Despite apprehension about the impact of supermarket private labels and forecasts showing they will dominate shelves in the next five years, Woolworths has attempted to calm the market by releasing information on its range on its website.
Business information research firm IBISWorld has forecasted that the share of private-label products will account for over 30 per cent of all Australian supermarkets sales by 2017-18 and according to IBISWorld’s General Manager (Australia), Karen Dobie, they have been one of the industry’s fastest growing segments over the past decade.
“In 2007-08, private labels accounted for just 13.5% of total supermarket sales – meaning the segment has grown by more than 85% over the past five years”, Dobie said.
Recent studies found that one in four products purchased in Australian supermarkets are private label, and of those, one in two is imported.
The increase in private label
The debate over private label continues to rage, and the impact of the reduced shelf space afforded other companies has led to countless manufacturers and farmers going out of business.
As both Coles and Woolworths appear to be delivering on plans to double private label products in store by 2020, the availability of anything other than private label becomes far less.
Consumers have little choice but to buy private label, as other brands are replaced by supermarket imitations, and according to IBISWorld data, Australians will spend over $21 billion on private label products in the 2012-13 period.
This is already a huge increase from the $19.7 billion in 2011-12, and an even bigger increase from the comparatively tiny $9.96 billion five years ago.
By 2017-18, Australian spending on private label products is expected to hit $31.8 billion, according to Dobie, which is already a 50 per cent growth from five years ago.
“The recessive economic climate has been a strong driver of private-label growth.
"Households have been reining in spending, paying off debt and increasing savings,” she said.
“This, coupled with an increase in the range of private-label products available, has led many consumers to make the shift to home brands.”
“Branded producers have responded to private-label growth by discounting their products to remain competitive.
“However, the dominance of Coles and Woolworths means that they are likely to give preference to their own brands in terms of spacing and design allocations – placing continued pressure on the big brands.
“This can be detrimental to branded producers as their share of shelf space is eroded by home brand products.
Woolworths attempts to address concerns
To address the competition between supermarket private label products and supplier brands, Woolworths has released an Official Range Profile of brands for its Australian supermarkets.
The supermarket giant said the data will be regularly updated on its website and will allow for a “more informed” discussion on choices between private label and branded rpoducts.
Managing Director of Woolworths Supermarkets, Tjeerd Jegen, said Woolworths wants to demonstrate how they meet their customers’ needs.
“As part of that commitment, we are releasing a snapshot of data about our range to the market to put our business into a correct perspective,” Jegen said.
“The facts show that in packaged groceries and perishables, Woolworths stocks more than 44,000 lines of which 94 per cent are branded products.
“Just 2,500 are Woolworths Own Brand products,” he said.
Complete dominance
While the supermarket is maintaining that their range is heavy in branded products as a way to alleviate debate on the issue, it does not change the fact that the supermarket duopoly is gaining more control of the market all the time.
The Senate Inquiry set up to investigate the anti-competitive practises of the major supermarkets struggled to get people to speak up, and while many will speak of the record, few will go public with the stories of the power the supermarkets’ wield.
There have been calls for an ‘Australian-made’ aisle in supermarkets, a cap on the percentage of private label products that can be stocked and restrictions on the market share the supermarkets can have.
However, while the awareness about the impact of the price wars, particularly on Australian dairy farmers is becoming more widespread, the supermarkets continue to maintain they aren’t doing anything wrong, but are instead encouraging companies to innovate and looking out for their customers.
We invited representatives from both Coles and Woolworths to attend our Food Magazine Industry Leaders Summit in June, but because there was one discussion topic, out of a total of six, planned on the impact of the supermarket price wars, we were told they had “no interest” in being involved in what they called a “get the supermarkets” agenda.
When Food Magazine reported on Coles’ failure to respond to more than 73 000 consumers who had “liked” a post on Facebook detailing the impact of the reduced price milk, we received a call a Coles representative, who wanted to point out that they did respond, albeit three days late and to the wrong person.
Food Magazine was accused of being biased towards food manufacturers, but since this representative from Coles does not usually return Food Magazine’s phone calls, we pointed out that does make it difficult to report from both sides.
We tried to come to an agreement that when we called for comment on stories, he would respond, and Food Magazine, in turn, would provide their perspective on all such stories.
However, he would only agree to this arrangement if we started reporting more favourably on Coles, saying he would “closely observe” the news section to see if we were doing so, before he agreed to participate in stories on the supermarket price wars.
Unfortunately for the supermarkets, we can’t be bullied into behaving the way they would like us to and will continue to report the true realities of the supermarket environment for food manufacturers and producers.
Do you think there needs to be limits on market share of Australian supermarkets? Do you buy private label?