Private label claims record market share in Australia

Posted by Daniel Palmer on 14th December 2009

The battle for the supermarket floor between private label and branded goods is heating up with private label reaching a record share of the grocery market in Australia, according to new research by market insight and information group TNS.

The news comes as supermarkets push their own labels harder than ever.

The largest Australian chains, including the likes of Woolworths, Coles, and IGA, have all reported the strong growth of private label this year and have continued to boost their expenditure on private label lines. While Aldi, which almost exclusively sells its own brands, has continued to expand quickly along the eastern border.

And tensions are only likely to heighten between manufacturers and retailers, with a number of promotional campaigns from the major chains this year encouraging consumers to examine carefully the price difference between ‘national brands’ and private label.

Such campaigns include a TV promotion by Woolworths that insinuated the only difference between their Home Brand products and those of similar but more expensive brands was ‘fancy packaging’, and a recent move by Coles to compare their low-carb beer offering to that of the major brewers. While Coles’ successful ‘Feed Your Family for Under $10’ campaign focussed almost exclusively on their own brands.

But the promotion that has so far appeared to rattle the most cages involved Woolworths directly comparing their Home Brand products to those of the likes of Nestlé and Kraft based on price, quality and country of origin. The in-store comparison was not well received by many of their suppliers, with the AFR reporting a flurry of complaints being directed to Woolworths’ Head of Supermarkets Greg Foran.

Here to stay

Director of consumer research at TNS, Nicole Marquardt, warned that a purchasing mentality had emerged that was here to stay, with private label growing amongst most shopper groups, particularly adult households, young singles and young couples.

“Private label’s growth has been spurred by the economic downturn, but when we look at the motivators behind its purchase, we find that few consumers are buying it in response to the recession with many there by choice,” she said. “People are opting for private label for a myriad of reasons, the foremost being to save money to spend on the family, the belief that brands are all hype and not of superior quality, and to display thrift by being smart selectors.”

Surprisingly, the research found that a large proportion of Australians who buy private label do so despite being concerned over potentially lower quality, inferior status image, poor packaging and lack of innovation of the products.

The groups of private label buyers found in the research were:

* The Committed Cost Cutters (12% of the population): Who view buying private label as a responsible use of their often limited family budgets and are perfectly happy with the quality.

* The Smart Selectors (24% of the population): Who believe that brands are all hype and are happy that they can see through them to know that private label products are really just the same.

* The Success Symbolisers (30% of the population): Often young, this segment feels that their budget has forced them into private label. They are not convinced of its quality and feel self conscious about buying it.

* The Label Lovers (11% of the population): Will sneak a private label product or two but only if no one sees – they’re put off by poor packaging and a lack of innovation.

* The Belt Tighteners (10% of the population): Often facing tougher circumstances due to the recession they feel forced into purchasing private label due to their finances but are hoping it’s just a temporary thing.

* The Brand Believers (13% of the population): Feel strongly that brands are better and are annoyed that Private Label products are taking over the shelves.

“We’re seeing that the majority show interest in private label regardless of the category, even in those that were traditionally resistant to the threat,” Marquardt advised. “Purchasing behaviour does not always reflect loyalty to private label, but can also be an indication that branded manufacturers have few true ‘brand believers’.”

“The implication for retailers and manufacturers is there is no one-size-fits-all approach when it comes to private label. There are huge variations across category and shopper types, but when it comes down to it consumers have a new purchasing mentality that the cheaper product can be just as good.”