In the early Eighties, own-label products accounted for about 22 per cent of supermarkets’ turn-over. With one notable exception, this figure has increased every year and now stands at 37 per cent.
Apart from Sainsbury’s, all retailers have contributed to this growth. Indeed, 15 years ago two retailers – Kwik Save and Asda – only marketed branded products but they now have substantial own-label ranges.
Sainsbury’s has always had a greater own-label presence than any other retailer, except Marks & Spencer, and this has remained constant, with about 55 per cent of its business being in own brands.
The one year in which own-label did not increase share was 1992, when the European limited line discount chains, such as Aldi and Netto, entered the UK market.
This led a number of the major multiples to introduce ranges of unknown brands at low prices to complete directly with the discount stores. As a result, price-conscious consumers switched from buying own-label – which had previously been the lowest price point – to these cheaper products.
These low-price products were a success with the consumer, accounting for about five per cent of all packaged grocery markets and up to 20 per cent of some commodity markets during 1992.
Retailers recognised an opportunity to develop their own range of low-price products under a generic, own-label name. Kwik Save’s No Frills and Tesco’s Value Lines both launched in 1993. Other major retailers followed, Asda with Farmstores, Safeway’s Savers, Somerfield’s Basics and, most recently, Sainsbury’s Economy line.
The result was an upsurge in own-label business, which grew faster in 1994 and 1995 than in the previous decade.
The impact of these developments has resulted in very different patterns emerging by outlet, largely dependent on when their budget lines were introduced.
Tesco increased its own-labels in 1993 but slipped back in 1994, possibly due to the lower contribution from the William Low chain, which Tesco bought that year. But they have risen again in the first three months of this year.
Kwik Save and Asda’s own-labels have grown consistently as their ranges have been extended. Safeway and Somerfield own-labels increased after the introduction of their budget ranges at the end of 1994 and beginning of 1995. Sainsbury’s has seen little movement since introducing its budget lines last summer.
But supermarkets have to be wary of going too far with own-label products. Consumers are still keen to buy well-known brands, and can be put off going to a store where all they see are own-labels.
Sainsbury’s has started promoting brands again after years of proclaiming its prowess in own-labels. And other stores could soon find themselves caught out by the rush into own-label.
Definition of own label
The definition of own-label is often ambiguous, in particular as to whether fresh goods, especially products such as fruit, should be included. For the purposes of this article, own-label covers only packaged groceries, and toiletries. Fresh foods are excluded.
All shares quoted are the proportion of total expenditure on own-label products. Budget lines have had a variable impact, with the higher contributions coming from those outlets with a more competitive price positioning. Own-label contribution is greater in packaged grocery than it is in toiletries – due both to the higher level of branding in the latter, plus the presence of Boots and Superdrug with lower own-label shares than the major grocery multiples.