Supermarkets' Own Brands - An Increasingly Important Battleground

For the first time in a long time supermarkets are struggling to grow food sales. Food inflation of around 5%  plus economic uncertainty equals shoppers trading down, seeking promotions, cutting waste and sticking to a budget. All of which gives a headache to supermarket bosses.

They of course will be twisting their supplier thumbscrews ever tighter, but ultimately there is only so far that cost cutting will take a business. At some stage it needs to grow. And here is where a sound own brand strategy can make a difference.

Own brand is possibly the best weapon in a supermarket’s armoury, if it gets it right.

It is supremely flexible. The name can be applied to thousands of products at various price ranges. Tesco Finest operates at the top end, and Tesco Value at the bottom. Sainsbury has Taste the Difference and Basics,  Asda has Extra Special, Chosen by You and Smart Price. Waitrose Essentials distinguishes their standard range from more expensive variants.

Done well own brands can enhance a retailers reputation, and provide a point of difference from competitors. Marks and Spencer has built a business on great quality, highly innovative food products.

Ultimately though, the reason why supermarkets make such an effort on own brands is that they are  more profitable than national brands, because they deliver a higher margin.

A good own brand range is especially important just now. Lower margin national brands are promoting heavily, drawing sales from own label. And, supermarkets are desperate to provide reasons for people to choose their store rather than a competitor’s, so that they get the highest possible share of a shrinking market.

So, we hear that Morrisons, which has 45% of its sales in own brand, is planning its first own label revamp for four years. Sainsbury is relaunching its 6500 line mid tier range, renaming it “By Sainsbury”.  Apparently around 25% of products across Sainsbury are new each year, so that customers don’t get bored and go elsewhere.

Waitrose is also working on improving its own label offer.

Reportedly Tesco is trying something completely different, registering a number of different brand names, but not displaying on the packaging that the brands in question belong to them.  The products will be premium priced. Chokablok ice cream for example which is said to be one of the new Tesco brands, sells at the same price as Haagen Daz.

The consistent theme through all these upgrades is an emphasis on quality. Supermarkets realise that in order for their own label ranges to succeed competitively they have to offer a combination of quality, price, and something a bit out of the ordinary.

So supermarkets’ own brands are more profitable and a potential differentiator. There is also a new thread emerging. Shopping online has been earmarked as a growth area,  and retailer labels can play a part in enhancing a supermarket’s on line shopping offer. The IGD points out that the web does not suffer the same space constraints as a shop, and so the full range of own label can be highlighted, reinforcing a stores reputation in whatever area they choose be it for innovation, price or quality, or ethical and environmental standards.

Supermarket Watch - How Sainsbury and Waitrose Got it Right but ASDA Didn't

Americans call it “The Big Mo” and it means that happy state when a business has momentum - the team is winning, confidence is brimming over, and whatever is being done is a huge success. Sainsbury, with 19 consecutive quarters of growth under their belts have it, Waitrose, currently the fastest growing supermarket have it, but ASDA whose sales have dropped month after month for nearly a year, most certainly do not have it.

Confidence about doing the right thing and doing it well is illustrated by the way these three supermarkets have executed their recent new initiatives. Sainsbury have revamped their premium “Taste the Difference” range with trading director Mike Coupe claiming that “this is the best range of premium food available in any supermarket”. At the other end of the scale Waitrose is trumpeting value credentials by saying they will match the Tesco’s price on 1000 major brands. In the middle, ASDA have announced the launch of “Chosen by You” which is a quality upgrade of their standard range, with products selected after talking to 40,000 people across the UK.
So here are three major activities, but it’s the way they have been executed which marks out Sainsbury and Waitrose as confident winners, and ASDA as an outfit that, temporarily at least, has lost its way.

Sainsbury’s have made sure that food shoppers across Britain know about the new range. They took out three and sometimes four page advertisements in the papers, are running a TV ad with Jamie Oliver, and are giving away glossy leaflets in store. Customers who shop on line get a message about the new range as soon as they click on to the website. Waitrose also took out three page advertisements, are advertising on TV, and have the price cut message when shoppers click on the website. They have put up big displays of the newly priced products in their shops, pinned up labels on the shelves, and just in case the message has still been missed, the dividers shoppers put on the checkout belt to signify the start of their shopping also mention the price cuts.

And what about ASDA? The range was launched on September 21st, but on a trip to the Leamington store today I saw only a couple of overhead posters talking about the range - easy to miss as few shoppers were walking around staring at the ceiling. There were no displays, no markers at the shelves, and no in store tasting sessions. There have been no advertisements, and when clicking on to the website the first message is that prices are low, the second that there is 15% off furniture, and only the third talks about “Chosen by You”.

Possibly ASDA don’t feel that the new launch is that big a deal, but this seems unlikely as their recently promoted MD has made a point of criticising the quality of its food, and in the press release that accompanied the launch he talks about ASDA now driving as hard on quality as it does on price. More probably, the launch smacks of a company that has lost its edge, cannot decide what its main message is, and forgotten the attention to detail that is vital. Retail is detail as someone once said. The ASDA approach It is a big contrast to the super- confident actions of Sainsbury and Waitrose.