A new age of retail owned BRANDS

\"\"This article comes from the oldest continuously published newspaper in Australia The Sydney Morning Herald and addresses the age-old dilemma of mimicry by private labels. In Australia they call them home brands but the idea is the same classic late 1980’s early 90’s private label – pick a national brand and leverage its equity with remarkably similar private label packaging and product – this is not so much branding as copying.  The strategy continues to be executed in many American grocers most notably Supervalu and Aldi.

It is my hope that as we emerge from the recent economic unpleasantness a new age of retail owned BRANDS will emerge. Brands will be created that are more than price points and mimicry they will claim their  place in the hearts of our customers; brands, which cross multiple categories and present unique solutions to problems in ways that no manufacturer could hope.

Home brands\’ trick of the eye

In a quest to boost the sales of their private label products, retailers are coming \’\’dangerously close\’\’ to misleading consumers by mimicking the packaging of established brands, say experts.

Woolworths Select Great Start cereal features the same sunny orange and yellow color scheme as Kellogg\’s Just Right. Coles Spaghetti comes in a green packet similar to that of Vetta\’s spaghetti, and Woolworths\’ generic scented garbage bags are packaged in the same shape, size, scent and color of those by Multix.

\’\’In the old days, the home brands were in plain packaging. The problem is when the packet starts to look like a specific branded product,\’\’ said consumer and competition law expert Frank Zumbo, an associate professor at the University of NSW.

The fight over Australia\’s $80 billion supermarket spending has always been cutthroat. But the consumer group Choice said the recent growth of supermarket brands had been phenomenal. A decade ago, home brands made up 10 per cent of grocery sales. Late last year it was almost 25 per cent.

But there are concerns that the expansion of private labels is hurting Australian companies, crowding their products off supermarket shelves, forcing prices below sustainable levels and stifling manufacturers\’ ability to compete.

Professor Zumbo said he believed some packaging – especially in cereals and biscuits – could come \’\’dangerously close\’\’ to breaching section 18 of the Australian Consumer Law, which prohibits misleading or deceptive conduct, including conduct \’\’likely to mislead a consumer into error\’\’.

\’\’If the supermarkets create an impression that this product is really a branded product of a supplier, it could come close,\’\’ he said.

Australian Food and Grocery Council chief executive Kate Carnell agreed the retailers aimed to make their products closely resemble their branded rivals, \’\’without ending up in court\’\’.

The Australian Competition and Consumer Commission said it received \’\’occasional\’\’ complaints from people who believed packaging had misled them into buying the wrong product, but it had not taken recent action in such cases.

Coles and Woolworths denied that they set out to copy branded products with their packaging, both pointing to the fact that their private label brands – Woolworths Select and Coles – carried similar designs across different products.

\’\’If our packaging was close to another brand\’s, I\’m sure the brand owner would, in a heartbeat, sue us,\’\’ Coles head of merchandising John Durkan said.

Coles and Woolworths said their own brands offered choice and value.

\’\'[Private label products] have to earn their place just like branded products earn their place,\’\’ Woolworths spokesman Benedict Brook said.

Source: The Sydney Morning Herald


Private Brand Invades The Land Down Under

\"\"The Sydney Australia daily newspaper The Australian presents this profile of the modern growth of Private Brands in Australia spearheaded by Aldi, Woolworths, Coles and Metcash.

In-house labels are proving a big hit for Coles

THEY\’RE cheaper than brand-name groceries, but they no longer have to look that way.

Far from the plain-wrapped budget offerings that had little to recommend them than rock-bottom pricing, the new generation of \”home brand\” products now account for almost a quarter of supermarket sales.

Private label products — the term retailers use to denominate in-house brands — make up 23 per cent of supermarket revenue, up from around 10 per cent in 2000.

Greg Foran, director of supermarkets, liquor and petrol at Woolworths, says the shift was catalysed by German discounter Aldi\’s entrance to the Australian market in 2001, with the economic downturn accelerating the trend in more recent years.

\”If you\’re going through a global financial crisis, you often see discounters such as Aldi and generic products grow faster than branded products, which is a reflection of people having less money and those who do have money wanting to spend less,\” he says.

However, Australia is still a long way behind Britain, where private label has a market share of around 45 per cent, highlighting the growth that is possible in the local market.

Foran says Aldi, which stocks private label products almost exclusively, fundamentally changed the rules on private label for Coles, Woolies and Metcash, the wholesaler behind the IGA chain of independently owned supermarkets and owner of the Black & Gold private label brand.

