Once supermarkets harness the power of their consumer data, own label will be unstoppable say marketing experts. Mary Carmichael reports
Brand owners need to watch out - the retailers are chasing their shelf space. Supermarkets’ own labels are spreading into all the grocery market’s nooks and crannies, with Tesco’s decision to push its mighty name into the arena of legal services being the ultimate testimony to the concept’s power.
“Retailers have an ability far beyond the manufacturers to know their market,” says Paul Cousins, director of Catalyst marketing consultants. “They have such massive banks of data. At the moment this is about observing consumer behaviour, but once they overlap this with attitudinal research - why consumers do what they do - they will be unstoppable.”
And it is tertiary brands that are most at risk, according to Cousins. “The likes of Kellogg’s Corn Flakes and Heinz Baked Beans will be fine, but it will be a hard game for others to play,” he says.
Consumers’ changing attitudes to own label can be seen in Cambridge Research Foodfax Top 100 new products of 2003 (The Grocer, March 27, 2004 p36). There were 30 own label entries, 12 of which could be designated premium and four from discounters, compared with none the previous year.
After a slight dip in fortunes last year, own label has nudged its share of the grocery market to about 40% [ACNielsen, May 2003]. Jonathan Grant-Nicholas, group communications director of the Greencore Group, which supplies nearly all the major multiples and is particularly strong in the chilled arena, points out that certain sectors have a considerably higher share than 40%. “The main retailers’ own label share can reach 45% or more,” he says. And he predicts this will grow as the major multiples acquire vast swathes of the convenience sector.
Figures from TNS Superpanel, which amasses data from more than 15,000 households and covers more than 200 categories, show some of the wide variations in the market. In the chilled arena, for example, own label accounts for up to 98% of products in prepared salads and nearly as much in chilled dips and fruit and vegetables. At the other end of the spectrum, however, it takes only a 2% share of carpet stain removers.
With the likes of Tesco extending its Finest range into homewares and clothing, this is also likely to grow further into non-food.
Gone are the days when own label conjured up images of anonymous products hiding behind plain wrappers. Today’s supermarkets are bigger names than many of the brands they sell and they bristle at the phrase ‘own label’ - preferring ‘supermarket brand’. “Supermarkets are proud of their brands,” says Cousins. “And where they have built up credibility - for example Sainsbury’s Taste the Difference - they’re brilliant. They are so multi-faceted. No manufacturer could deliver that many different types of product.”
Supermarket brands allow retailers to grab a point of difference and to fight each other on price. They’ve also become adept at pinpointing the trends and fulfilling consumer demands through segmentation.
Most define their ranges as ‘good, better, best’, with a value range at the bottom end of the scale, a regular brand in the middle and a premium label at the top end. There has also been increasing segmentation, particularly in health and children’s ranges, with Safeway following a ‘Healthier’ proposition across its portfolio and Sainsbury pioneering the kids’ lines with the Blue Parrot Café.
Consumers rarely buy at just one of these levels and tend to buy staples from the value ranges, and treats from the premium end. But it is premium lines that are growing fastest. Greencore’s Grant-Nicholas reckons that premium supermarket brands have grown 600% in the three years to 2003.
Premier Foods has 40% - or more than £300m - of its business in own label. Ian York, group sales director, also points to the decline in value own label saying: “The cheapest own label is declining by 2% - which is good for both retailers and manufacturers.
“Meanwhile, own label hierarchies have been created. Value is declining, everyday is competing but premium products are driving the perception of quality. From the manufacturer, consumer and retailer perspective, this is good news.”
Catalyst’s Cousins says there are good reasons for the growth in premium. “Own label has evolved from following the brands’ lead to showing the way. They are more able to break the rules and they’ve become leading edge.”
He reckons the only categories where own labels really do not have a hold are those where there’s a strong emotional attachment from consumers. “In babyfood, for example, they are fighting an exceptionally strong barrier. It’s the same with chocolate.”
However, there are potential pitfalls for retailers that stretch their brands too far. “When a range fulfils consumers’ needs and really works, they can be too keen to slap the brand on other products.And it’s then harder to maintain the brand’s integrity.
“The Blue Parrot Café does not lend itself well to Chocolate Drops,” he points out.
