How private labels in retail are affecting markets

I Love Coles, BUT…

FUCK    FUCK    FUCK    FUCK. This is coming from the next aisle. You could be forgiven for thinking it was a couple of iced-up hip-hop dudes from the western suburbs, all baggy pants and 50 cent attitude. You might imagine it’s a 3 year old trying to tell Mummy he can see a Truck on a packet of cereal. But no, it’s two blonde, jeans wearing, late 30’s Mums. The oft-cherished Household Grocery Buyers. Deeply pissed off with not being able to get the pasta sauce, biscuits, a cheese… can’t get the brands they want. These women are not unique. They are complaining loud and long right across the suburbs in their millions. They are upset that the supermarkets have introduced Private Labels and deleted all the little brands they’ve come to love. So the gourmet market is leaving. The middle ground is leaving. The poor down and outs are disappointed, angry. Any of us given an option are going elsewhere. It’s about choice, range, options. Pure and simple.

You can’t get what you want. You might like Milo or Nescafe, big brands, but you also like that funny little brand of capers from Portugal or the roll-mops from Finland. So by deleting the smaller brands, the supermarket is destroying your sense of self. Your kitchen, your family, is not as it was.

This is the direct result of a management policy running like a rampant disease through retailers in supermarket land. Dumber than shooting yourself in both feet with a spear-gun then trying to justify it by saying you’ve got less chance of falling over, the Coles, Woolworths, may-be soon the IGA’s of the world are taking what we want about them and ditching it out the window.

The concept of Private labels is in direct contrast to why I go to their stores in the first place. Why do I go to a supermarket? Because I can’t get certain stuff at a Milk-Bar. If the Milk Bar on the corner had range, was a similar price and obviously more convenient, I’d shop there over the supermarkets. Derr. And they think I don’t care. And that I’m so stupid I’m likely to believe their product is as good as an independent suppliers. People who’s lives depend on the product competing.

Who this really hurts

You and me. It’s often poorer quality. The wrong shaped granules or bitter tasting or whatever. In many cases sizes aren’t optimal, colours, packaging etc. don’t suit so well. Or it’s shit made in China, not Australia, for the sake of a few cents less.

And obviously it massacres the companies that make things here. And the small and large suppliers to those companies – the truckers, the input products, services like accountants, ad agencies etc.

But the thing that saddens me most is the stupidity of the strategy in a marketing sense. Not content to prove their own lack of imagination and education by constantly harping on about price when professional marketers all know there are other more effective, smarter sales motivators, many of the supermarkets and other big retailers continue to doggedly trade on price.

Where supermarkets do offer service (How can I help you today? – Foodworks) community involvement (Supporting our local community – Ritchies) convenience (We’re locals and we’re proud of it- IGA) etc. they do way better. But the best strategy of all, in any retail setting, is range. Giving people stuff they want. Delivered best at present by intelligent independent supermarkets. The little guys. Good on them. If you want to see range and how it works, in Melbourne, try Leo’s in Kew. Or any of the small supermarkets in Atherton Road, Oakleigh or Sydney Road Brunswick. In Sydney, I’m told to try Jones the Grocer or About Life.

In Brissy, Fresh on Melbourne, Power’s Markets or James Street Market, Newfarm.

Balance? What’s that?

This treatment by major retailers of other businesses reflects no understanding of the delicate balances working in our society. I remember overhearing a quip from a buyer once ‘It’s mind over matter. I don’t mind and they don’t matter.’

The march to Private Label displays no integrity on the part of the big supermarkets. Nor for that matter, any integrity on the part of the sucker companies making for them and thus, like sheep racing up the Abattoir gang way, assisting in their own destruction. (Yes, I know they need to feed their families. Which is the only reason they go along with what amounts to blackmail.) A limpet on the retailer whale shark as it sucks out their production lines, making someone else’s brands on minimal margin. And just as bad – often disappointing their other customers; the very people they need most – weakening their negotiating power still further.


The arrogance of the big guys. The cheap-brained grab for money. The condescending assumption – that our desires don’t matter – only the eternal dollar. The sheer bad naturedness of beggaring little companies all across the land. The draining effect on Australian morale. Our diets dictated by what Coles or Woolworths management deem us to be able to eat. In a democracy? Talk about losing touch with your consumer….

Market power

This arrogance comes from the knowledge that a lot of people will have to change the buying habits of a lifetime for them to lose market share. The current situation is that 75% of the $60 billion grocery trade in Australia is owned by just 2 companies. I wonder how long this dominance will last?

