Woolworths ‘Official Range Profile’ tries to counter House Brand war perception

Posted by AFN Staff Writers on 31st July 2012

The competition between supermarket house brands and supplier brands continues with Woolworths just releasing its Official Range Profile of brands for its Australian supermarkets.

The Australian supermarket giant said the data, which will be regularly updated on its website, would facilitate a “more informed” discussion around the issue of range and choice provided in Woolworths supermarkets.

Managing Director of Woolworths Supermarkets, Tjeerd Jegen, said that Woolworths had a commitment to demonstrate how they meet their customers’ needs.

“As part of that commitment, we are releasing a snapshot of data about our range to the market to put our business into a correct perspective,” Mr Jegen said.

“The facts show that in packaged groceries and perishables, Woolworths stocks more than 44,000 lines of which 94 per cent are branded products. Just 2,500 are Woolworths Own Brand products,” he said.

Investors Told a Different Story?

Despite the newly released date claiming a majority of supplier brand products, Woolworths is committed to increasing their private label products.

As Australian Food News reported last year, Woolworths announced plans to double its own brand sales with more products for lower prices. At the time speaking in November 2011 at an investor briefing, Mr Jegen said the plan reflected a “growing demand for value and quality.”

In that 2011 investor meeting, Mr Jegen reportedly said that “customers tell us that, whilst they enjoy getting the broad choice of brands at Woolworths, they also appreciate the fact that own brands inject additional competition into the grocery sector by offering the same or better quality as national brands but at a cheaper price.”

The pressure applied to Australian manufacturers by the major supermarkets might be exemplified with the recent news from Patties Foods, the makers of iconic bakery products such as Four ‘N’ Twenty pies.

Releasing their latest results on July 16 2012, Patties Foods reported they were under pressure from the increase in private label supermarket brands.

“The second half saw increasing pressure on margins in the In Home (supermarket) channel, particularly with the continued growth of private label products,” Patties said in a statement to the Australian Stock Exchange (ASX).

Patties predicted that in the second half of 2012, it will face much tougher trading conditions, as private labels from Woolworths and Coles increase in numbers, pushing established brands off the shelves.

Woolworths Own Brand mimicking international trends

Meanwhile, according to Woolworth’s Mr Jegen in terms of sales, Woolworth’s Own Brand products earn around 11 per cent of grocery sales, “highlighting that despite their low share of range they are very popular with our customers,” said Mr Jegen.

It is this popularity that Woolworth’s hopes will create the success of the house brand strategies, imitating the success of Tesco seen in the UK.

However Tesco’s boss Sir Terry Leahy, who  took the chain from a struggling operator in the UK market to a global grocery leader, has been quoted recently as saying there is a limit to how much private labelling can achieve, and warns against forcing the choice for the customer. He also indicated that a maximum threshold of between 30 and 50  per cent of sales could be generated by a supermarket’s own house brands.