Private Labels take over our Supermarkets

A recent survey by Canstar Blue has revealed that consumers are increasingly choosing to buy private label groceries over brand name groceries in Australian supermarkets. 65% of the 3000 respondents indicated that they would buy private label groceries over big name brands, up from 44% in just six months. http://www.canstarblue.com.au/retailers/supermarkets/private-labels-vs-brand-names/

Private label groceries have traditionally been the choice of the more frugal consumer but these survey results suggest a more fundamental shift in consumer behaviour. So what have supermarkets done to create such a dramatic change?

As an example in November Coles announced a major overhaul of its private label branding including the replacement of the brands ‘Simply Less’ and ‘Smart Buy’ with a simple ‘Coles’ brand. The changes reflect a distancing from a ‘lowest price’ philosophy and are accompanied with a change toward higher quality packaging of private labels products . http://www.news.com.au/finance/business/retail/why-home-brands-are-the-way-of-the-future/news-story/76d0fe00119ba35ce418bf003839f0c2

peanut butter

Of particular note is the resemblance of many of these private labels to well-known brands. This use of similar design, images, colours and fonts gives the subtle impression that the private label brand will be of similar quality to the well-known brand. It is quite an interesting example of the concept of perceptual fluency in consumer behaviour studies. imagesIt is even conceivable to suggest that a private label could effectively leverage off a well-known brand’s advertising (Iacobucci 2013, p.18).

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Of course this all sounds a lot like classical conditioning, where consumers are conditioned over time to connect sensory experiences with products. We would all hate to admit that we are as primitive as one of Pavlov’s salivating dogs so if we do manage to become cognisant of the fact that we are being influenced by a conspiracy of marketing strategies at least we can reassure ourselves that we are still able to consider the quality of the product and make a rational choice.

But are we really able to evaluate the quality of these products?

Products such as rice, sugar and milk seem to be particular targets for private brands simply because most consumers will not be able to detect the difference in quality. Rarely would a consumer have the palate or the expertise to evaluate the quality of rice for example and so according to credence purchase, another consumer behaviour concept, consumers instead evaluate the quality of a product by looking for something that they can evaluate. And so we find that even after consumption the consumer is often still evaluating the quality of the product based on the packaging. (Iacobucci 2013,p.186).

But Supermarkets have not only targeted the products that are difficult to evaluate but also the products where consumers have a larger zone of tolerance ie. targeting products where consumers will tolerate a larger range of possible quality outcomes. (Iacobucci 2013,p.187).

In reality many of these targeted products are considered low-involvement purchase decisions and the consumer is not generally applying much thought to the quality of the products. If we did take the time to conceptualise a consumer’s attitude toward rice for example we would probably find that the consumer still holds the belief that ‘Sunrice’ is the best quality brand but in terms of the weight of importance of this… the consumer simply doesn’t care enough (Iacobucci 2013,p.21-22). After all the important thing for supermarkets is not what consumers think but what they buy.

But even our sense of taste can be lot more variable then we think. Some studies have shown that our experience of a product, particularly our taste experience, can vary considerably based on our expectations and the information we receive prior to consumption… again the product packaging plays a role (Velasco et al. 2016).

Whatever the consumer behaviour theories tell us about products and quality of products it all seems to be working for our Supermarkets because in the same Canstar Blue study 76% of the 3000 respondents indicated that they believed private label products are of ‘good quality’, up from 59% in the same six month period. It seems that new private label packaging is working and consumers are certainly buying.

Posted by Daniel Joy 215138594 (dmjoy)

References

Chung, F 2015, ‘Why home brands are the way of the future’ 19 November, retrieved 23 March 2016, http://www.news.com.au/finance/business/retail/why-home-brands-are-the-way-of-the-future/news-story/76d0fe00119ba35ce418bf003839f0c2

Dalley, E & 2014, ‘The situation on the supermarket shelves’, 11 September, Retrieved 23 March 2016, https://www.choice.com.au/shopping/everyday-shopping/supermarkets/articles/choice-supermarket-special

Downes, S 2016, ‘Private labels vs Brand names: The switch is on’, 21 January, retrieved 23 March 2016, http://www.canstarblue.com.au/retailers/supermarkets/private-labels-vs-brand-names/

Iacobucci, D 2013, MM4, South-Western, Cengage Learning, Mason, USA

Velasco, C, Woods, AT, Petit, O, Cheok, AD, Spence, C 2016, ‘Crossmodal correspondences between taste and shape, and their implications for product packaging: A review’, Food Quality and Preference, March 2016, retrieved 26 March 2016, Science Direct.

4 thoughts on “Private Labels take over our Supermarkets

  1. Great observation re: change in branding and packaging in Coles, I must say they have significantly improved the quality of their private label range over the years. Further to this, I also notice the strong push in packaged (often cut-up) fresh produce. I have no doubt that the proportion of this “convenient” segment will grow significantly over the next 12 – 18 months as more and more people become “time-poor”.

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  2. Good blog. Interestingly its not just the similarities in design, images, colours and fonts. The names are also quite similar. For example in Aldi, their paracetamol is branded as Hedanol (Panadol – the GSK brand), and Hedafen (Nurofen – the Reckitt Benckiser brand).

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  3. Yes, I’ve watched the transition from the old black and gold to current branding with interest! I’d also make the point that the change of branding and alignment to consumer spending patterns has been potentially fast tracked by the increase of ALDI in Australia. Forcing the larger retailers to compete on price and new alternatives for consumers may finally have resulted in “consumer entered marketing” in Australia! See here for interesting article: http://www.roymorgan.com/findings/6297-aldi-effect-australias-changing-supermarket-scene-201506220132

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  4. Great article Daniel. Woolworths & Coles are causing a commotion in the wine industry with their private label wines – http://www.afr.com/lifestyle/food-and-wine/woolworths-coles-private-label-plonk-angers-wine-industry-20151030-gkmqyg. They are crafting labels which lead consumers to believe they are buying a bottle of wine from a boutique winery in a quaint country town when in fact they are buying a Woolworths / Coles private label. As a wine lover and a supporter of this country’s wine industry, I know that I would personally seek a boutique wine over wines produced by one of the major retailers!

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