With Coles (these figures are a few months old – one wonders how far they have got with this plan) the aim is for 6000 (six thousand) products to be in the mammoth  ‘I love Coles’ range, at 10% cheaper than the ‘average’. I believe they are up to at least 2,500 or so. Some 230 plus in the ‘Smart Buy’ range at 30% cheaper. I guess that would be the black and gold stuff- all crumbly loo-paper, gluey pastas and stuff your dog would say no to. About 200 of ‘Coles Finest’ at the same price as the long-dead average competitor. That’s, in many categories, three ‘brands’ they own. How much space is left for the products they have unashamedly copied? Coles wants 30% of all products to be house brands by mid 2008. Are they on target?

Woolworths is just as bad at giving customers what they want. They are looking at 900 ‘Homebrand’ at 30-40% cheaper. 300 or more ‘Select’ at 10% cheaper. But they are being slightly sneakier about it with what seems to be more home-owned but not acknowledged brands, registered to their various offices locations. They own ‘Southcape’ and a stack of other pseudo brands. (With Coles look for ‘Toorak Rd Tooronga’ on the label.) Which makes many of these figures miniscule in reality – the hidden home-owned brands, I’m lead to believe, account for much more than either will admit to publicly.

Retail cancer

And the sickening thing is it’s not just supermarkets. Almost all significant retailers, from Bunnings to various Chemists to the Just Jeans and Dick Smith’s of the world all do it. The bloody tyre shop has it’s own brands. Like I want to trust my families lives to the (sadly) recently deceased Bob Jane’s product development department. What’s that consist of? A grumpy part-time buyer beating up Dunlop’s lowest paid engineer?
And it’s all over the world. Tesco has 31% of the UK grocery mkt and Sainsbury’s 16% grocery mkt. House brands account for 30% of all lines in the UK. 20% of all products bought in Europe and the USA are now private labels.

Goodbye consumers

It looks like an unstoppable machine. One that flies in the face of fairness and customer enjoyment and respect for your buyers. Where were the people in their marketing departments during lecture 101? Or haven’t they employed any qualified marketers?

Their boards talk about a marketing focus but they don’t satisfy customers. They talk about destination shopping. The shopping experience. I live the shopping experience every day and I’m telling you it’s getting worse by the hour. I’d rather drive 10 minutes further and go to an independent where I’m often the only person in the store who speaks passable English.

Aldi as a model?

From fear of competition, Coles are copying Aldi, a bottom feeder from Europe that targets the poorest 10% of the public (pensioners, unemployed) and sells them their own brands at a considerable profit. Instead of taking their rightful place as a middle-Australia supplier fighting shoulder to shoulder against Woolworths, Coles are diving their brand down the feed-chain, chasing Aldi. Why ruin Coles? What do they think their own discount-house brand oriented Bi-Lo stores are for?

Why do they do this?

The real motivation is margin – from 15% rocketing up to 45% plus. More control. Possibly to save on buyers wages. The business model is ‘We’ll steal their idea’. And the culture is ‘we are invincible.’

They hide this grasp for profit behind the expressed motivations of ‘Saving you money’, ‘Better quality control’ and the frankly incredible ‘We can do it just as well as them’.

Who this really helps

Only retailers. To a lesser extent, over the short-term, it potentially helps the mythical ‘shareholder’, (Westfarmers bought Coles recently, so it can’t have worked for the shareholder much, can it?) but actually it helps directors and various key executives on short-term arrangements with KPI‘s that can be manipulated to make it look like it’s going to be profitable. Heaven help the long-term employees or the public.

Not helping marketing one bit

Where are the marketers in Coles and Woolworths? What are they doing about this? Are they so scared of the accountants sitting above them that they don’t say or do anything? If you’re a middle level marketer at a big supermarket, you’re not doing your profession any good being there.

Our lives are affected in some ways worse than anyone else’s. For we marketers this policy reflects a severe professional threat. With some 10,000 or so Private Labels eventually cramming the shelves of Australia’s major retailers, without marketing budgets, that’s five to 10,000 or so marketing managers and/or product managers, sales managers out of a job. It’s less work for the media, the packaging people, everyone. You, as a marketer, have less chances with your career.

The destruction of these brands undoes decades of well-meaning marketing effort. If a brand is killed, it’s a useless word on your CV. It’s actually poison. ‘Oh, they went broke if I remember, was that your fault?’

Get this right. Fewer brands = fewer opportunities to stand out and lead = fewer chances of riches and glory and/or working for yourself etc

Big is not always right

I know this is sacrilege amongst ‘academic’ marketers, but we can’t just accept that because a practice is conducted by a big company, that it’s OK…somehow acceptable by mainstream marketing as a ‘marketing rule’, just because X corporation does it.

