Almost half (49%) of consumers who are buying more products from supermarkets’ premium own-brand ranges than last year are trading down from named brands to save money, according to a study by Lightspeed Research.
And with supermarkets relying on discounting to encourage shoppers to fill their baskets with more premium own-brand products, price appears to be an influential factor for consumers when making a decision between premium and standard supermarket products.
The most popular reason for buying premium own-label goods is because they are being discounted or on special offer, with 30% saying it would be their main reason for trading up from standard supermarket products. This appears to raise questions about the positioning of premium own-brands and the strategy of price-cutting to drive volume growth, says Ralph Risk, marketing director for EMEA at Lightspeed.
He says/ “[Supermarkets] have to be very careful not to degrade the image of premium own-label goods and their brand values by giving it too much discount, or making the cost too cheap. I think it is a balancing act to encourage people to purchase them without actually damaging the brand by making it look like it is a cheaper brand,” says Risk.
One indication that consumers do not see supermarket premium ranges as having the same prestige as named brands is their approach to buying gifts. Asked about buying food items for others, only 21% say they would buy a premium supermarket product, against 69% who would buy a named brand. And only 9% would buy something from a regular supermarket range. Risk suggests that own-label brands still lack “the cool factor or the posh factor” of other brands.
This appears to have more to do with the label than the product itself, however, considering what consumers say about the quality of supermarket premium products. Of those consumers buying less from these ranges, only 5% say it is because they are unhappy with the quality. Better quality and taste are the next most popular reasons for buying premium rather than standard supermarket products after discounting. And some people (13%) admit to having passed off supermarket products as their own cooking in the past, including 22% of 18- to 34-year-olds who took part in the research.
Risk comments: “If people feel they can pretend they have cooked it themselves, it indicates that the quality of the supermarket brands is of a high enough level.”
The decline of traditional cooking skills among the population might also be influential in the finding that prepared meals are the item most consumers claim to have bought from a supermarket premium range in the past three months. With 53% saying they had purchased ready meals, they led meat (50%) and cakes and biscuits (49%) in the top three items. The high placing of meat, where there are few named brands against which to compete, perhaps suggests once more that supermarkets’ premium brands do provide a level of reassurance to consumers on quality, compared with standard alternatives.
While dairy products and cheese also rate relatively highly, with 45% of those questioned having bought items in this category in the past three months, other product types lag behind. Notable among these are alcoholic drinks, which come last of the specified product types with only 17% saying they have purchased them from a supermarket premium range.
Risk comments: “There are many different product categories out there, but perhaps it is just that people do not know them as well; they have not been pushed [by the supermarkets] and they do not come to mind as quickly as ready meals and prepared food.”
The leading premium supermarket brand is Tesco Finest, but 51% of those surveyed say they have bought a product from Sainsbury’s Taste the Difference range in the past three months compared with 65% from Tesco Finest. This is despite Sainsbury’s having an overall market share only about half that of its rival. Other supermarkets’ premium brands are broadly in line with market share on this measure.
For all the supermarkets, it appears there are still opportunities for own-label premium range growth. In times of continuing economic uncertainty for consumers, there is clearly scope to take business away from named brands by competing on price rather than concentrating on protecting the premium positioning of such supermarket ranges.
However, while consumers are apparently impressed by the quality of products sold under supermarkets’ premium brand names, they seem less convinced about their prestige. Whether price promotions have played a role in this, and whether the labels will cede business back to named brands as a result when the economy improves, remains to be seen.
WE ASK MARKETERS ON THE FRONTLINE WHETHER OUR ’TRENDS’ RESEARCH MATCHES THEIR EXPERIENCE ON THE GROUND
Head of private label
Extra Special plays a really important part in our offer. The occasions when our shoppers are consuming Extra Special vary, but it is certainly not just for special meals. Consumption through the week is relatively even.
Asda is the fastest growing of the top four supermarkets’ premium tiers, according to Kantar. In the 12 weeks to 31 October, we have grown about 17%. We have also had a lot of promotional activity, including a 25%-off event to get customers to try the products, but we are investing in the brand because we are confident in it.
When we have promotional activity on Extra Special, it is done from a strategic and very controlled point of view to make sure that it encourages trial. Far from being promotionally dependent, the sector uses all aspects of the marketing mix to grow the brand in the right way.
The big initiative in the past six months has been the launch of Chosen by You. Our approach to our total own-brand offer is about making it relevant, motivating and compelling for shoppers to buy. We have got to give shoppers more reasons why they should pick up own-brand products, and not be just a pure imitation of brands.
Chosen by You is about having its own philosophy, its own positioning, our own independent quality control. There are still a lot of products still to come into store in the first quarter of next year.
When you get into core grocery areas, the competition with some of the established brands is a different playing field; but at the same time it is not so much about what we are competing with, it is making sure our offer in every category is relevant and motivating to the shopper.
Taste the Difference marketing manager
Taste the Difference is now a £1bn brand and its relaunch represented our biggest ever investment in own-brand.
We are constantly looking for ways to improve the range to exceed our customers’ expectations. One example of this is the Bistro range that we launched in September, which focuses on traditional cooking methods and offers a restaurant-quality starter, main and dessert for two.
We introduced the Bistro range so customers who might be cutting back on eating out can still enjoy the quality of food that they have become accustomed to, but in their own home. This is particularly important during the run-up to Christmas when people are more likely to treat themselves.
By providing a Basics [range] as well as a standard tier alongside our Taste the Difference brand, a wide spectrum of customers can shop with us.
We have noticed that shoppers have become more savvy and shopping through our tiers in order to keep costs down while still treating themselves. This is demonstrated by the fact that more than half of Sainsbury’s customers buy both Taste the Difference and Basics.