Why Store Brand Goods Aren't About To Dominate In Australian Supermarkets

The question of whether Australia's major supermarket chains, Coles and Woolworths, have too much power or are trying to control what brands we buy is rarely out of the media. But as former Australian Competition and Consumer Commission (ACCC) chairman Graeme Samuel points out, much of the discussion is driven by vested interests and doesn't necessarily reflect our interests as consumers. And he argues persuasively against the notion that store brand goods will dominate our shopping habits in the future.

Picture by Ian Waldie/Getty Images

Samuel, who retired as chairman of the ACCC last July, was interviewed at The Conversation on a wide range of competition-related issues. The whole interview is worth a read, but from a Lifehacker perspective one of the most notable issues is the discussion of supermarket competition and the rise of house brands.

Samuel points out that back in 2008, the main anti-supermarket argument was that a lack of alternatives meant prices were likely to rise:

The bemusing element of the debate is this: back in 2008, contrary to all the statistics, it was being said that the two major grocery chains, Coles and Woolworths, were leading increases in the prices of groceries beyond the rate of inflation, and beyond the rates of increases in grocery prices in other major OECD nations. That wasn’t borne out by the statistics, but it didn’t matter, it was what was being put out.

In 2011, the argument switched to suggesting that the price wars between Coles and Woolworths were dangerous for exactly the opposite reason: because they made goods too cheap:

On January 26 last year – Australia Day – Coles announced the commencement of the price war in some of the staples, milk and ultimately, bread. Suddenly the supermarkets were charging too little and so it’s no longer a question of them pushing the prices up. It’s a question of them pushing the prices down too low. And we get another group that comes out which is the suppliers and the farmers in the supply chain who are saying it is going to impact on them significantly. To the best of my knowledge actually, to date, that hasn’t happened.

Samuel suggests that we're seeing a tussle between the supermarkets on the one hand and other large suppliers on the other:

There is a battle of some quite powerful vested interests that’s going on here and it’s a fascinating tussle for the consumer dollar. On the one hand, (there’s) farmer groups and on the other hand, major supermarket chains like Coles and Woolworths and the Metcash IGA group. But also sitting in the centre are some very powerful suppliers and processors of milk and bread and the like, who are feeling the squeeze.

What's worth emphasising here is that while this competition has impact on individual groups in the supply chain, the impact for consumers is very clear: goods get cheaper.

Samuel also makes a simple argument against the proposition that we'll be "forced" into buying store-brand products rather than other brands:

The scare campaign out there – I’m taking home brand products as one of the examples – is that Coles and Woolworths are going to crowd their shelves with home brand products and they’ll sell nothing else.

Well, forgive me, but that can’t possibly happen if consumers are exercising a choice. Because there are a vast number of consumers that simply say they’re not prepared to buy the home brand milk, they’re not prepared to buy the home brand bread, or they’re not prepared to buy the home brand baked beans, or toothpaste, or whatever.

Experience overseas and elsewhere has shown there are some consumers who are very price conscious who will buy the home brand product. And there is a group of other consumers who, for a range of reasons, are less price conscious and won’t buy the home brand product. I first recall reading six or seven years ago about how Coles and Woolworths were going to increase the percentage of home brand products on their shelves by 35%, over a period of two years.

But you know, if I walk up and down those aisles today in either of the major supermarket chains, I’ve actually got to look to the bottom shelves to see the home brand products.

So clearly, Coles and Woolworths don’t believe that their home brands merit eye-level positioning on shelves and there is a massive amount – tens of thousands – of products that are there that are not home brand. So we keep on seeing these prognoses that the home brands are going to take over and there will be no branded products left on the shelves. If that was the case, no one would shop anywhere but Aldi, but that hasn’t happened, it’s just not the way it works.

It's also very evident that while a lot of noise is made about store-brand goods, that stance isn't generally reflected in our behaviour. For instance, eggs as a category are dominated by store brands. (That's also indicative, incidentally, that levels of concern over caged eggs aren't especially high in the general community.)

Testing by Choice, Lifehacker and others indicates that store brand goods are often (though not invariably) just as good as their pricier equivalents. You won't know until you check, but many people demonstrate confirmation bias and dismiss the products without actually trying them.

And that's the ultimate point: whether you want to get the best value or whether you have a particular 'ethical' approach to shopping, it's up to you to consider what you buy carefully. Supermarkets might design their store-brand products to look similar to name brands, but you're the one who chooses what goes in your trolley.