Surely our collective role as professional marketers is to make people’s lives better, not worse?

Open your eyes

What can we do about it? See the aggressive chess game for what it is. Watch the brands evaporating faster than the sugar dissolving in your coffee this morning. Talk about it openly and honestly. Call it the I.P. & asset theft that it is. The rape of Australian small business. The abuse of market power. Write to the ACCC about it. Send them an email. Ring them. Let’s hope with Rudd in they’ll try a bit harder than they did under Howard.

Shut up

If you’re a manufacturer squeezed between the pressure to give the buggers more market information to justify your product’s inclusion on their planner-gram, versus the certain knowledge they are about to launch a competitor directly against you, don’t play their game. Don’t make their products. Tell them to nick off.

Help those who help you

Seek alternative distribution anywhere you can. Put whatever ad money or support you have into the independents. Mention their stores on your ads. Shove your promotional people in there too. Nothing nicer than being accosted by someone offering a tasty tidbit while you slide down the aisle. Give them gondola ends. Case deals. Link your website to theirs.

Develop products with the independents that have say a 5 year exclusivity – guaranteeing they will keep your brand alive long enough for you to build it in the minds and buying habits of the public. Help them anyway you can. Making the independents a more enjoyable shopping experience, a more successful operation, will help them sell more of your stuff.

Change your channels

Look at other distribution options – web selling, party-plans, home deliveries. I don’t care; survive. You could set-up retail yourself. I met a pie manufacturer the other day who makes four brands and when I suggested he could run his own stores, he laughed at me. ‘We’re not retailers’. Well I’d rather be a not very good part-time retailer than just plain unemployed.

Promote, promote, promote.

Never before has the pressure been as intense to own a piece of your public’s mind. To develop, to cement loyalty from customers and retailers, than now. Powerful, creative, intelligent advertising will protect you way better than any other thing in this fight to the death. The reason most second/third tier brands are in trouble is because they have not promoted themselves well enough. American HVPG companies spend 10-12% of their turnover on promotion. Australian, more like 5%. Think about that.

Pick an agency.

Then pick a few media and attack the buggers. Give the public a reason to demand the product. For the buyers to fear dropping you.

Treat it as war

Use all of the weapons you have in your arsenal as a trained marketer. P.R. is good with HVPG, so’s TV, magazines, outdoor. You can run cooking shows now on you-tube. The digital world provides you countless options to promote your products and save your company. Don’t just sit there like a stunned mullet waiting for the filleting knife.


You can even change your products so they have enforceable I.P. protection, even patent protection via unique packaging or formulae. Fundamentally, the reason retailers can copy products and get away with it is because those products have become a commodity due to copying in the first place by second and third tier brands. Make yours different.

Don’t help them

If you have to come to some agreements, do it badly. Plan your tactics so it doesn’t quite work for them. Stall, miss-deliver. Drop pallets. Don’t return calls. Make it hard for them to stuff your industry, whatever that industry is.

Gang up

You could get together with the other guys with similar equipment, similar suppliers – I know it’s illegal to collude – but that doesn’t mean you can’t have coffee with an old friend to discuss economics. Be careful of the 1974 Trade Practices Act – you can’t be proven to ‘withhold supply’, but there are many ways to skin a cat and these are decidedly feral.

Marketers are such wimps. I can’t remember the last time marketers in any industry got together to protect themselves and look after their own interests. Farmers do it all the time. So do Doctors, Master Builders. But marketers? What’s wrong with us?

What’s to stop a few decent, gutsy marketers forming an association? The ‘Anti Privateers League’? Or ‘Not at Home’? Or ‘No Name, No Future’? ‘Black and Blue about it’? Or ‘CCRAP – Companies and Consumers Rallying Against Privates’ We could get the ASMI & AMI behind it. God knows they do bugger all else.

Don’t shop there

And most of all, don’t buy the house brands. March away with your wallet like the smarter side of Australia is already doing.


If you’re a retailer reading this and going purple from my attitude, put yourself in the position of your customers, for once. Do the right thing for your fellow Australians. If you have to make your own products, contribute to our collective well-being.

Help us

Do original products. Do better products – solve problems and/or inspire us with healthier preservatives, smarter, less wasteful packaging, more natural formulae, sharper blades, quicker setting or something else that’s useful. Market those improved products like professionals. Give yourself a reason to have some pride in what you do. Make we fellow marketers respect you rather than just fear you because you’re big and fat and can suffocate many of the smaller guys with a fart.

As a final point, I’m not anti-retail. I love retail. I just want a relationship with retailers that’s mutually satisfying.

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