Our Penchant for Private Label

Our Penchant for Private Label


In the past, private label Christmas pudding would have been unheard of and it’s likely you wouldn’t even think about taking a private label wine to the Christmas meal! But look around supermarkets and liquor stores today and you see gourmet hams, award-winning wine and high grade vintage cheeses all sporting a house brand or exclusive brand label.

The days of modest and cheap private label products have passed and consumer support for store brands is increasing both globally and locally. In Australia, private label volume share sits at 21%, up from 18% in 2012. Store-brand growth (6.6%) is also outpacing total retail growth (2.4%) significantly.

Looking at the change of private label over time, the quality and range of products have increased exponentially in recent years. It is clear that Gen Y is a key driver of acceptance and growth as questionable quality private label goods simply don’t exist in their memory, meaning there is no stigma associated with a store brand product – and for good reason.

Retailers are driving this phenomenon through three key tactics; premiumisation, price promotions and innovation. Consumers are responding, with almost half (49%) saying they would buy more store brand products is they become available across more categories.

Quality private label becomes the norm

Investment in private label goods globally means consumers now see a strong quality and value proposition for these products. Recent Nielsen research has found that 71% of global consumers say that store brand quality has improved and in Australia this number is five points higher at 76%. This is due in large part to an increasing investment in premium lines such as Woolworth’s Gold, Coles Finest and ALDI’s exclusive brands.

In fact, quality has improved across the board as retailers look to increase volume share and store loyalty.

Innovation driving growth

Retailers are putting on the hat of brand creator, providing reassurance, personality and a unique quality in the products they offer. A good example of this is Coles Peanut Butter Ice-Cream, which is in the top five volume sellers on the Eastern Seaboard within Coles. Likewise, Australians love fresh food, so the industry is also developing their portfolios in that space too.

Retailers are also innovating in other categories, including health and wellness. We see this category as a key driver for store loyalty, as long as the brand can provide a unique benefit to the consumer. Woolworth’s Macro brand is a fantastic example of a unique category offering, and drives certain shoppers into stores for this offering alone. Herein lies the future of private label and store loyalty.

The Promiscuous Shopper

Loyalty remains an issue for retailers, with 70% of Australians having no preference in grocery store, and the ‘promiscuous shopper’ reaching market saturation. The promiscuous shopper is in fact the vast majority; 91% of Australians shop at both Woolworths at Coles. Private label products also unsurprisingly show lower levels of loyalty than brands. However, it lies with retailers to develop more opportunities for growth by tapping into consumer wants and needs across various categories.

Price promotions are a widespread tactic for retailers and as a result they have become an expectation as opposed to a differentiator. Nonetheless, the proliferation of price promotions has driven the sales of private label products up over the past year. This is particularly important for new products in order to encourage trial.

The New Reality

Private label products are going to grow to represent at least a quarter of all grocery sales in the next five years. With ALDI in the mix – the fastest growing retailer in the country – non-discount retailers must maintain a commitment to their customers; offering variety, quality, innovation and premium offerings amongst brand products.

The essence to driving loyalty is in pinpointing growth categories and focusing on improving the variety and quality of products. Likewise, pinning down the promiscuous Australian shopper will take significant investment in analysis; it is about the right selection, not a bigger selection.