Retailers report that they are cutting back on brands and instead devoting more space to own label. C-Store investigates what’s driving this change and how shoppers have been persuaded that branded isn’t always best
When Nisa members were weighing up the pros and cons of the Co-op’s buyout offer, it was the Co-op own label that may have swayed the decision for many. “A thriving, successful own brand provides us with the opportunity to build customer loyalty and trust,” a Co-op spokesman asserts. The society isn’t alone in this thinking, with symbol groups making big investments in own label improvements, and shoppers are increasingly buying into them.
Research shows that three-quarters of shoppers agree that the quality of own label has improved over the past couple of years (IGD, September 2017), with the result that consumers aren’t shy of giving non-branded goods a try. In fact, HIM Research & Consulting’s CTP for 2017 found that 18% of shoppers planned to buy own label from a c-store.
The confidence is echoed by c-store retailers’ experiences. Colin Smith, owner of Nisa Pinkie, in Musselburgh, believes own brands are a credible alternative to the big brands. “We now have an equivalent own-label product for most of the branded products we sell,” he says. “I think people are seeing own label as a positive, quality product that is also good value. And people don’t mind saving up and going for the more premium own-label offering.”
This means Colin’s shoppers are less sensitive about paying more for a better-quality own label. “Premium own labels are doing really well at the moment,” he asserts. “People see what Aldi and Lidl have done, offering own label goods that don’t look like the cheap option, and people’s perception of quality has changed across the board. I think the convenience market is now very different as a result.”
The Lidl effect
“British retailers have stepped up their own-label offer, consolidating and recalibrating their private-label lines in response to consumer demand for quality goods at low prices,” says Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel.
“The growth of Aldi and Lidl’s market share has also played a role as consumers become accustomed to seeing non-branded products on the shelves.
“Consumers have responded by increasingly opting for own-label alternatives across all retailers, and the proportion of the population buying the top 10 branded products has fallen by an average 2.5%.”
Matthew Smith, insight and research manager at HIM, says premium own labels also help create a perception of value. “Focusing on premium, taste and quality will make shoppers feel that they are getting greater value for money,” he says.
Satminder Deo, who owns three Costcutter stores in Yorkshire, agrees the discounters have had a role to play in shoppers’ changing views. “If you look at what the discounters are doing, they are introducing a new way of shopping and thinking,” he suggest. “People now accept Aldi and Lidl’s products and the value they offer them.”
According to IGD, 61% of shoppers trust own-label products as much as brands, with 46% of shoppers agreeing own brand now has the same status as branded products.
Colin says that sales of own-label products, particularly in the chilled category, have grown so much that he has cut down on his range of branded goods.
And at Satminder’s stores, own label is so strong in some areas that he no longer stocks the branded lines. “In some categories, such as household, we have got rid of the branded products leaving just own-label equivalents. We only bring the branded goods back in if they are on promotion.”
It’s testament to how good shoppers believe own brands are, he says. “In the past, buying own label was seen as a taboo. If anything, people think own label is nearly as good as the brands, and it’s cheaper.”
Ready to go
The top category that own-label shoppers buy into, according to HIM CTP 2017, is chilled foods (42%), followed by bread/bakery (31%) and milk (27%). Satminder has found having a comprehensive chilled own label is a must, and it’s an area many of the symbol groups have been concentrating on.
Nisa and Spar have both recently added new own-brand meal-for-tonight ranges; Nisa introduced a fresh fish range in September; and Spar’s premium ready meal range hit shelves last month. Both symbol groups are hoping to tap into the growing consumer trend towards quality ingredients and provenance.
The Heritage ready meals range has been a huge success for Nisa. Nisa says retailers will be able to stock the own label for the time being. Long-term plans for the range, however, are unknown.
The company’s 2017 full-year results revealed that sales of own brand were up by 4.9% year on year, with ready meals up 15.7%.
Inflation playing a part
Own label products are growing faster than branded, according to data released by Nielsen (September 2017).
Over the past quarter, consumer spend on own-brand groceries rose 5.5% year on year, nearly five times the growth in spend on branded products (up 1.2% year on year). The average increase in sales across all grocery products was 3.5%.
Mike Watkins, UK head of retailer and business insight at Nielsen, says: “Looking at what shoppers are putting into their baskets suggests food retailers are helping shoppers manage the impact of inflation by offering different ranges of own label alongside brands across many categories.”
Booker has been rolling out 22 different types of ready meals into Premier stores under the company’s Discover the Choice own-brand offering. The products, including pasta, pizza, fish ready meals and salad dressings, are also being introduced across Budgens and Londis stores. Discover the Choice products aim to provide increased margins for retailers, with the company’s ‘two for £5’ promotion making retailers more than 28% POR.
For Colin, ready meals promotions work well. “Promotions depend on the category, but with ready meals we do two for £5 across the range, so customers can mix and match and choose what they like. It’s about getting a balance between products that offer retailers good margin, but will also sell well.”
One of the big benefits of own label for retailers is the increased margin, which Colin says can provide 5% to 10% more than the big brand alternatives.
Satminder stocks the Independent range, which he says is not quite as good as the Heritage range, but is growing in popularity. “I think the majority of problems come from availability, as the range is not as big as other own labels. The pet food range does really well, but we stopped doing the crisps range because the products just didn’t sell.”
Jerry Tweney, owner of Budgens Prestbury Village Stores in Cheltenham, believes having the right own-label packaging is vital to encourage repeat custom. “The best own-label products look premium and deliver on flavour and taste,” he says. “The Discover the Choice range has it right. The products stand out on shelves and people don’t know that it is a value, or even a non-branded, product.
