Home labels set pace

02 Apr, 2013 06:28 AM
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WOOLWORTHS' private label brands are growing two to three times faster than national brands, a sign consumers like the retailer's strategy to double the sales penetration of house brands.

Total sales across Woolworths' stable of house brands – Homebrand, Select, Gold and Macro – had risen by "low double-digit" rates this year, the managing director of Australian supermarkets, Tjeerd Jegen, told The Australian Financial Review.

This is two to three times the rate of growth in national and international brands, where deflation has crimped modest top-line sales growth.

"Customers are embracing that – they're voting with their feet and we are growing those brands significantly more than we do with our overall business," Mr Jegen said.

Health food brand Macro, which Woolworths acquired as part of its $16 million purchase of Pierce Cody's Macro Wholefoods chain four years ago, was growing at "strong double-digit" rates and was now worth almost $600 million a year.

Private label products comprise 6 per cent of stock-keeping units on Woolworths shelves and 11 per cent of total sales.

Nielsen's Homescan survey shows private label brands at Woolies now account for 18.3 per cent of packaged grocery sales, up from 16.8 per cent in April 2011, and are catching up with Coles, which has had a more aggressive private label strategy in the past. Coles' private label brands now account for 20.5 per cent of packaged groceries, down from 21 per cent two years ago.

Mr Jegen rejected suggestions that private label brands were growing faster than proprietary brands because of retailer strategies that favour house brands.

"Our approach is very simple . . . we only launch it if we feel it fills customer needs and it has to justify itself on the shelves. If it fails, we take it off," he said.

Suppliers have complained to the Australian Competition and Consumer Commission that the major retailers are deleting their brands in favour of private label products unless they agree to reduce prices, pay extra fees or agree to supply house brands. As part of negotiations over an industry code of conduct, suppliers have demanded that retailers quarantine or "ring-fence" their private label and branded grocery buying teams to prevent supermarkets using confidential supplier information to develop or promote private label products.

But Mr Jegen rejected the demand, saying it was "unworkable" and "utopian".

"We all focus on the whole category and the complete offer for the customer. The moment you start separating elements out of an offer you tend to lose out," Mr Jegen said.

"We want the best offer in the category and it doesn't matter if it's branded or private label. We want one person deciding that, not several."

Nielsen's executive director of retail services, Kosta Conomos, supported Mr Jegen's view.

"When you are making a decision on the best mix for a category you need to look at the overall proposition – that's not necessarily brand versus private label but the tiers within the category in terms of good, better, best and understanding where duplication is required," Mr Conomos said.

But ACCC chairman Rod Sims has indicated the regulator is taking ring-fencing seriously as part of its investigations into misuse of market power by the major chains.

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READER COMMENTS

dissapointed
2/04/2013 6:55:48 AM

A few months ago, my mother went to buy a tub of her usual brand ice cream only find out later it tasted terrible. She realised that she had brought gluten free ice cream. so she went back to the supermarket to ask why she couldn't see any that wasn't gluten free the lady told her that the normal ice cream was only available in the home brand. To me that denies us the right to choose and that would back this article. If you make branded items dearer than home brands then people will buy home brand. Where's the ACCC or John Cobb for that matter?
Dickytiger
2/04/2013 9:57:38 AM

Of course the home brands are growing faster. They keep kicking the other ones out.
Foxy
2/04/2013 2:53:50 PM

The only "choice" we have is what is shown to us by the two supermarkets, and our "choice" is priced accordingly so it is attractive to us to purchase. This "choice" we are given is killing our rural and food processing industries, as a nation we will rue these years of no government leadership and poor foresight. Where is a leader that can look ahead 5-10-15 years, and picture a nation with few farmers supply only multinational food processing interestests?
Elle
2/04/2013 3:34:09 PM

Quite frankly, I despair at the way Australian consumer is so easily duped by the duopoly. Of course house brands are growing - they are pushing name brands off the shelf & people are purchasing them without thinking of long term effects. Soon the duopoly will source product cheaply from OS & we will only have UHT milk from China, vegetables & fruit from dubious sources (from Asia via NZ), etc., & our farming & manuf industries will have been strangled. The ACCC has much to answer for
inverell
3/04/2013 7:21:48 AM

Have you seen the Buy Australian ads? Sydney people don't care if an AU farmer looses their job. The ads should be saying, buy our food because we have standards and it’s safe. Two traits most of the imported food doesn't have, that includes your house brands. If the ads put doubt in the consumers mind about imported and house brand products, then there may be a change. Most consumers are blind to the dangers. They will buy expensive cars; clothes etc but want the cheapest food to put down their kids mouths. They need to be informed about the dangers. Redo your buy AU ads they don't work

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I don't know that that's all so. People generally do best if far from home...thus Aussie
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My grand-daughter, very confident and presentable, now 22 began work in Nth Shore Sydney as
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whilst much input is noted here I think Mouse was close to the point. . Of the several methods