GROCERY shelves will be dominated by private label brands if plans by supermarket rivals Coles and Woolworths to dramatically increase the produce they own come to fruition.
Coles has no less than 553 brand names pending and registered while Woolworths has 721, in a wide range of categories including liquor.
Prepare for Marlborough Sound wine, Bolt and Flinders beer, Nelson County Bourbon, Buckeye and Iguana rum – all owned by Woolworths.
Coles has Bendigo Valley and Tallagandra trademarked for a meat range along with Coles Lighter Living and Grill.
The supermarkets’ ploy is not original – German discount store Aldi, which has steadily increased its presence with about 260 stores claiming about five per cent market share since its Australian launch in 2001, stocks about 95pc private label items.
Research has shown customers believe the unfamiliar Aldi brands are “European” rather than private label.
Australian Food and Grocery Council (AFGC) chief executive Kate Carnell said the aggressive incursion into private labels shifted power from the food producer and processor to the retailer, particularly if supermarkets got a foothold into processing.
“The $1 per litre milk war has demonstrated that sales for the private label increased and demand for the branded label decreased; the price for the latter is a bit higher because the margin for the processor and the farmer is higher,” she said.
“So, private label milk processors and farmers suffer.”
Ms Carnell said supermarkets had total control over their private label brands, from pricing and contracts to where it sits on the shelf.
“And more and more space is being given to private labels,” she said.
“With milk, the great dilemma is you just can’t turn cows off.
“You can’t control supply and you have to take the price on offer.
“We have been incredibly lucky to have fresh white milk every day across Australia.
“That is not the case overseas, even places like Holland and the Netherlands and parts of France where there is a lot of dairying, but big private label infiltration — they couldn’t make money with fresh milk so they’ve gone into UHT (long life) milk where there is less wastage and it’s easier to maintain profitability.
“Consumers might think $1/L milk is fantastic but in the long run they won’t be able to buy fresh milk at all.”
She said private label, or home brand milk, increased market share from about 40pc to 60pc in the past year.
“There’s no doubt supermarkets are chasing the figures they have in the United Kingdom, where private label groceries are about 40 to 50pc of the market, and they’ll increasingly source products offshore.”
Ms Carnell agreed brand equity was one way to fight back but added “it only works if you can get the product on the supermarket shelf”.
Coles is promoting its generic brands with its “feed your family for under $10” campaign while Wool-
worths has focused on shifting perceptions of generic brands from “cheap” to “good value” – a strategy that has paid dividends for Aldi.
UBS analysts have estimated Woolworths generated about $5.5 billion or 18pc of its national sales, with its Select, Macro and Home Brand ranges.
Own brand sales are believed to account for 30pc of Coles’ sales.
Before Aldi rocked the boat, the duopoly meant neither Coles or Woolworths was concerned with achieving high private brand sales figures, as both already enjoyed considerable market power with suppliers due to the high level of concentration.
Research company Neilsen suggested the private label push could transfer $4b of profits in grocery products from manufacturers to retailers.
Email a friend