“Old-style own-label packs didn’t look as good as they do now. They used to be plain and brown or green. Now we do 40 different ready meals and they are all really bright and colourful.”
Jerry believes shoppers are looking for ‘good quality evening meal solutions’ and because own label offers good value for money, it is a perfect fit for his store. “We have a real mix of customers, from young professionals to the elderly, and they see the ready meal range as an easy way to have a good dinner.”
Own label only
Sales of own-label pizzas have been so impressive in Jerry’s store that he no longer stocks one of the market leaders. “I stopped selling Pizza Express’ range because things have changed from years ago. Own label now offers so much choice and I’m happy just selling the Budgens range,” he explains.
Jerry believes the market has moved on and symbol groups are continuing to invest more money in improving their own label offering. “People are really surprised by the quality of own-brand products. We have held two sampling days and customers genuinely believe it’s a luxury product. A good own-brand range is now key to the success of a convenience store.”
For the Co-op, own brand is an integral part of its strategy. Kantar data earlier this year showed that Co-op’s growth was driven in part by strong premium own-label growth, with sales of the premium-tier Irresistible range up 33.7% year on year. In 2016, own brand sales accounted for 46.9% of Co-op Food sales (excluding lottery/pay point, fuel, cigarettes & tobacco, kiosk, newspapers & magazines, non-food & commercial services & electrical).
Last year and in the first half of this, 640 new Co-op own-brand products were launched, with more than 2,000 additional own-brand lines being reformulated or relaunched. The group now sells only 100% British fresh own-brand meat which includes ready meals, pies and sandwiches, and Fairtrade plays a key role in the product mix.
The company says own brand is central to its membership offer, which sees customers receive 5% back to an online wallet and 1% donated to a nominated local cause on the purchase of own-brand products. It says it is also what sets it apart from other stores.
“We have a really clear strategy to become number one UK convenience retailer and understand the importance own brand plays within this. When this is combined with customer insights and our ‘right range/right store’ segmentation, it allows us to develop an own-brand product range that meets our customers’ needs and allows us to differentiate ourselves and the brand from others,” a spokesman says.
In response to growing demand for premium own label, Bestway earlier this year introduced Best-one Inspired. The new range is designed to focus more on quality and features a differentiated label design with a black base. Despite the premium nature of the products, all are designed to be competitively priced and feature pricemarks to help retailers communicate value.
Best-one Inspired products include all-butter cookies, hand-cooked crisps and high-fruit content conserves.
Ed Smeaton, director of trading for retail at Bestway Wholesale, says: “Best-one Inspired gives independents a label on which they can compete on quality and price with the supermarkets’ premium offer, and a real point of difference. We have plans to introduce many more products over the coming months to help retailers drive sales and loyalty with shoppers.”
Many former Best-in products have also been reformulated to reflect shopper demand for better quality ingredients and taste, and new on-pack graphics provide a more modern look for the brand. The revamped range offers a typical POR of 30% or 40% when on promotion, the company says. So far, 300 products have been given an overhaul.
Spar, too, is looking at npd that enhances customer perception of own-label products. Cath McIlwham, head of brand at Spar UK, says: “The next phase of our evening meal strategy looks beyond prepared meals to cover a more comprehensive meal-for-tonight offering for customers. The Spar brand now caters for the popularity of component cooking as well as offering new prepared meals and essentials to cook from scratch.”
The range covers more than 1,000 selected products, which Spar says are benchmarked against competitors to ensure the range is of comparable good quality. “2017 has seen Spar continue with development and innovation in its own- label range,” McIlwham adds. “The range is going from strength to strength with a turnover of more than £300m in retail sales.”
The group has also focused on adapting its own-label range to suit changing consumer tastes, with confectionery, snacking and frozen lines all receiving new variants and packaging redesigns.
Over the past 12 months, Spar has made up to a 10% reduction in the amount of sugar in its Spar brand soft drinks, which is equivalent to removing 51.6 tonnes of sugar and 206 million calories from across the range.
Ian McCabe, owner of Spar Penryn, in Cornwall, says he chose to move to Spar from another symbol group so he could start selling Spar branded products. “We have always had strong sales of home-branded products and we felt the Spar range was the best available on the market,” he says. “We have already had a 20% uplift in sales of chilled products due to the quality and depth of products available to us.”
Spar brand white wine, water, thick white bread, smoked bacon and pear cider are among the strongest performers, he reveals.
With symbol groups’ continuing investment in their own labels and inflation taking its toll on shoppers’ spending, own brand only looks set to take on a bigger role in the c-store’s sales mix in the future.
Own-label wine is a winner for Paul Stone, owner of seven Spar stores in Manchester, where the first of Spar’s revamped wines are doing well.
The first phase of the relaunch began in October with the introduction of everyday wines and varietals, with range exclusives and regionals to follow in March next year. Bold packaging includes specific customer missions and occasions and helps the wine stand out next to branded equivalents.
Says Paul: “Spar have done a great job on their own range. It’s going really well for us and it’s been great in terms of taste and label design. It was definitely the right time to change the range - own label should be reviewed periodically anyway - and the focus on the grape variety is a smart move because that’s the way people like to buy their wine.”
Paul held a number of wine tastings to push the range, and says the feedback from customers has been very positive.
“The range has great standout on shelf and, with the launch of the more premium lines next year, customers will have even more choice.”