Supermarket giants to increase 'home' brands on their shelves

You may have noticed on your most recent trip to Woolworths or Coles, whether in Esperance or elsewhere, that the number of home brands, Coles or Woolworths owned brands, have increased around the supermarket. There is packages Coles salads and Woolworths brand sugar, they do their own milks and sandwich bags. They appear to be everywhere… and the two giant supermarket plains plan to have more shelf space dedicated to their own home brands.

Barry Urquhart, the retailing guru from Marketing Focus, brought the information to the Triple M Breakfast show on Monday morning.

“If we go back to about the turn of the century, the year 2000, there was just marginally more than 12% (of home brands) and that seems to be the natural figure. When Australian’s were given the choice, one in eight of us would prefer house brands…”

Back then the norm would be to purchase these generic brands, which were under the guise of black and yellow products or similar, and put them into plain packaging to try and hide our ‘cheapness’.

“Now with the intense hot competition between Coles and Woolworths and price deflation, to beat price competitors they have actually introduced it more and today it sits around 23% to 28% in the categories that Coles and Woolworths choose to have their household products.”

And the increase will continue, with both Coles and Woolworths declaring within five years their ambition is to have at least 40% of home brands shown to and bought by their customers.

So what, affect will these have on local brands being squeezed out of premium shelving space at these supermarkets.

Barry again. “it implies, to consumers they are going to have less choice… there will be less choice, less satisfaction for many consumers and they will be looking to alternative circumstances where they can buy their preferred brands…”

House brands is a relatively old concept. The French were custodians of the idea, which was born after World War Two. Much of France and other regions of Europe feature supermarket chains where their products are represented by 55% to 65% home brands.

The major benefit of flooding the supermarket floor with home brand is generally these products will have preference to premium, eye-level shelve space and they can increase profit margins on house brands due to savings in packaging and other economic factors.

So, with Aldi and other Euro chains coming to Australia in the coming months and years, it appears there will only be more home brands in stores.  

The only respite for local, smaller brands is that Coles and Woolworths will still need to source their products from somewhere, often they will just buy and repackage well-known brands or local products. You just need to have the right volume capacity and price to land that contract… and probably a little bit of luck!