Upmarket makeover for house brands

By DITA DE BONI

Make no mistake, the distinction between house brands and other brands is often no more than a thin plastic wrapper and consumer perception.

To correct the lingering impression among shoppers that house brands equate to poor value, supermarkets have repackaged their self-label lines.

In New Zealand, house brands occupy around 10 per cent of all sales through supermarket tills each year, compared to about 30 per cent penetration by European supermarket house brands.

Believing there is room for growth, supermarkets here have studied overseas trends and rushed to upgrade both their product quality and packaging to compete with national brands on look, feel and price.

Price really is the biggest factor in the marketing of house brands, also known as corporate or private label brands. Until now, supermarket brands have been marketed on shop floors, in direct mail catalogues, and through in-store demonstrations, allowing them to avoid an ad/marketing mark-up and outpricing national brands by up to 20 per cent.

Supermarkets now aim to deliver what may have once seemed impossible: products comparable in quality to market leaders, packaged in colours and styles that give them the "look" of their nationally branded equivalents.

For the first time, above-line media campaigns are being used to take the message to consumers.

The latest contender in the heavily fought house-brand arena is a new "premium" label called Signature, from Progressive Enterprises, owners of Foodtown, Countdown, 3 Guys, Super Value and Fresh Choice stores.

Signature is Progressive's answer to Woolworths' First Choice range, which is also pitched as "premium", but with a price point roughly 15 per cent below major brands. First Choice and lower-priced cousin No-Frills offer around 12,000 items.

Progressive's new range, distinctively packaged in black and gold, is aiming to double the company's current sales ratio of 6-7 per cent in house labels.

The company has whittled down its several house brands to two labels, Signature and Basics. Signature will be aimed at the more discerning consumer in all chains, while Basics is expected to remain more popular in the lower-priced 3 Guys and Countdown stores.

Progressive's merchandise general manager, Mark Brosnan, says the move to develop a premium house brand started around 18 months ago.

Consumer research had shown consumers were prepared to sample house brands, but wanted better quality.

"Consumers had a perception that retailers' brands didn't deliver quality. But house brands have evolved from 10 years ago when they first entered the marketplace, when brands such as No Frills and Budget were launched.

"Consumers are now looking for better quality in corporate brands - quality that can rival the market leaders."

Progressive will launch Signature products in 80 grocery categories, with around 500 black-and-gold branded items available within three to four years.

Overall, supermarkets are hoping to boost consumer acceptance of house brands to the international average of around 14 per cent. An AC Nielsen study of 57 grocery categories in 30 countries last year found Europe had the highest penetration of private label brands in the world, led by countries such as Switzerland, where 54.1 per cent of all supermarket products were house brands.

In the US, private label represents a $43.3 billion segment of the retailing business, up from $34.6 billion in 1994.

An army of marketing experts oversees the growth of the concept into product areas including health and beauty and meat. It is in these areas that consumers have tended to stick with well-known brands.

New Zealand supermarket chains are increasingly calling on international expertise to market their house brands effectively. In the case of private labels, perception has become reality. Both Woolworths and Progressive have employed corporate brand marketing experts - US-based Daymon Associates - to create distinctive packaging that eschews traditional house branding and is unmistakably distinct.

For Progressive, the "luxury" colours of black and gold were favoured to give the products a premium feel. An above-line advertising campaign has been launched "at considerable cost" to seduce shoppers aged between 25 and 50.

Mr Brosnan admits it is essentially a marketing exercise - the inherent advantage being the ability to influence customers at point of purchase. In an attempt to raise the quality of products, the supermarket chain carefully monitors the manufacturing process, visiting plants and promising wherever possible to source GM-free and Kiwi-made products.

Director of strategic business development and marketing at Woolworths, Des Flynn, says the company's house brands have been most successful where they have filled a niche in the market.

"Some supermarkets overseas have created me-too brands, rather than identifying a point of difference," he says.

"Chains such as Sainsbury's [in the UK] have developed house brands at such a level that they have been detrimental to national brands.

"We are not aspiring to take 30 per cent of the market with our brands."

Mr Flynn says the house brands are promoted very heavily in-store, and the range has picked up enough credibility to move into typically under-represented areas such as toiletries.

He says the company has hit pay-dirt in fresh and frozen meals in particular and, as testament to their success, Woolworths' First Choice range has been adopted by its parent company, Dairy Farm International. Some products in the range are now being exported to Australia, Singapore and Hong Kong.

"The most important attributes a house brand can have are quality and innovation," Mr Flynn says.

"Our sales indicate the range has encouraged repeat purchases and that rigid specifications we've set for each line have paid off with consumers."