With further growth expected in premium, niche and non-food, strong relationships between retailers and their suppliers are increasingly important. “Even though it’s all highly competitive we need each other,” says Greencore’s Grant-Nicholas. “The winners will be those who can work most effectively,” he adds.
“The whole way of doing this is different from branded products and the product churn is exceptionally high. The branded manufacturer with an investment in advertising doesn’t want to change too quickly, but we have to be flexible. We can create a point of difference not only within segment but also by designing products specifically for individual customers.”
Premier’s York agrees: “The own label market will become more competitive and not only on price.It’s also about investment in plant to retain quality along with price.”
Own label began as a child of the 1960s when grocery retailers realised there was money to be made by offering cheap alternatives to brands.
As supermarket empires grew, retailers recognised that they could compete on quality terms. Many manufacturers, believing consumers would continue to pay for the brand names anyway, gave their product recipes to retailers rather too easily. In some cases, they were caught out, as own label spread through almost every grocery category, knocking many an established brand off the shelves.
Most recent advances have been in the non-food areas.
The initial rapid growth was followed by a period of decline as brands grew aware of the threat and focused on adding value. Edward Garner, communications director of TNS Superpanel, says the market is now showing gentle growth.
Death knell for tertiary brands
Tertiary brands will suffer as retailers grow more confident that their own labels can do better than some brands. Unilever and other big players are already selling off smaller brands.
Greencore Group communications director Jonathan Grant-Nicholas says factory gate pricing is one reason.
“Pick-ups are a lot easier to organise with only a small group of suppliers,” he says. “And the responsibility for food safety is not spread so wide.”
Overarching brand propositions
Successful supermarket own labels will extend across more categories - including non-food. This will provide the retailers with further opportunities for cross-category selling.
Increased segmentation
Themes such as health, kids, taste and indulgence, will prove useful tools that retailers can use to target their own labels. Retailers’ extensive consumer research makes them ideally positioned to see and act on new trends.
Increasing market share
As the major multiples continue to swallow up convenience chains, the market for their own labels will expand.
In some categories, own label will be able to carve itself a much bigger share.
Own label growth
Pressure points
Brand owners need to watch out - the retailers are chasing their shelf space. Supermarkets’ own labels are spreading into all the grocery market’s nooks and crannies, with Tesco’s decision to push its mighty name into the arena of legal services being the ultimate testimony to the concept’s power.
“Retailers have an ability far beyond the manufacturers to know their market,” says Paul Cousins, director of Catalyst marketing consultants. “They have such massive banks of data. At the moment this is about observing consumer behaviour, but once they overlap this with attitudinal research - why consumers do what they do - they will be unstoppable.”
And it is tertiary brands that are most at risk, according to Cousins. “The likes of Kellogg’s Corn Flakes and Heinz Baked Beans will be fine, but it will be a hard game for others to play,” he says.
Consumers’ changing attitudes to own label can be seen in Cambridge Research Foodfax Top 100 new products of 2003 (The Grocer, March 27, 2004 p36). There were 30 own label entries, 12 of which could be designated premium and four from discounters, compared with none the previous year.
After a slight dip in fortunes last year, own label has nudged its share of the grocery market to about 40% [ACNielsen, May 2003]. Jonathan Grant-Nicholas, group communications director of the Greencore Group, which supplies nearly all the major multiples and is particularly strong in the chilled arena, points out that certain sectors have a considerably higher share than 40%. “The main retailers’ own label share can reach 45% or more,” he says. And he predicts this will grow as the major multiples acquire vast swathes of the convenience sector.
Figures from TNS Superpanel, which amasses data from more than 15,000 households and covers more than 200 categories, show some of the wide variations in the market. In the chilled arena, for example, own label accounts for up to 98% of products in prepared salads and nearly as much in chilled dips and fruit and vegetables. At the other end of the spectrum, however, it takes only a 2% share of carpet stain removers.
With the likes of Tesco extending its Finest range into homewares and clothing, this is also likely to grow further into non-food.
