Private label products now account for one in every five supermarket dollars spent in Australia – its share almost doubling over the past eight years. While much of this growth can be attributed to ALDI’s entry into the market in 2001; the other major retailers have made a concerted effort to push their premium private label ranges to compete head-to-head with leading brands.
One of the reasons private label has become significantly more important in driving store choice is that we are now entering the third stage of the private label life-cycle. The first stage, where we stayed for much longer than other markets, was the ‘private label is cheap’ phase – during this time there was considerable stigma attached to buying store brands and shoppers were aware they were sacrificing quality for a cheap product.
The second stage which developed over the past three to five years, was the ‘private label is good value’ phase – during this time private label started to look and feel a lot more like leading brands, and shoppers felt they could purchase these products without sacrificing quality.
The third phase that we are currently witnessing is the third phase – ‘private label is special’. With it, we have seen a group of shoppers (26%) emerge who are trading up within private label to get benefits and quality they don’t believe they are getting from brands (e.g. Woolworths Emily’s Kitchen or Macro brands, or Coles Finest and in house bakeries).
With retailers stocking almost identical line ups of major brands, it’s the house brands that are truly the differentiator between what stores sell, and now with the arrival of premium private label ranges this differentiator has become more meaningful and a genuine reason to switch stores.