Having a single dominant supplier has obvious risks (Telstra's control of the copper network being the clear example). However, with Woolworths and Coles aggressively price-matching and ALDI expanding rapidly, rising food prices because of supermarket behaviour seem fairly unlikely in the near term.

Graeme Samuel: the problem with petrol, the NBN and the "scare campaign" against supermarkets [The Conversation]

Lifehacker's weekly Loaded column looks at better ways to manage (and stop worrying about) your money.


Comments

    I don't think this is entirely true.

    There has been a complete overhaul, particularly in Woolworths, of product replacement (by the various store brands) and removal (of different brand lines). For example, at one point you may have had 5 different brands of Mustard, now you have 2, maybe 3. In both my local Coles and Woolworths, their "Select" brands, as in, their premium store offerings, are *always* at eye level.

    Whether people are buying less brands or the supermarkets are crowding them out is unknown, but there is definitely a trend of brand removal occurring in both Coles and Woolworths. It's a bit unfair on the brands, to be honest, as Coles and Woolworths have can place their products next to brands and then heavily discount them before the brands have time to compete.

      I totally agree. Last time I shopped at one of the two big chains I was really surprised how many
      "select" brand items were available. I find the quality of these items a bit of a lottery too. cheers

    I don't have a problem with own brand goods. More often than not, they come out of the same factory as the branded stuff. All I know it that Coles own Belgian chocolate is awesome and beats the shit out of Cadbury which costs almost twice as much!

      Oh I totally agree with the Coles Belgian chocolate, delicious

    Here is how I see it.

    If the home brand product is exactly the same as the branded product (like milk) then why would I pay a premium price for a different label.

    If there is a difference in the product; such as in my breakfast cereal of choice Nutri-Grain, I will buy the product I prefer based on taste etc. in this case is the more expensive branded product (sorry Coles, your "Mighty Grain" is not as good as the real thing)

    "Experience overseas and elsewhere has shown there are some consumers who are very price conscious who will buy the home brand product"
    I would bet that the majority of those buying 'Home Brand' goods are in general, low income earners who are by necessity have to be very budget conscious.

    "Testing by Choice, Lifehacker and others indicates that store brand goods are often (though not invariably) just as good as their pricier equivalents"
    That is not my experience, however even if the quality is close to parity, when the providers have been squeezed off their land, because they can no longer afford to sell at the price dictated by those big buyers, the big two/three will import goods from overseas, which also by necessity will be either priced higher or reduced quality.

    Has anyone else noticed Aldi has started sourcing non-perishable food items from China? Stuff like biscuits, spreads, etc. I don't buy Chinese-made foodstuffs because I have concerns about quality control, in terms of contaminants and the quality of ingredients. I also like to support local producers and manufacturers where possible.

    Aldi - predominantly house brands - opened in Australia with a huge fanfare that their house brands were locally-made or locally-sourced and high quality. Now I've noticed the odd item here and there sneaking in with the "Manufactured in China" label.

    Bait & switch, anyone?

    I disagree with this. My favourite microwave meal was taken off the shelf at woolworths and replaced with this batshit disgusting woolworths select imitation. The closest Coles is a 20 minute drive away.
    Almost all the chips have gone sans a couple of smiths ones. Half the frozen section has been replaced, and even meat products have been replaced with lower quality crap.

    Get rid of all of it. I'm happy paying 2x more for stuff I can actually digest.

    Right On James P
    I am infuriated by going to buy Bega cheese cubes only to find its Woolies or nothing
    Not every store but it's happening

    and the Meat selection once dominated by gourmet butchers - is now again all Woollies
    Not happy Jan !

    I went to Woolies to specifically buy tomato sauce today and the Select brand was right next to the Brand leader... Same designed squeezy bottle, same twist lid design and colour. I seriously had to do a double take and the pricing wasn't even that much different.

    As usual. ACCC gutless, toothless and clueless. All full of wisdom now he's no longer in the job - pity its all wrong - again.

    This is my experience too! I started going to Coles (again) after a long absence because I could source organic meat, which I couldn't from my local butcher. Now, after about 6 months of being able to buy it, they've rearranged the meat section, removed my meat of choice and replaced it with their own "organic" brand. The range and quality is not as good and the same thing has happened with many other products I'd started buying. And as for their store brand being of similar quality...I'm not sure who believes this? I purchased the "coles organic" baked beans for my kids once and MORE THAN half of the can was liquid! Coles makes it hard to get what we want as consumers and we often end up buying stuff there only because it's convenient, not because it's the quality we really want.

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