Are House Brands About To Take Over?

Supermarket house brands now account for as much of a quarter of all the goods sold in the big two Australian supermarkets, Woolworths and Coles. But does that mean we'll soon have no choice but to buy those brands?

Photo: Marianna Massey/Getty Images

We've frequently discussed the issue of house brands here on Lifehacker. If you're looking to save money, there are no two ways about it: buying house brands means you will spend less money. Buying an equivalent basket of non-store-branded goods will often cost you twice as much.

Objections to those brands typically fall into two categories. The first is that the cheaper goods are invariably inferior. Experience suggests that isn't the case: in some instances, house brand products actually taste better. The strategic shopper will end up with a mix of products, matched to their taste and budget. That makes more sense than any kind of absolute stance.

The second objection is that buying house brands gives even more power to the supermarkets, an area where the two major stores already dominate the market, and allows them to force manufacturers into unfair and unprofitable contracts. A related complaint is that store brands more often use imported products, which puts off people who aim to always buy Australian products.

There will always be vocal opponents of house brands, but research suggests that their visibility in supermarkets isn't about to drop.

A report in the AFR over the weekend (note: paywalled link) noted that research by IBISWorld suggests that 25 per cent of supermarket revenues comes from house branded goods, a figure which has risen from 13 per cent five years ago. IBISWorld predicts that one in three products sold by supermarkets will be store-branded by 2013. (Note that this might not change the proportion of revenue by the same amount, since store-brand goods are often, though not invariably, sold at lower prices.)

The fact that this percentage is rising could reignite the argument that supermarket brands are eventually going to squeeze out other manufacturers, at which point we'll have no choice about what we buy or what we pay for it. But that argument needs to be put into perspective.

Firstly, as we've noted before, the evidence for this change actually happening is slim. Secondly, even if the IBISWorld predictions are correct, they would still mean that two-thirds of the goods sold in local supermarkets won't be house brands. There are categories where store brands already dominate (eggs being the standout example). But there are also categories where store brands very much play second fiddle (soft drink). Coca-Cola is not a minnow of a company being forced into unfair deals.

A final point: the two most visible new entrants into the Australian supermarket space, ALDI and Costco, both rely on house brands to a much higher extent than Coles and Woolworths. Clearly, the shoppers in those stores aren't fussed.

That's my take. What's yours? Tell us in the comments.

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Comments

    My take is that home brands limit customer's choice. I personally like to chose amongst various brands when I shop. I don't like, and maybe it's psychological, to be "told" what to buy by the retailer.
    Said that, I keep going to Coles or Wollies but mainly for convenience; I wish there was an IGA or some other supermarket near me...but I guess it's not enough of an excuse.

      I like home brand products because they are
      A) cheaper and
      B) simple no-frills stuff, so your cupboard looks easy to access and uniform :3
      However, I dislike them because they give Coleworths more power. Urgh!

    Coles, Woolies and any other big business in Australia is seemingly free to do whatever they like. Vested interests of the pollies is one of the reasons, but arguably the biggest reason is that we Australians like to make a lot of noise and whinge but when it comes to action we come up short. Until we start voting with our feet and "walking the walk" nothing will change. Ignorance and laziness will be this country's downfall.

      What's your actual point?

        I thought it was obvious - shop somewhere else

        OR complain directly to Coles / Woolies - not in store though they have no clout, go direct.

    I don't mind buying house brand stuff for generic things like flour, tomato paste, and so on. But everything else I will prefer to buy non-house brand stuff, even it means buying a foreign, unknown brand, or an internationally well-known brand name.
    I disagree with the duopoly going on here in Australia with the supermarkets but I find the average Aussie would rather go with convenience than principle.

    Buying home brand may be cheaper now but when the competition dries up and all that's left is home brands then the quality will drop substantially and the price will rise. It's just business, the first thing these big companies look after is the stockholders, they don't give a rat's about the customer. Those of you who insist on buying home brand because it's cheaper, are not helping! Unfortunately the horse has bolted and you ain't gonna catch it now. Best we can hope for is some kind of co-op that caters to proper name brands. it will be more expensive but hey, those who didn't listen can stay with the big name shops.

    I depends how much collusion is going on between the big retailers.

    Both might be happy to shrink choice to their own brands knowing the other is doing the same. Or they might continue this, but then actually use access to other brands and products as a form of differentiation which in turn will then lead to an increase in other brands.

    I think they're in a state of flux seeing what they can get away with. The biggest problem with two big retailers like this, is they have the market locked up. Both are happy to be against each other. They work together to stamp out the little guys and both know it serves their interests for the other to be there. So you do get them working together for the greater good of both retailers. When they shouldn't be.

      I think they're in a state of flux seeing what they can get away with
      They aren't really being monitored enough to warrant testing the waters and they no doubt do collude to an extent. The big motivation is making money for their shareholders though and that's all that counts.

    I actively avoid house brands so that my money supports competition.

    The 'Big Two' love riding on the back of the success of name brands, selling their own branded products at reduced prices, but they would equally hate for name brands to leave the market.

