Woolworths have announced a change of their ‘Homebrand’ range of housebrands to ‘Woolworths Essentials’ a more ‘upmarket’ housebrand.
If that is all that is happening, will this just be putting lipstick on a pig?
The strategic and competitive challenges facing Woolies run way deeper than the packaging on a housebrand offering.
However, if it is a signal that the changes are cultural, and the changes are to impact the way the organisation operates, it may be the start of a competitive revival. To be fair however, Woolworths’ financial performance over the decade up to only two years ago was outstanding and shareholders had been a very happy bunch on the supermarket side of things. However, the suppliers have recently decided they have had enough, and customers are becoming more open to alternatives.
Suppliers and customers are surely pretty important groups to a retailer.
Housebrands started as strategic move in Australia by Franklins in packaged goods almost 40 years ago, as outlined in this ABC podcast. They had been around in variety and general merchandise for some time before that, Marks and Spencer in the UK pioneering the idea way back in the 1920’s.
Franklins raison d’etre was customer value. They achieved this by a combination of low prices, aggressive promotions, and the widest possible range of products. The addition of a low priced housebrand range in heavily shopped commodity categories made absolute sense, so they started with ‘No Frills’ margarine in the late 70’s.
At first, many Australian consumers hid the No Frills products in the bottom of their trolleys, hoping none of their friends saw, as it was perhaps a social indicator that could see them accused of being cheapskates or down to their last bob.
The brands you buy were, and still are, an important part of your own self-image.
Pretty quickly however, shoppers discovered that some housebrand Sku’s s offered great value, so they locked in on them, and the presence of a housebrand in a trolley came to indicate a canny, value-conscious shopper. Conversely they also rapidly discovered the Sku’s that offered only price as an incentive to buy a rubbish product, and discarded them. Consumers are very quick learners, and make choices in discriminating ways.
Experimenting with housebrands
Since those early days, retailers have experimented widely with housebrands, coming up with sometimes elaborate words to support the introduction of fancy labels on the same stuff, or to simply copy the new products of a proprietary supplier before the category is established in consumers minds.
Fluff when substance is needed.
The strategy has changed radically from the Franklins’ original model of using housebrands to deliver value to customers, to one of capturing proprietary margins without the expensive, and long term work of brand building that requires an understanding of consumers lives outside a supermarket. Instead their control of what goes on their shelves has been used to squeeze the margins of the remaining proprietary suppliers while filling the now vacant space with their own “Faux-brands”.
Niche housebrand
Both Woolworths and Coles have leveraged their mass merchandising and supply chain expertise into liquor retailing.
Go into Dan Murphy’s and look at their range, particularly of beers, fancy niche names, many of them are just sold in Dan’s, with no marketing credibility beyond the shelf space and quirky name.
They are a Housebrand.
Both also have ‘cleanskin’ wines also housebrands, but unashamedly so.
Market niches
Private Label quality has improved over time, some of them are pretty good, as good as proprietary brands, although usually a bit different in composition, packaging, or in some way at least moderately meaningful to consumers.
The problem is that the retailers are in the business of flogging stuff. Product to consumers and shelf space to suppliers. It is a high volume, multiple transaction, low margin business. By contrast, suppliers are in the business of building brands for the long term based on consumer preferences, behaviour and emerging lifestyle trends. They are the ones seeing market niches emerge, and building new products to suit, but why take the risk when you know that the retailers will copy you in a short space of time, squeeze your shelf space, and screw you on margin and terms.
Where will the genuine, category creating innovation come from? Not from the retailers if the past is any guide.
Not all the blame for the innovation stagnation that is evolving goes to the retailers. Proprietary marketers are also in the gun. It is suppliers, albeit under considerable retailer pressure, who have allowed the categories to become commodities by transferring the innovation and marketing funding to price promotion, thereby destroying the value of their brands over time.
Years ago as a young product manager, I worked for what has become Meadow Lea Foods. Meadow Lea margarine had been built into one of the strongest brands in supermarkets, with a dominating market share well over 20%, in a crowded field. I have not seen ‘Mum’ being congratulated for probably 20 years, presumably the available marketing and advertising funds were swung from what had worked to build the category, into the retailers pockets.
What is Meadow Lea’s market share now? I bet it is in single figures with the rest of the commoditised products in the category. Brands cannot be neglected for so long in the sun. each brand must find a new market niche.
