Woolworth’s announcement in recent weeks that it would be rethinking it’s private label brand strategy, in particular, its ‘Homebrand’ products, didn’t really come as much of a surprise to me.
When they were originally conceived, private label supermarket brands such as ‘Homebrand’ or ‘No Frills’ were developed to be ‘anti-brands’ to compete at low price points and appeal to the budget conscious shopper. They were designed to look like very little investment had been made on their branding—without photography and in basic utilitarian colour schemes—to create the perception that the low price had come from cost savings in packaging and marketing, rather than in the quality of the product under the label.
This ‘anti-brand’ private label strategy served its purpose for a long time. Over the last 5 years, in Australia at least, the positioning of the private label brands of the major supermarket chains has gradually shifted, requiring a rethink to arrest changes in perception within the market which have largely been caused by the supermarkets themselves.
Coles & Woolworths continue to make a play for more of their own shelf real estate, gradually replacing smaller brands with their own private labels. This strategy has required repositioning their private label brands to look more like the established and trusted brands they are replacing instead of than ‘value’ looking, ‘no frills’ alternatives. And so, as they have gradually raised the bar for how private label brands look, they have changed consumer expectation.
Aldi has a different strategy that has been very successful; creating stand-alone premium looking private label brands for each category by mimicking the symbols and graphic cues of branded goods and trading off their heritage and associations. This strategy has had a real impact on consumer perception, where their Aldi purchases are seen as better value branded goods because they don’t look like private labels. In fact, many Aldi shoppers may not be aware they are buying private brands at all.
The combination of these two approaches has resulted in traditional style private label ‘anti-brands’ like Homebrand as being perceived as inferior.
“The issue with Homebrand is not so much price but a perception built around the product branding and packaging,” Credit Suisse analyst Grant Saligari has said.
“What they’re trying to address is the weakness in the brand itself, not so much the price points,” he said. “If [the new strategy] lifts brand quality and maintains price, that should be positive.”
According to reports, the nearly 1000 red & white Homebrand products will gradually be reintroduced under the lesser known red & yellow Woolworths Essentials brand.
While still looking simple and uncomplicated, the Australian Woolworths Essentials brand has a fresher and more contemporary visual style, although the Australian packaging doesn’t look nearly as good as the work Vince Frost did for Woolworths South Africa in 2010.
A refreshed packaging range will go some way in arresting the ‘perception problem’ that eventually eroded the value proposition of Homebrand, however, more importantly, in my opinion, is how Woolworths addresses the other two tiers of their overall private label strategy – Woolworths Select & Woolworths Gold.
Compare Woolworth’s three-tiered private label strategy to Coles’ decision to simplify its private label offer under the one single ‘Coles’ label, or Aldi’s approach of unique brands across different categories and it’s the most confusing for proposition for consumers.
While killing Homebrand is a positive step, I think their strategy either requires further simplification or more work to get real clarity in the marketplace around the differentiation between their private label tiers.
I think Coles has got it right by simplifying their offer because it makes the decision an easier one for their customers. They can choose ‘Coles’ private label or choose their preferred brand. The simpler they make the decision, the easier it is for the customer to switch as well. Another example of where simple succeeds.
It should be noted that Woolworths have stated they are reviewing their entire private label strategy at the moment, so perhaps there will be more changes on the horizon.0