Alan Mitchell: Assessing the scope of grocery super-categories

Remember the great set-to between Sainsbury’s and Coca-Cola over “copycat” own-label cola? All we could see at the time was Sainsbury’s success in gutting Coke’s market share within its stores. But actually, for a whole range of reasons, it marked the end of own label’s apparently unstoppable rise.

As Taylor Nelson Sofres’ director Ed Garner pointed out at the recent Marketing Week conference – Own label and Brands: Re-inventing and Expanding the Retailer Brand: Where to Next? – since that conflagration own-label penetration in the UK has fallen: every year for the past five years. At Sainsbury’s, own-label share is down from 56 per cent in 1995 to 45 per cent in the third quarter of this year.

The great set-to also marked the beginning of the end of an approach to own label that has dominated retail strategies since own label was invented. Only now, after five years of directionless drifting, is own label again finding its bearings. This new direction, in the form of own-label ranges such as Tesco’s Value, Finest, Organic and Healthy Eating, or Sainsbury’s Blue Parrot Café, Be Good to Yourself and Taste the Difference, has more to it than at first sight appears.

For a start, these ranges have been incredibly successful. Sainsbury’s Blue Parrot Café range, for example, reached its £45m annual sales target within the first few months of its launch. The range will soon cover more than 200 products – and their roll-out is being brought forward. Sainsbury’s senior manager for own label Lesley Chapman says that, if you treat these ranges as single brands in their own right, Taste the Difference is the fourth-biggest brand in the UK behind Coca-Cola, Walkers and Nescafé. The Be Good to Yourself sub-brand is not far behind, at number eight (after Müller, Persil and Andrex). That means two have got into the top ten within a very short time: not bad.

Even more important, however, is what these ranges tell us about the evolution of retail marketing. A penny has dropped; a very big penny.

Deny it as they may, retailers’ approach to own label was also driven by “me-tooism”. Sometimes it was glaringly obvious: copying packaging, colour and design cues. But that was just the surface froth. The me-tooism went right to the heart of own label. Such products were developed as an alternative to manufacturers’ brands: every reference point and benchmark was driven by, and related to, these brands. Own-label product formulations and propositions were driven by the brands. When manufacturers introduced a new product, all the retailers could say was “we want an own-label version”.

Likewise, every benchmark was brand-driven. own label was positioned as “cheaper than” the brand. Then it became “as good quality as”. In the copycat rows, it looked like the brand. Even with the advent of super-premium, it was “better quality” than the brand.

But now, for the first time, retailers are developing brands that do not in any way look back to the manufacturer. Instead, they look forward to their own customers. Manufacturer brands have always been product-centric. Soft drink brands were invented to help sell soft drinks. Snack brands were invented to help sell snacks. But these new, sub-branded own-label products are consumer-centric. Their key attributes are not product attributes but consumer attributes; consumer concern, or interest in, price, indulgence, organic foods, healthy eating, whatever. These consumer attributes that are then used to define the nature of the brand, and what products, formulations, and so on, should come under its mantle.

This is quite a departure. Where could it take us? Well, for a start, this new consumer focus is the source of a new marketing confidence among retailers. As Asda head of brands Siobhan Lynch told own-label suppliers at the Marketing Week conference: “Stop telling us the brand is doing this, or doing that. We are our own people now.”

Secondly, initiatives such as these trump traditional brand marketing in important ways. There is, for example, no way that any single brand manufacturer can develop, produce or market a range such as Blue Parrot. Even mighty multinationals such as Proctor & Gamble and Nestlé do not have a big enough presence in enough categories to create one. Only retailers can do it.

What is more, because only they can do it, retailers are in an excellent position to claim the marketing high ground in these areas of consumer need. Factors such as indulgence or healthy eating connect far more emotionally that traditional me-too own label. They also create a more comprehensive proposition. A specialist retailer range can offer a complete solution for the healthy eaterí while a manufacturer can only offer separate, isolated ingredients to this solution. Walkers, for example, can produce a low-fat crisp, but it cannot address a consumer’s wish to construct a completely low-fat diet.

The new ranges also have knock-on implications for category management and new product development. Retailer category plans could increasingly be driven not by traditional supplier-defined categories, such as pet food or yellow fats, but by the needs of their new super-categories. Retailers will question how a manufacturer’s brand fits into or complements its various supercategory offers.

For own-label suppliers and buyers, the existence of super-category ranges provides instant focus. Chapman says: “Our innovation costs are down dramatically.”

Just how far retailers will go with own-label ranges remains to be seen. They are certainly a nightmare to manage. The activities of scores of fiercely independent buyers and category managers need to be co-ordinated. And each range needs its own specialist market research, design, and so on. We are talking about a new tier of retail marketing and brand management.

Also, beyond a few obvious target areas such as gourmet food, healthy eating and children, it is unclear how far the notion can be extended.

But the key point remains. Own label was a genuine retailer-led innovation within the world of marketing and branding. With these new customerrather than product-centric sub-brands, retailers are innovating once again.