necessarily mean that demand weakened by the same amount.

AVI's fiscal 2026 revenue rose 1.4%, driven mainly by price increases across its businesses, while volumes declined. Its coffee operation raised prices by more than 12% to recover Arabica and Robusta costs [1]. Management then said it does not currently expect input-cost pressure this fiscal year to force more pricing into the system [1]. That statement is an input-cost forecast, not proof that retailers rejected AVI's prices, but it points in the same direction as Kroger's policy of suppressing shelf inflation.

B&G Foods showed a similar mix: price and mix added 1.4% in its base business while volume fell 4.3%, and the company said some branded shelf placements were replaced by a similar number of private-label SKUs [3]. John B. Sanfilippo reported private-label volume growth of 2.4% and contract-manufacturing volume growth of 12.6%, while management said retailers were seeking private-label options [4].

Product assortment becomes the retailer's control point

If a retailer can decide which increases are justified and use private label to fill opening price points, control shifts from the manufacturer's price list toward retailer assortment, sourcing, and contract manufacturing. Branded suppliers face a sharper choice between margin and volume. Private-label manufacturers may receive more units, usually at thinner unit margins. Kroger's SmartWay item count and private-label penetration, alongside branded food companies' price/mix and volume trends, provide the clearest checks from here.

The pattern is not universal. J.M. Smucker's coffee volume grew despite higher pricing, management described elasticity as modest, and the company reversed a contemplated list-price reduction [5]. Brand strength, supply scarcity, and product innovation still determine whether a price increase can pass through the shelf.

Companies exposed to this shift

• B&G Foods (BGS): Its branded shelf-stable foods already show the combination of price-led sales, weaker volume, and some shelf space moving to private label, although not every product will be replaced.
• John B. Sanfilippo & Son (JBSS): It manufactures private-label nuts and trail mix and can receive substitution orders, but its disclosure did not identify the retail customers.
• Hormel Foods (HRL): Part of its retail volume decline after two price rounds reflected elasticity, placing it in the same mechanism, while its exit from some private-label business complicates the comparison [6].

Sources

[1] Drillr · AVI Limited (AVSFY) · 2026-09-07 · FY2026 annual results call

Revenue grew 1.4%. This growth was largely underpinned by selling price increases that were taken across most of our businesses in order to recover the impact of higher input costs. This was offset by the impact of lower volumes.

[2] Drillr · Kroger (KR) · 2026-09-11 · FY2026 Q2 earnings call

[3] Drillr · B&G Foods (BGS) · 2026-08-11 · FY2026 Q2 earnings call

[4] Drillr · John B. Sanfilippo & Son (JBSS) · 2026-08-20 · FY2026 Q4 earnings call

[5] Drillr · J.M. Smucker (SJM) · 2026-08-26 · FY2027 Q1 earnings call

[6] Drillr · Hormel Foods (HRL) · 2026-08-27 · FY2026 Q3 earnings call

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