\”Instead of running a product that is perceived to be of lesser quality, Aldi actually improved the quality stakes and kept the prices down.

\”That creates a competitive reaction across the marketplace,\” says Foran.

Rod Evenden, general manager of Woolworths private label division, says Woolies has upgraded the quality of about three-quarters of its private label products, which are ranked from the basic white-labelled Home Brand at the bottom end to the mainstream Woolworths Select, which is pitched as a competitor to market-leading brands.

\”Every product that we put on the market, we grab the market leader in the category and benchmark our product against it . . . if it comes up as acceptable to customers it goes into the range and if not, then we go back and reformulate it until we find something customers do like,\” he says.

Coles merchandise director John Durkan says that while customers demand name-brand quality, they still expect to be able to save money by buying private label.

\”If it\’s not priced at a discount of 15 per cent or more, there\’s no rationale for a customer to buy,\” he says.

Given that they don\’t have to compensate suppliers for the value associated with their brands, supermarkets are able to deliver these savings while still banking higher profits than they would selling branded merchandise, with figures from retail sector consultants Coriolis putting the average gross margin on private label products at 35 per cent, compared to 25 per cent for branded goods.

\”We don\’t have all the overheads of a huge marketing budget, all that proprietary stuff, so it\’s a much lower cost and that translates into the price the customer pays,\” Durkan says.

Since being taken over by Wesfarmers three years ago, Coles has completely overhauled its private label offering, closing down the \”You\’ll Love Coles\” brand launched under previous management. \”One thing that customers told us when we first arrived was that they didn\’t love Coles at all, so it was quite a misnomer,\” Durkan says.

The new mainstream brand, simply badged as Coles, instead features more subtle \”quality promise\” badging offering refunds if customers don\’t feel the product is up to scratch.

Both the major chains have also introduced a number of \”pseudo-brands\” — products that appear to be mainstream branded goods but on closer inspection reveal small print saying they have been \”packed for\” Woolworths or Coles.

It\’s a strategy Aldi has used almost exclusively, stocking its supermarkets with a limited range of about 1000 products, most of which bear a striking resemblance to market-leading brands but are actually in-house labels.

At Woolworths, Foran says pseudo-brands make up just a handful of the 2000-strong private label portfolio, but in some segments — such as miniature chocolate bars designed to mimic market leaders Mars, KitKat and Bounty — they are seen to have more appeal than a standard private label.

\”We know that if we call it Home Brand, it won\’t sell as well because the product is put in kids\’ lunch boxes or given as an afternoon snack, so there will be a stigma associated with that for children,\” he says.

At Coles, Durkan says Coles has employed the same strategy with skin-care products, launching an in-house brand rather than try to push a Coles-branded moisturiser.

\”Customers have high expectations and it\’s quite an expensive category, and Coles isn\’t known for the science behind that, so we made a skin-care brand called Derma,\” he says.

Rowena Vitarelli, shopping in Coles\’ Tooronga supermarket in Melbourne\’s east with daughter Amelia, says she mainly buys private label products for commodity items such as milk, cat food and flour.

\”I\’ll give other things a go, like paper towels, when they\’re the cheapest, and canned fruit or salmon, and then if I don\’t like it, I\’ll go back to the brands, but for something like milk I can\’t see the point in paying more unless I\’m buying organic,\” she says.

However, Vitarelli admits that she does find herself being swayed by the upmarket packaging of the new-look private label.

\”It definitely makes a difference — when it\’s actually got Coles branding on it you think it\’s better than the really cheap stuff, but that might just be because it looks prettier.\”

But she confirms Durkan\’s suspicions on the limits to which private label can extend, ruling out buying private label personal care products after years of loyalty to branded items.

\”It might sound snobby, but I wouldn\’t buy face cream from a supermarket,\” she says.


Generic Takes On New Meaning in Australia

\"\"In an unusual twist on packaging and branding news the Australian government today announced a comprehensive attack on smoking and its harmful effects, including an increase in the tobacco tax of 25%. The move includes a shift to “plain white label” generic packaging that is reminiscent of the historic past of Private Brand. But instead of the cheap, price driven aesthetic of the generic past this move by the Australian government eliminates the last frontier of tobacco advertising package design

The anti-smoking legislation includes:

  • The first increase in tobacco excise (above inflation) in more than a decade, an increase of 25 per cent.
  • Cracking down on one of the last frontiers for tobacco advertising – in a world first, cigarettes will have to be sold in plain packaging.
  • Restricting Australian internet advertising of tobacco products.
  • Injecting an extra $27.8 million into hard-hitting anti-smoking campaigns.