    Name brands are vital to supermarket profits, as they drive product innovation and the desire for luxury and convenience that has seen a shift from the basic 'value' version of a product being market leader, to a premium version now leading the market. You have probably noticed this already in areas like Shaving and Dental Care.

    Some examples you may not have noticed before;

    Soup. Think back to what the soup section of the supermarket looked like years ago. Mostly it was Campbells, Heinz and Rosella condensed soup which was dirt cheap and you added water to it and cooked it on the stove. Now it's mostly ready to eat soups. Yes, they are a better product, but with a premium price. Even the instant Cup-soup has moved from being mostly basic soups with four serves to fancier soups with 2 serves - for the same price.

    Soap. Used to be mostly bars of solid soap in packs or four to six. Now, mostly a mix of shower gel and hand wash, each one lasting only as long as one or two bars or soap and costing more.

    Pet Food. There has been a huge move from big tins to single-serve tins and foil tubs and pouches. Premium product with a premium price.

    This move from value to premium products leading the market is almost universal across all supermarket categories and has been highly profitable for both supermarkets and manufacturers. And it's only possible because name brands innovate and drive the market.

    TL;DR
    Supermarkets need name brands.

      The name brand items were increasing in quality well before the big two started making their own product, it happens because the technology has improved over the years and people will naturally gravitate to higher quality if the price is right. Pet food is a poor example btw it is horrendously expensive because they are gouging pet owners too stupid to stop treating their pets like children. Thus even the dried food section is also way more expensive than it needs to be. There is nothing altruistic about house brands, they are a way to bring in customers on a lower budget but in the end they bring down the prices of named brands because they have no choice but to try and keep up. I think this practice will lower quality of both house and named brands in the end.

    I buy house brands only when I perceive them to be higher quality than, or equivalent quality to, most alternatives. And that happens relatively rarely.

    I buy house brand plain canned beans because the Coles ones are actually better than many name brands, although specifically for baked beans, it's Heinz all the way. Similarly, I buy Home Brand sun-dried tomatoes and Coles stuffed green olives which I also find superior to most other brands on the shelves. Coles brand sparkling mineral water is also good, and equivalent to other unflavoured waters. Mount Franklin's flavoured ones can't be beat, but they're tough to justify at more than TWICE the price of Coles plain sparkling water. Occasionally I've been known to bring home some Coles frozen veg as well, which I mix with name-brand frozen veg so that the quality difference isn't quite so noticeable. Other than those few things, I am a firm supporter of name brands because of the quality and/or taste being superior. Soup, tuna, pasta, sauces and marinades, biscuits, crisps, drinks, laundry supplies, etc. I even buy name brand paper towels because I like them better.

    Most recently, it's the takeover of the salad dressing section by house brands that has most irritated me, because one by one ALL FIVE of my favourite salad dressings disappeared off the shelves, to make space for corn syrup- and water-laden store brands. Like HALF of the salad dressing section is house brands, and this is a category in which differences in taste and quality really show. (I shamed one of my local markets into bringing back one of my preferred salad dressings by listing out everything that's gone missing over the past 12 months in favour of making space for more house brand stuff and pointing out that salad dressing is a type of grocery for which you can't easily substitute another similar looking one and expect anywhere near the same taste.)

    @barb
    I've noticed that many named brand frozen vegetable products (I'm looking at you Mc*cough*) are grown overseas. Many originate from China and are of very poor quality but are just as expensive to buy as locally grown produce. In one Broccoli, Cauliflower and Carrots product I tried the vegetables had a spongy texture and a flavour was very bland but with a bad after-taste. The next time I bought frozen vegetables I studied the labels of several brands and found that in its favour Coles Brand is at least Australian grown and of fair quality. I've since resolved never to buy any frozen vegetables that aren't clearly labelled "Australian" on the front. Made in Australia from Imported and Local Ingredients DO NOT count. Products labelled as coming from New Zealand and made from imported ingredients also do not fool me any more.

      If you've ever tried house brand frozen veg you would notice a definite difference in quality from name brands. Buying house brands puts a lot of pressure on name brands and the practice needs to stop.

      @arcanum, comparing Coles frozen veg to Birds Eye isn't much contest. The veg from Birds Eye just look better, to me. McCain's isn't of the quality level of Birds Eye.

    I agree with you that many practices of big supermarkets are extremely objectionable. I watched a series on the abc recently called The People's Supermarket. I wasn't convinced about everything I saw (a supermarket run under the co-operative model) but it did draw attention to some terrible policies of the big supermarkets. Whole fields of crops left unharvested, with farmers left with no option but to plow them back into the ground, because they didn't meet a supermarket's criteria of size or appearance. Orchards of apples that were left unpicked because the supermarkets had changed what species of apples they will buy and their huge market share meant the farmer couldn't find another buyer. He had no choice but to tear down his whole orchard 1/3 of the way through its life and replant with a 'supermarket sanctioned' species. These practises are simply evil. It baffles and infuriates me that many think that capitalism should not be allowed operate unchecked.

    I don't have much money, so I buy home brand a lot of the time. Otherwise I buy fresh fruit and veg from the markets.

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