Due to the popularity of private label goods on the shelves of Coles and Woolworths, a new study released in Thursday forecast that by 2017, the share of such products would make up one-third of total supermarket sales.

The bold forecast by business consultants IBIS World is based on the 85 per cent growth in the past five years on sales of private label products in the two grocery giants due to lower price tag.

IBIS World estimated that private label sales would hit $21 billion out of the total $86 billion total grocery sales expected for 2012. By 2017, the amount is expected to further rise to $31.8 billion.

Among the grocery items with private labels that consumers snap up are butter, sugar, bread and milk which were the items that Coles and Woolies fought a price war on the past few months. Up to 68 per cent of butter sold in the two supermarkets is private label, while for sugar it is 67 per cent, 56 per cent for bread, 55 per cent for fresh milk and 53 per cent for eggs.

IBIS World Australia General Manager Karen Dobie attributed the popularity of private label brands to the economic climate in Australia.

"Households have been reining in spending, paying off debt and increasing savings. This, coupled with an increase in the range of private label products available, has led many consumers to make the shift to home brands," she explained in a statement.

"Major supermarkets are spending big bucks on activities aimed at blurring the lines between branded products and their own in-house fare. These retailers are introducing premium, organic and fair trade products to attract private label buyers from all walks of life," Ms Dobie added.

However, she said the strongest growth opportunities for retailers to sell their private label products are the middle- and higher-income households. She admitted the popularity of heavily discounted items such as $1 milk per litre squeezes the farmer and producer, but benefit the consumer and the contractors of the private label products in the long term.

RELATED STORIES