Generic Brands Explained: Definition, Types, and Comparison to Store Brands

What Is a Generic Brand?

Generic brands are products sold without a widely recognized name or logo, usually offered at lower prices than brand-name items. They offer cost savings, and many people find that their quality is comparable to more expensive alternatives. Generic brands are common in industries like food and pharmaceuticals, including products such as milk, cereal, and over-the-counter medicines. While used interchangeably with store brands or private labels, generics may be unbranded, while store brands carry the retailer’s name but often offer similar pricing and quality benefits.

How Generic Brands Work

These brands are known for their trimmed-down packaging and plain labels. Rather than being known by a brand name, generic products are distinguished by their characteristics alone. All of this helps keep the product's price down significantly.

When choosing between generic and brand-name products, consumers often compare the ingredients list. Most consumers believe that generics are of a lesser quality compared to brand names. Generally, the quality of generic brands is similar to that of name-brand products. Despite the difference in cost between name and generic brands, there is little taste or nutritional difference between them. Some consumers may prefer generics—as they're often called—over name brands, even if its price isn't a considering factor.

As noted above, generic brands can be found in the food and beverage industry as well as in pharmaceuticals. For example, a supermarket may offer its own generic product—say a dairy product like sour cream—next to a name brand product to appeal to a cost-conscious customer. Or a pharmacy may offer consumers a generic alternative to Advil's ibuprofen.

Important Factors When Considering Generic Brands

A generic drug or pharmaceutical may be created when a name-brand drug's patent expires. In the U.S, which is responsible for most drug patents, the patent term length is 20 years. There is also an exclusivity period—the length of which depends on the drug type and its use. Once a patent ends and exclusivity is satisfied, a single manufacturer is permitted to produce a generic, chemically identical version of the brand-name drug. Once the generic exclusivity ends, other manufacturers can create a generic drug if they prove it works equivalently.

Some manufacturers may even create a generic version of their brand-name drug, either by manufacturing it themselves or contracting it out to another manufacturer. This strategy makes sense because insurance company policy often dictates that a generic, when available, must be prescribed. Generics usually cost about 80 to 85% less than brand-name drugs. Because of competition, margins on generic drugs can be very thin. In 2020, it was estimated that generic drugs had saved the health care system about $2.2 trillion over the previous decade.

Comparing Private Label and Generic Brands

A variation of a generic brand is a private brand label—also called a store brand, own brand, or private brand—in which an item carries the brand of a store. Some stores offer both value and premium versions of the same private label product.

Common Types of Generic Products

Grocery and dollar stores are well known for their generic brands. Those commonly found on these retailers' shelves include:

• Dairy products
• Snacks such as cookies and potato chips
• Canned products such as soup, fruit, and vegetables
• Dry goods, including pasta and rice

Generic brands in pharmacies includ,e but aren't limited to:

• Pain relievers
• Cough medicines
• Baby products
• Personal hygiene products such as shampoo, conditioner, soap, and toothpaste
• Medical products such as cleansers, bandages,

Differences Between Generic and Brand Name Generics

Some well-known brands become generic when they lose trademark protection or their names become common language. Here are a few common examples:

• Aspirin is a trademark in more than 80 countries, but it is the name used by any company in the U.S. for any acetylsalicylic acid product
• Dumpster was a trademarked type of mobile garbage bin, but it is now the general name for any product serving this purpose
• Zipper was a trademark of rubber products maker B.F. Goodrich that was used in rubber boots
• Escalator was a trademark of Otis Elevator, but now it refers to any such device

The Bottom Line

Generic brands are cheaper alternatives to brand-name products, lacking advertising and recognizable logos. This allows them to be sold at lower prices. While some consumers perceive them as lower quality, generics can match the quality of brand-name items, especially in food and pharmaceuticals. Generic drugs provide affordable options once patents expire, offering the same efficacy as branded drugs. Unlike private label or store brands, generics are usually unbranded. These products offer major cost savings and can have a big economic impact, especially during recessions or periods of financial strain.