International supermarket trends show a growing appetite for private-label goods, in a move that’s gaining momentum among Australian companies.
The Wall Street Journal reported this week that supermarkets’ investment in strengthening their own product range is the chosen future-proofing model, because it allows them more control over the production and sale costs, edging out traditional manufacturers.
And shoppers don’t mind. In fact, they like it.
At home, Coles last year announced it aims to have 40 per cent of its sales from its own labels by 2023.
It’s estimated the average Australian supermarket shelves are full of between 20 and 25 per cent private label products – meaning products made and sold under the supermarket’s branding.
Meanwhile, the ever-popular Aldi is ahead of the game, stocking about nearly three-quarters of its products, University of Tasmania retail researcher Louise Grimmer said.
“Over the past few years consumers have definitely warmed to private label products and they are now a really effective mechanism for building and maintaining customer loyalty for both private label brands and the specific supermarket stocking them,” Dr Grimmer told The New Daily.
“The fact that Aldi is so popular with shoppers and they stock around 70 per cent private label just shows the growing appetite that Australian consumers now have for private label products.”
If it works, keep doing it
Dr Grimmer referenced Woolworths’ Macro range as a success story that had garnered a loyal following among consumers, which she said showed supermarkets’ targeted investment in improving their own products was working.
“If you compare the quality and branding of the current private label brands available in Coles and Woolworths, there has been a very significant improvement in these types of product over the past five years,” she said.
This is a trend she expects to see continue when Kaufland enters the fray in the very near future.
Competition is said to breed success, innovation and excellence – and it’s no different in the world of supermarket retail, associate professor in marketing and international business at Queensland University of Technology Gary Mortimer said.
Blink and you’ll miss it – or not
While there is the possibility some brands and products will disappear from shelves as Coles, Woolworths and the like favour their own over outsiders, most consumers won’t notice, Professor Mortimer told The New Daily.
The goods most likely to be swallowed up in the private label vacuum are staple goods – think pantry items like sugar and flour, cleaning products and toilet paper.
These items carry a lack of brand loyalty, Professor Mortimer said,
“Often people say, ‘It’s just sugar’ or, ‘It’s just toilet paper’,” he said.
“It doesn’t necessarily have to be floral scented or printed, it’s just toilet paper.”
The product lines that won’t be losing market share to private label products are linked to what consumers hold closest to their hearts: Their children, their pets and their own wellbeing.
Nappies, beauty products, baby food and pet food will never give over to a dominant private label share, Professor Mortimer said.
Why? It’s just part of historic stigma of own-brand labels, plus the value of strong marketing, he said.
“We often associate global brands with quality,” Professor Mortimer said, referencing the likes of L’Oreal and Huggies.
But overall, Professor Mortimer said, consumers were the winners in this shift in supermarket behaviour, with higher-quality goods and lower prices at the forefront of the gains.