Ricardo's Business

SBS Presenter Ricardo Goncalves with the latest in finance.

The rise of home brands

18 July 2012, 18:20 PM | Source: Ricardo Goncalves, SBS

I admit I’m a bit of a fan of some private brand products.

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They’re the ones with the Coles or Woolworths label on them.

Coles branded milk, serviettes, sparkling water, meats and frozen vegetables all go in my grocery basket.

But there are some things I would rather not buy.

Home brand toothpaste, washing powder, soaps, chocolate and cereals are some items that I’d prefer paying a premium for. I’m actually not too sure why, but I can only assume it’s because they’re ‘health’ related products.

A few years ago, mum would always bug me when I bought home brand items. It was the assumption that if it wasn’t as expensive as the branded goods, like Dairy Farmers, Uncle Toby’s or Serena (when it comes to Tuna) then they’re simply not as good.

But the tide is changing, especially in today’s tighter economic environment.

New research from business information research firm, IBISWorld, predicts one quarter of all super market sales, at $21.6billion, this financial year will be from the private label or home brand category. That’s expected to rise to 33 per cent in 2017/18 and is up from 14 per cent in 2007/8.

It notes dry grocery items and chilled packaged food categories are the best performers.

Home brand butter (68%), sugar (67%), bread (56%) and milk (55%) are the highest sellers.

That’s no surprise as the recent price war between Coles and Woolworths on their milk and bread products took the media spotlight recently, as the low cost of these staples squeeze margins for farmers and producers.

Interestingly, eggs have fallen from 61 per cent over the past ten years, to 53 per cent. That’s been attributed to a shift in consumer attitudes and switch towards free-range which aren’t adequately represented by private labels.

IBISWorld says chocolate, confectionery, soft drinks, cosmetics and sanitary products are the poorest performing home brand categories citing consumers’ ongoing preference for a trusted, quality brand for these segments.

Home brands are most popular with those families earning less than $44,000 per year accounting for more than 40 per cent of their total grocery bill.

Those in higher income brackets, above $75,000 have been slower to adopt private labels, representing only 15 per cent of their bills. For supermarket retailers, is that category which represents the biggest growth prospects.

In the short term, the rise in popularity of private brands will benefit consumers through lower prices.

But in the long term, consumers will miss out because private brands will take up more and more shelf space meaning less choice for consumers.

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Your Comments

No branded products will equal price increases

susan - from brisbane, 11 months ago

Supermarket chains take in brand products and watch how they sell. They let the supplier spend the dollars on marketing etc to build up the market, then if successful, the supermarket puts a similar product on the shelf in very similar colours, (and priced lower because they dont have the "up front" establishing costs to recoup). They rely on the success of the branded product to sell their own 'replacement product' and Mr /Mrs Moron buys it hook line and sinker

whats fair about a competitor deciding the price of my product

wendy - from wangaratta, 11 months ago

What everyone seems to forget is that its illegal for a supplier to dictate the retail price of their product. The supermarket chain prices the competitors item and then prices its own item. Guess which it makes the more expensive. Retail pricing policy needs amending.

So-called "home brands" are the supermarkets' power .....

Mike M - from Kellyville, Sydney, 11 months ago

Coles & Woolworths have been squeezing suppliers for decades - and their so-called home brands are the secret to their power. Short-sighted customers who buy home brands are simply contributing to the supermarkets' ability to hold suppliers, and particularly primary producers, to ransom. Stop buying generic products and you'll rob this duopoly of their power and influence. And if you care about our future quality of life, that's exactly what you'll do.

Let's all bow down and shop as the supermarkets wish us to

Judge Holden - from Hobart, 11 months ago

The rise of home brands is testament to the agressive push marketing of the big supermarket chains. For these retailers it's a win-win situation, but for the wider community it is not. Producers and wholesalers are coerced into supply agreements for home brand products, resulting in lower margins for them (offset by higher volumes) but more worryingly it also results in the loss of their brand. This helps supermarkets by meaning consumers will not show brand loyalty if they change suppliers.

Home Brands ruin Jobs

Willg - from Hobart , 11 months ago

Seriously? Are you not a business reporter? Private brands are the death knell of farmers, manufacturers and producers nationally. The supermarket duopoly make big money while squeezing everyone else. It is the death of choice of brands and shopping places as the ACCC let that duopoly take over most major markets. They destroy smaller competitors and are doing there best to destroy jobs through more and more automated lines. There is nothing positive about the rise of home brands.