On the tails of Waitrose launching Waitrose 1 and Tesco’s recent launch of seven new own brands, retailers are beginning to take control of their own shelves. Is this strategy the missing link for resilient growth, or is it an uncalculated risk? Furthermore, what do these labels mean for the retailer’s position in the market?
In assessing the baseline, own brands account for 54 per cent of overall supermarket sales according to Nielsen, and they are showing signs of growth for 2016. Of the ‘Big Four’ supermarkets – Asda, Sainsbury’s, Tesco and Morrisons – Sainsbury’s has come out on top with 0.5 per cent in the last three months, which is the longest spell of growth for any of the Big Four since March 2013.
Tesco seems to be showing strong signs of recovery with sales falling only 0.8 per cent, versus a previous decline of 1.6 per cent, and with minor loss in market share. Strong global players like Aldi and Lidl continue to see solid growth while stealing market share, and are making further plans to expand the number of stores. Within these growth rates, premium own brands and performing at almost four times the market rate (1.4 per cent).
As we look to uncover the opportunity with premium own brands, marketers are left asking: ‘Is there a way to be both cheap and premium?’ While this may appear to be a bit of a contradiction, recent data points to consumers trusting the value and quality of own brands in the UK:
- 71 per cent of UK consumers think the quality of own brands has improved
- 50 per cent said they would buy more if greater variety was on offer
- 60 per cent said the quality of own brand labels was as good as that of name brands
- 42 per cent reckon some own brand labels are better quality than name brands
For established players, this trust could be the base that distinguishes them from the growing global competition. It is in the best interest of retailers like Waitrose, Sainsbury’s and even Tesco to avoid a dog fight on price. It is a match they will never win, or worse, could be detrimental not only to own brands, but also to the retail master brands.
So how do retailers unlock the opportunity and differentiate themselves? Two key elements – the trust of the consumers and strong relationships with suppliers – appear to be the factors that support a greater retail experience – a lifestyle – that will go a long way in developing consumer loyalty. Seems simple, however, this doesn’t come easy.
Consumers are looking for brands they trust, and are willing to go out of their way to get the right product. In the recent Authenticity Gap report from FleishmanHillard, it was found that 49 per cent of consumers see ‘honesty across business operations’ as a key factor in brand consideration. They also reported that companies should operate with the highest ethical standards in order to be considered for purchase. Consumers want to understand where their products are coming from, whether its provenance or source. If brands do decide to implement transparency into their strategy, they must ensure that they are now meeting the standards that consumers now demand.
Waitrose has created a strong perception that transparency matters. A great example of this is its ‘Live from the farm’ initiative, which gives customers a sense of comfort and connection to the source of their food. Launching this month, Waitrose 1 is a clearly defined platform, appropriately separated and elevated from the Waitrose Essentials line. Waitrose 1 does an excellent job of balancing simple, elegant design with a sense of provenance for each of its products, helping to elevate the perception of quality and its premium nature while eschewing misleading information.
It’s no surprise, then, that Waitrose was voted best supermarket from which to buy own branded products in 2015 by independent retail surveyor Which? (i.e. best value for money and consumer perception). 47 per cent of Waitrose’s own branded products won Which? Best Buy of the Year leaving the retailer in a prime position to capitalise on its premium own brand growth.
In contrast, Tesco’s own recent brand launches, which in theory made a lot of sense, are creating question marks in practice. The strategy was to support the categories which were under-performing by developing a concept for seven own brands that would elevate the story and provide a cohesive strategy across categories.
Each brand utilises a farm to symbolise a sense of place and source. As if Tesco hasn’t been navigating enough turbulent waters – from accounting scandals to decreasing sales – now, chief executive David Lewis has been put on the defensive because the farms in this new own brand strategy don’t actually exist.
While Tesco is not the first brand to create a fictional farm (others have done so and gotten away with it), in this instance, the purpose behind launching the premium own brand was to instil trust in the master brand. Tesco should have recognised the need to orchestrate a launch rooted in a stronger source story versus artifice. While Lewis stated, “Rosedene stands for a level of quality that is consistent. We are clear about where this product is sourced from, the customer definitely gets it,” adding 95 per cent of shoppers surveyed were either positive or neutral about the new labels, and that “the results are encouraging. However, there is much left to be desired.
Both own brands and branded consumer products have to think critically about the purpose they serve within the business strategy and how this translates to the brand experience. One could design and execute a product line that looks as though it is – and in theory should be – successful. However, if it is not connected to consumer insight, market context and business strategy, the most likely outcome is a flop. Again, simple enough, right?
Nulty White is senior client director at Brand Union