Multi-billion-dollar private label takeover in Australia

  • July 19, 2012
  • Amy Brown

New research predicts that by 2017 Australians will be spending $31.8 billion dollars per year on home-brand (also known as “private label” products or “supermarket brands”) products, which will account for more than 30% of supermarket sales.

International business information research firm, IBISWorld, today released the results of its survey into private-label spending by Australians.

According to IBISWorld General Manager (Australia), Ms Karen Dobie, private-label products have been one of the Australian supermarket industry’s fastest growing segments over the past decade.

“In 2007–08, private labels accounted for just 13.5% of total supermarket sales – meaning the segment has grown by more than 85% over the past five years”, Ms Dobie said.

Australians are expected to spend $85.9 billion on groceries in 2012–13. IBISWorld has predicted that $21.6 billion of this will be spent on private-label products, up from $19.7 billion in 2011–12 and $9.96 billion five years ago. Looking forward, Ms Dobie said this figure is expected hit $31.8 billion by 2017–18, representing growth of nearly 50% when compared to five years ago.

The strongest private-label products

According to IBISWorld, dry grocery items and chilled packaged food categories have been the strongest private-label product performers, although private label alcohol has also been a strong winner for Woolworths and Coles.

Eggs, which in 2002–03 had the largest market private-label market share (of 61%), have dropped to number five in 2012–13 on a chart of private label product ratings, released by the Department of Agriculture, Fisheries and Forestry (DAFF).

“The decline is mainly due to a switch towards free-range, a segment not adequately represented by private-label players,” Ms Dobie commented.

Staple products, with a high degree of homogeneity, such as bread, butter, sugar and milk, have shown the strongest private-label growth.

In contrast, products such as chocolate, confectionery, soft drinks, cosmetics and sanitary products were weaker segments. IBISWorld cited consumers’ ongoing preference for a trusted, quality brand when purchasing these items.

Who is buying the supermarket private labels?

IBISWorld noted that private labels are most popular with Australia’s low-income families (those earning less than $44,000 per annum), accounting for over 40% of their total grocery bill.

Consumers in middle and higher income groups represent the strongest growth opportunities for retailers looking to push private-label products.  Ms Dobie said, “Major supermarkets are introducing premium, organic and fair trade products – such as Woolworths’ ‘Select’ range – to attract private-label buyers from all walks of life.”


Bookmarks

Reader Comments

Australian Food News reserves the right to edit or not publish comments of a potentially offensive or defamatory nature. Comments will not be published if name and email address has not been provided (name and email will be withheld if requested).

The opinions expressed below are those of Australian Food News readers and do not necessarily reflect those of Australian Food News.