Gone are the days when own label conjured up images of anonymous products hiding behind plain wrappers. Today’s supermarkets are bigger names than many of the brands they sell and they bristle at the phrase ‘own label’ - preferring ‘supermarket brand’. “Supermarkets are proud of their brands,” says Cousins. “And where they have built up credibility - for example Sainsbury’s Taste the Difference - they’re brilliant. They are so multi-faceted. No manufacturer could deliver that many different types of product.”
Supermarket brands allow retailers to grab a point of difference and to fight each other on price. They’ve also become adept at pinpointing the trends and fulfilling consumer demands through segmentation.
Most define their ranges as ‘good, better, best’, with a value range at the bottom end of the scale, a regular brand in the middle and a premium label at the top end. There has also been increasing segmentation, particularly in health and children’s ranges, with Safeway following a ‘Healthier’ proposition across its portfolio and Sainsbury pioneering the kids’ lines with the Blue Parrot Café.
Consumers rarely buy at just one of these levels and tend to buy staples from the value ranges, and treats from the premium end. But it is premium lines that are growing fastest. Greencore’s Grant-Nicholas reckons that premium supermarket brands have grown 600% in the three years to 2003.
Premier Foods has 40% - or more than £300m - of its business in own label. Ian York, group sales director, also points to the decline in value own label saying: “The cheapest own label is declining by 2% - which is good for both retailers and manufacturers.
“Meanwhile, own label hierarchies have been created. Value is declining, everyday is competing but premium products are driving the perception of quality. From the manufacturer, consumer and retailer perspective, this is good news.”
Catalyst’s Cousins says there are good reasons for the growth in premium. “Own label has evolved from following the brands’ lead to showing the way. They are more able to break the rules and they’ve become leading edge.”
He reckons the only categories where own labels really do not have a hold are those where there’s a strong emotional attachment from consumers. “In babyfood, for example, they are fighting an exceptionally strong barrier. It’s the same with chocolate.”
However, there are potential pitfalls for retailers that stretch their brands too far. “When a range fulfils consumers’ needs and really works, they can be too keen to slap the brand on other products.And it’s then harder to maintain the brand’s integrity.
“The Blue Parrot Café does not lend itself well to Chocolate Drops,” he points out.
With further growth expected in premium, niche and non-food, strong relationships between retailers and their suppliers are increasingly important. “Even though it’s all highly competitive we need each other,” says Greencore’s Grant-Nicholas. “The winners will be those who can work most effectively,” he adds.
“The whole way of doing this is different from branded products and the product churn is exceptionally high. The branded manufacturer with an investment in advertising doesn’t want to change too quickly, but we have to be flexible. We can create a point of difference not only within segment but also by designing products specifically for individual customers.”
Premier’s York agrees: “The own label market will become more competitive and not only on price.It’s also about investment in plant to retain quality along with price.”
Own label began as a child of the 1960s when grocery retailers realised there was money to be made by offering cheap alternatives to brands.
As supermarket empires grew, retailers recognised that they could compete on quality terms. Many manufacturers, believing consumers would continue to pay for the brand names anyway, gave their product recipes to retailers rather too easily. In some cases, they were caught out, as own label spread through almost every grocery category, knocking many an established brand off the shelves.
Most recent advances have been in the non-food areas.
The initial rapid growth was followed by a period of decline as brands grew aware of the threat and focused on adding value. Edward Garner, communications director of TNS Superpanel, says the market is now showing gentle growth.
Death knell for tertiary brands
Tertiary brands will suffer as retailers grow more confident that their own labels can do better than some brands. Unilever and other big players are already selling off smaller brands.
Greencore Group communications director Jonathan Grant-Nicholas says factory gate pricing is one reason.
“Pick-ups are a lot easier to organise with only a small group of suppliers,” he says. “And the responsibility for food safety is not spread so wide.”
Overarching brand propositions
Successful supermarket own labels will extend across more categories - including non-food. This will provide the retailers with further opportunities for cross-category selling.
Increased segmentation
Themes such as health, kids, taste and indulgence, will prove useful tools that retailers can use to target their own labels. Retailers’ extensive consumer research makes them ideally positioned to see and act on new trends.
Increasing market share
As the major multiples continue to swallow up convenience chains, the market for their own labels will expand.
In some categories, own label will be able to carve itself a much bigger share.
Own label growth
Pressure points
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