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?

[credit provider=”getty” creator=”Marianna Massey”]

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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