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

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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  • I’m happy to buy “some” household brand items. But I am a little resentful of what I perceive to be an attempted monopoly of house brands across the entire suite of supermarket products. To me, it suggests a plan to control my shopping experience. And whenever I find my supermarket dumping one of my trusted brands, something I’ve used for many years, I will actually go out of my way to find that brand in another supermarket, rather than blindly accept whatever alternatives are put in front of me.

    It’s great to have low-cost options for certain products like flour, sugar and so on. But not for everything. And not so much that it cuts out my preferred options, even if they cost more.

  • ALDI it up
    in germany (where me and ALDI are from) aldi rebrands the exact same product from the exact same producers with new packaging.
    you can verify by comparing the production addresses on the labels
    would surprise me if it wasnt the case here.
    regardless, Aldi is super cheap for decent quality. we do all our major grocery shopping there once a month or so, and then top up during the month with trips to others for more “luxury” stuff.

    • That’s true of many house brands, not just those at Aldi — I’ve been doing some research for another Lifehacker project and there’s an enormous amount of obvious price and content matching amongst house brand products. (Though it’s more accurate to say they sign a contract with the same manufacturers to produce stuff with their own house label on it.)

  • Just because it comes from the same supplier, doesn’t mean it’s exactly the same quality or formulation.

    I’m not happy with this at all and some of our favourite products have disappeared – so we also go out of our way to buy what we like.

    Some of the Woolworths Select products have been quite good but I want the *choice*. Clearly, when every product is a home brand, that gives then much more freedom to control prices and costs and that’s not a good thing for consumers.

  • What is interesting is comparing Coles $mart Buy with You’ll Love Coles. Comparing ingredients and nutrition information gives identical results, yet $mart Buy is significantly cheaper. For example 1 KG of $mart Buy cheese is about $6 versus about $9 for You’ll Love Coles cheese.

  • i think the significant benefits for own branded isn’t just the initial sales and possible increased margin its the increased leverage.

    Leverage against the customer because they may like say a coles product which of course means they get locked in to shopping at coles.

    And best of all from the supermarket point of view leverage against the vendor, as the customer is used to purchasing the product as ‘coles’ brand not ‘heinz’ so if heinz don’t want to play and give a discount/margin increase/rebate/etc… they can switch the behind the scenes product with out having to worry about customers going else where (provided they can keep the new brand close enough).

  • I prefer to buy products that are Australian Made and Australian Owned.

    I find the ‘el-cheapo’ brands are quite often packaged in Australia with local and imported ingredients.

    So I try to buy Australian as much as possible, more so than cost.

    • I wonder how much the primary producers are screwed by the el-cheapo brands.

      I will always go for the locally produced goods if I can find them. Sadly the product descriptions never give a good indication of what the mix of local and imported ingredients might be. Often I suspect it’s 99% imported ingredients in local packaging.

      For seafood products, the el-cheapo brands are rarely marked by dolphin-safeness or stock-consciousness.

  • Having worked for a major food company that supplied both branded and private label supermarket products, I can confirm that typically the branded versions are higher quality, although sometimes they are literally the same product in different packaging.

    As for the supermarkets’ motivations, it’s as much about creating leverage over suppliers as creating customer loyalty. In Coles case, it’s also been partly about slavishly adopting the Tesco nodel from overseas.

    • Agreed! I bought generic aluminium foil and cling wrap and while the aluminium foil is identical for my usage, the generic cling wrap had obviously forgot about the “cling” in the name – it was at best, just “wrap” or more like “anti-cling wrap”. It doesn’t stick to anything, including itself, making it completely useless for it’s intended use as cling wrap. Needless to say, it’s still sitting in my drawer while I try and figure out a use for it because I’ve alrady bought a branded replacement that actually does the “cling”-ing part of the name.

  • The bottom line is the shareholders. Woollies like most big corp’s don’t give a damn about the product or the customer, it’s all about making the most money in the shortest time for the shareholders. Quality, availability, fairness in competition mean absolutely nothing to them. And one day, when there is no more competition and no one can afford the crap that they forced the competition to produce we will all have to rely on the pittance we can grow in our back yards??

  • What I’d like to know is: which is more profitable for the supermarkets – selling name brands at a higher price or selling their own brands at a lower price?

    My girlfriend tries not to buy too many ‘You’ll Love Coles’ products as she is convinced the profit margins on these lower-priced products are such that, by buying them, she will be aiding the expansion of the Coles-Meyer machine more than if she buys name brands.

    • Your girlfriend is 100% correct.

      Larger profit margins – and more control over them – and the ability to change the source of supply drive this.

      Note there is no ‘Coles Myer’ machine any more, they are two separate entities. Instead you have the levelled up ‘Wesfarmers’ boss machine.

  • Should parallel imports be mentioned here as well?

    Still get the brand name, same ingredients.

    Example. Cussons Imperial Leather soap. made in australia. $4.29 ($3.49 on special) for a 4 pack from IGA/Coles/Woolworths. When made in Singapore and sold at discount stores – $2.

  • For people that don’t know, there are 3 types of milk:

    Watered-down milk and
    Super watered-down-milk.

    Farmers Union supplies all the house brand milk.

    • If you can expand on that, it’d be great. I’ve been enjoying no-brand milk at $3.06/3L as opposed to $3.66/3L for the next-step-up Coles branded and the $5-6/3L for the other brands – is there really a difference?

  • This is similar to the battle for dominance in the petrol station market, where already Coles and Woolworths are already making it hard for the independents. If they win there won’t be much competition left and consumers will be the losers.

  • The ultimate aim is to have Generic Brand products at bottom, middle and top price points and the top one or 2 selling brand names so in any one category there will be for example:
    Super Cheap Cola, Decent Cola, Great Cola, Pepsi and Coke.
    or Compound Chocolate Biscuits, Chocolate Biscuits, Double Chocolate Biscuits and Tim Tams

  • There are certain categories of items that you’re always better off buying the store-brand or no-brand items.

    Cleaning products is one. Have a look at the g/L of the active ingredients on things like spray bleach. “Mould Remover” Woolworths brand has 4 times the concentration of 1 of the active ingredients and the same amount of the other than the next most powerful brand available.

    No-name Draino is half the price and twice the concentration for the same volume in a name brand.

    But the other ones come in colourful bottles with detailed instructions on the back and pretty graphics…. It’s odd how that works.

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