When We Buy Supermarket House Brands (And Why We Don't)

Supermarkets are increasingly spurning outside suppliers in favour of their own house brands. But just how willing are we to buy them?

Picture by sheeprus

There’s nothing new about the ‘house brand’ concept — supermarkets have been offering their own branded products for at least as long as I’ve been alive. However, in recent years those products have taken up an increasingly large share of the average supermarket shelf, a move generally attributed by industry observers to a desire to emulate the success of overseas retailers such as Tesco, which routinely devote more shelf space to their own brands than to outside suppliers. Aldi, which is expanding rapidly in the Australian market, is also a major supporter of the house brands concept — in any Aldi store you’ll see only a handful of products which aren’t under one of its house brands (Damora, Elsbury and Dairy Fine, amongst others).

One big difference with the more recent house brands — such as Select at Woolworths or You’ll Love Coles (now morphing simply to Coles) at Coles — is that they aim to provide a higher level of quality. While brands such as No Frills, Home Brand Or Savings (which Coles later dumped in favour of Coles Smart Buy) made a virtue of minimal packaging and minimal prices, the newer entrants want to compete directly with existing major brands, slightly under-cutting the pricing of name brands but not aiming as cheaply as the older, bare-bones options.

However they are packaged, just how willing are we to buy them? According to Nielsen Company data, 22.8% of supermarket sales (excluding fresh food and cigarettes) in the first three months of this year were due to house brands. The same time a year earlier, the comparable figure was 23.1%. During that three-month period, the average shopper spent $187.10 on house brands.

Those figures were reported in a recent report for the Australian Financial Review by Neil Shoebridge, which I would happily link to and recommend reading if the AFR didn’t keep virtually all of its content hidden behind a paywall. Here’s a link to the first paragraph.

Those numbers still mean that three-quarters of grocery spending is on branded products (less surprising when you consider the top-selling items in supermarkets are generally soft drinks). On the other hand, the numbers are well up on the 1990s, when, Shoebridge reports, the ratio was more like 10%.

Despite pushing through the changes, retail managers won’t necessarily be unhappy with those figures. Supermarkets need to approach change cautiously; customers don’t like feeling that their options are being restricted purely to turn a profit (as Woolworths has demonstrated in spades recently with its unpopular removal of debit card payments). An Eye On Australia survey cited by Shoebridge suggests 9% of Australians have said they’ll never buy house brands — a sizeable number even if it suggests most of us are happier to chase a good price than a particular brand.

Slower growth in the space might also be due to an increasingly willingness by supermarket chains to offer discounts on established brands, making them more competitive with house products. Coles and Woolworths both made a lot of noise in 2009 about how prices were being permanently reduced in many categories; established brands seem to have benefited from that trend.

I suspect many people take a suck-it-and-see approach to house brand products; trying them if the price seems appealing, but then dumping them if they don’t work as well as their branded equivalent. If you’re looking to save money, that’s a sensible approach — there’s no point in subsidising some multi-national’s marketing campaign, but equally there’s no point buying cheap toilet paper if you end up with the adult equivalent of nappy rash.

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