The Discount You Didn’t Know You Were Giving
Stand in the battery aisle at Costco and you’re choosing between two boxes of the same AA battery, one at about 33 cents apiece and one at about 50. The only thing you can’t see is that Duracell makes both. Costco’s chief executive at the time, Craig Jelinek, said so to a TV station in Atlanta in 2016, and he wasn’t leaking it so much as explaining the price:
“There’s no overhead, there’s just packaging.”
Both boxes are still a few feet apart. In January, the tech site BGR checked Costco’s listings, and the Duracell box came out about 17 cents a battery above Kirkland Signature, Costco’s own label, so the 17 cents is the box.
If you make a product, that number should bother you, and I’d guess it doesn’t yet, because your evidence looks fine. Sales are steady, customers reorder, and nobody in the history of your company has emailed to say the box cost you a sale. That’s a reasonable reading of the facts you have, because repeat customers are the best evidence a business gets, and you’d be a fool to argue with them.
So sales aren’t the problem. The price is, and a bad price looks exactly like a fine business from the inside. Nobody complains about it. There’s no meeting where it comes up. It’s a smaller number in the account than there should be, month after month, for long enough that it starts to feel like the size of the company.
Duracell’s Box Is Worth $6.70 a Pack
A customer standing in an aisle can’t test a battery, can’t taste the coffee, can’t run the moisturizer for six weeks, and can’t take the knife home for a month and hand it back. What she can do is look at the box and decide what it’s worth, and she does that in about the time it takes to read this sentence. Whatever’s inside gets priced later, by people who already bought it. The box gets priced first, by everyone, and nobody thinks about it again, which is the whole fucking trick.
Duracell knows this and is fine with Kirkland because it collects 17 cents a battery, 40 batteries a pack, for the copper top and the name, from customers who could get the identical battery for less by walking another ten feet. Call it $6.70 a pack for the words on the front. Costco has run the same play with coffee, with tuna, and with aluminum foil, where the word Reynolds is printed on the Kirkland box in case anyone was wondering how hard they’re trying to hide this.
Now run it the other way. Your product is better than the store brand, and your box looks like it. So you get the store-brand price from every customer on every unit, and the gap between what they’d pay for what you made and what they pay for what your box looks like is the discount you didn’t know you were giving. It’s the largest line item you don’t have.
The Shelf Got Harder in 2024
I want to be careful here, because this is where a branding person is supposed to say the word “premium,” and I’ve sat in enough of those meetings to know the room stops listening the second it’s said. So skip the word and look at what the biggest retailer on earth did with the same information you have.
In April 2024 Walmart launched bettergoods, its biggest store-brand food launch in decades, with most items under $5. (The announcement says the line is “designed to delight,” which is what a $1.97 bag of pasta says after it’s been to a branding meeting.) Walmart’s private brands chief promised “unique culinary flavors at the incredible value Walmart delivers,” and for a shopper that’s decent chowder in a bright jar. For you it’s the competition, because the largest grocer in America looked at customers trading down and responded by making the cheap thing look expensive.
The numbers since say it worked: in January the Private Label Manufacturers Association, the store brands’ trade group, put 2025 store-brand sales at a record $282.8 billion, growing almost three times as fast as the national brands, the names you’d recognize. National brands sold fewer units than the year before and made more money anyway, so they raised prices on whoever stayed. Circana’s Sally Lyons Wyatt says 69% of consumers now rate store brands as good as or better than name brands.
Strip the numbers and it says one thing: store brands used to win on price and lose on the box, and they fixed the box. Now the customer trusts a $4 chowder in a bright jar at Walmart, and a good product in a plain box gets the price a plain box gets, which is the store-brand price minus whatever you’re charging for not being Walmart.
Do the Math Before the Meeting
Open the spreadsheet and find last year’s unit count. Next to it put the gap between your price and the price of the best-looking product in your category that isn’t obviously better than yours. Multiply. If you sold 20,000 units and the gap is $4, that’s $80,000, and you don’t get to call it a marketing budget, because you already spent it, on customers, as a discount for a box that undersold you.
I’ve watched founders do this math and go quiet for a full minute. Some argue the gap is smaller, and sometimes it is. Nobody has ever argued it was zero.
Duracell’s box has been collecting its 17 cents since before you had a company, and it costs Duracell nothing it wasn’t already paying for, and your box is worth something too. Right now you’re the one paying for it, and that’s the discount you didn’t know you were giving, renewed every morning the truck leaves.
