The rise of home brands

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

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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3 min read

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By Ricardo Goncalves
Source: SBS

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