Kroger house brands losing share to national brands in hopeful sign for economy

More Kroger customers are opting for brand-name products instead of house-label items in a trend that has company executives feeling cautiously optimistic about consumer spending.

The company said sales of national brand products rose in the third quarter while sales of Kroger's more than 20,000 house-branded items fell from about 35 percent of sales to 34 percent.

CEO David Dillon said strong sales last year for private-label products, brought on in part to an unwillingness by the big food players to drop prices to match deflation, have made comparisons tough this year. Another factor: National brands have invested in more advertising and promotional activities in 2010.

"I also think it's a partial indication of some of the customer base seeing that the world around them has improved," Dillon said in a Dec. 2 conference call, before cautioning listeners to read too much into the trend.

One trend that's more clear: The widening distance between the haves and have-nots.

Kroger officials noted that the chain has seen sales rise for Boar's Head meats, high-end wines and Starbucks coffee at its in-store kiosks. At the other end of the spectrum, more than double the number of customers are using food stamps for groceries than just three years ago.