What Is a Generic Brand?

A generic brand is a type of consumer product that lacks a widely recognized name or logo because it typically isn't advertised. Generic brands are usually less expensive than brand-name products due to their lack of promotion, which can inflate the cost of a good or service. Generic brands are designed to be substitutes for more expensive brand-name goods. Generic brands are especially common in supermarket goods and pharmaceuticals and tend to be more popular during a recession.

Key Takeaways

  • A generic brand is a consumer product brand without a widely recognized name or logo because it typically isn't advertised.
  • Generic brands are known for their very basic packaging and labels and lower prices.
  • A generic drug or pharmaceutical brand may be created when the patent of a name-brand drug's expires.

Understanding Generic Brand

Generic brands are often known for their trimmed-down packaging and plain labels, as well as their lower prices. For example, a supermarket may offer its own generic product next to a name-brand product to appeal to a cost-conscious customer. A variation of a generic brand is a private label brand (also "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.

Generic brands may be manufactured in the same production facilities as name-brand products, or they may be produced by lesser-known manufacturers.

They may be of the same quality as a similar name-brand product. Despite the difference in cost between name-brand and generic brands, there is little taste or nutritional difference between them. In some cases — without factoring in cost — some generics may even be preferable to name brands. Still, most consumers believe that generics are of a lesser quality compared to brand names. When comparing generic and brand-name products consumers tend to pay close attention to and compare their lists of individual ingredients.

Special Considerations

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, whose length depends on the drug type and its use. Once a patent ends and exclusivity has been satisfied a single manufacturer is permitted to produce a generic, chemically identical version of the brand-name drug. At the end of the generic's period of exclusivity, any other manufacturer that can prove that it can achieve the same drug efficacy may make a generic version of that drug.

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 are sold at a discount from brand-name drugs, often about 80% less. Because of competition, margins on generic drugs can be very thin. As recently as 2015, it was estimated that generic drugs had saved U.S. consumers about $1 trillion over the previous decade.

Generic Brands vs. Brand-Name Generics

Some well-known name brands have become genericized. This can happen when a company loses trademark protection or if a name enters the lexicon:

  • Aspirin is a trademark in 80 countries but 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 used in rubber boots.
  • Escalator was a trademark of Otis Elevator. Now it refers to any such device.