Only a few years ago jokes about home brand products were quite common.
Having a blue and white or red and white dinner meant enjoying generic brand fare that night around the table.
But the recent intensification of the supermarket wars has seen the introduction of more sophisticated and aggressive branding strategies by Coles and Woolworths.
Most recently the retail war went to another level with Woolworths signing a 3 year private label bread deal with current private label supplier George Weston Foods, which gives both supplier and retailer more certainty in their marketing and operations strategies.
The supermarket war has never just been about the market share held by Coles and Woolworths. It has also been the perfect opportunity for the retailers to attack premium or name brands by introducing several brands in many categories.
And brand name producers, aware of the growing difficulties of competing against supermarkets, are quietly tweaking their business models.
More recently introduced generic products look and taste nearly the same as the premium brand offerings, but with a significant price advantage. In other words, they are copy cats, trying to take advantage of the minor but noticeable difference and the differential threshold that exists in all of us and in all products we consume. That is, if we can notice this difference, then we will probably also notice the difference in price, product, place and promotion between brands as well.
The supermarkets aim to steal market share from premium bands and move to an overall market share of roughly 20-25% for home brand products in each category. Some have predicted this may even rise to 40-50% by 2020.
This would mean billions in new revenue for the supermarkets, and with an increased market share, more influence to put pressure on the margins of the name brands. The viability of name brands depends on wide profit margins – if they go so can entire product lines.
Without that profit, these companies are not able to invest in new production technologies, premium product ingredients or the marketing that helps differentiate their brands from others.
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