In a world first, all cigarettes will be sold in plain packaging by 1 July 2012.

This will remove one of the last remaining frontiers for cigarette advertising, and was a key recommendation of the National Preventative Health Taskforce.

The legislation will restrict or prohibit:

  • tobacco industry logos
  • brand imagery
  • colors
  • promotional text other than brand and product names in a standard colour, position, font style and size.

The Government will develop and test package design that will make cigarettes less appealing, particularly to young people.

Graphic health warnings will be updated and expanded. Research shows that industry branding and packaging design reduce the effectiveness of graphic health warnings on tobacco products.

The National Preventative Health Taskforce concluded that \”there can be no justification for allowing any form of promotion for this uniquely dangerous and addictive product which it is illegal to sell to children\”, including packaging.

The Government will also legislate to restrict Australian internet advertising of tobacco products, bringing the internet into line with restrictions already in place in other media.

At the same time, the Government will boost investments in hard hitting advertising campaigns by $27.8 million over four years, to a total of more than $85 million in the next four years, to encourage even more Australians to quit smoking.

This additional investment will be used for campaigns targeting people in high-need and highly disadvantaged groups such as low socio-economic communities and pregnant women and their partners.

This will extend and broaden the focus of the previous National Youth Tobacco Campaign.

The first elements of the new campaigns will be rolled out by the end of this year.

Through the Australian Taxation Office and Customs and Border Security the Government will continue its successful strong enforcement against the production and importation of illicit tobacco.

This comprehensive anti-smoking package follows this week\’s landmark COAG agreement delivering fundamental reform to Australia\’s health and hospital system, and builds upon other actions the Government has taken to improve preventative health:

  • A record $872 million investment in preventative health including programs in schools, workplaces and community settings
  • $103.5 million under the National Binge Drinking Strategy
  • The decision to establish the Australian National Preventative Health Agency which is currently being blocked by the Opposition in the Senate.
South Africa Woolworths

Woolworths Essentials Debuts in South Africa

\"\"The South African retailer Woolworths is launching a range of Private Brand basic products called Woolworths Essentials.  The first products are available as of mid-March and include food, household cleaning and toiletries.

Head of Foods Julian Novak said: \”With tighter budgets, customers are looking for products that offer excellent quality as well as a great price.  South Africans have always relied on Woolworths for excellent quality – and with the launch of our Essentials range, they\’ll be able to enjoy the superior quality they expect from Woolworths at prices that are comparable – and some even lower than – competitive products in the marketplace.\”


Private Brand Invades Australia


An interesting Private Brand blog post by Jonathan Sinton for the Australian site Marketing Mag. The post illustrates that the Private Brand story in Australia is intriguingly similar to the U.S.

A battle in the aisles!

Many have said that the tightening of belts brought on by the recession will pass once the good times return, but this would depend on the lessons consumers have learnt being unlearnt. It also ignores past experience, when we’ve seen emerging trends in the consumer landscape accelerate and establish themselves during a crisis more often than come and go. In the supermarket, shoppers have learnt that cheaper can be just as good, with private label products reaching a record share (over 20%) of the market in Australia. While there may be some relaxation of the purse strings when things improve, the trend towards private label is a new purchasing mentality that is here to stay.

Research we conducted in July found that, having been given permission to reassess what constitutes value, shoppers are more likely to select the less expensive option – be it branded or private label – unless convinced that a dearer product is tangibly or emotionally better. Even historically resistant categories are under threat. For instance, Huggies nappies were once bullet proof against private label due to the high level of involvement and trust linked to the category, but Aldi has shaken the market up with its cheaper offer gaining advocacy amongst the most viral of groups – mothers. Across all categories, we’re seeing consumers trading down from branded offers, with the popularity of private label products growing amongst adult households, young singles and young couples. And they’re doing so for a variety of reasons – some out of preference for private label and others despite an aversion to it.

The most common reasons pro-private label shoppers buy these products are 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. But surprisingly, many (up to 40%) who buy private label do so despite being concerned over the perceived lower quality of the products and packaging, its inferior status image and lack of innovation. Regardless of their negative opinions, these shoppers are slipping private label products into their trolleys highlighting that purchasing behaviour does not always reflect loyalty. In this case, it is more an indication that branded manufacturers have few true ‘brand believers’. As a result, branded products face a challenge – offer something that private label cannot or face losing market share.

Read the entire story.