Watch the private label space

Major Australian full-service grocery retailers are following the well-proven UK model and have set ambitious targets for the total share of packaged grocery products business they expect to achieve through their private label. 

The implementation of that plan includes the positioning of private label into different value points – budget, mid-priced and premium.  Alongside this, the listing of proprietary brands are being streamlined down to a limited set of strongly performing lines – a leader plus one or two others within each category.

The strategy is strong evidence of the commoditizing of grocery products, compelling brand owners to constantly innovate to maintain shelf space and product margin.    However these changes in category management by retailers and the trends being seen in shopping will require investments in new product innovation and marketing to be made with great care. 

The 3-tiered private label expansion may or may not work with the consumer, but they provide the option of cleaning up many untidy categories and simplifying choice for the time-poor consumer.  Time will judge the success of the expansion of retail brands, but in the meantime, accurate intelligence on product and category performance will be critical to decision-making.

Retailer Private label brands programs are undergoing expansion and have been assisted by increased proce sensitivity of households. The risks to the overall retail value and margin contribution in some categories are high.