Private Label Buyer: New Value Brands - Are They a Diversion?
Through a special arrangement, what follows is a summary of a current article from Private Label Buyer, presented here for discussion.
Roaming the shelves in the Idea Supermarket at PLMA's World of Private Label in Amsterdam was an interesting exercise this year. Copycat wellness, green, organic, convenience, functional, excellent packaging, pet food, HBC and the rest. All looking great. Doing well and capturing a lot of attention from the crowds.
But what I was really looking for was there in abundance. New discount brands. And was there a choice - Carrefour, Tesco, Delhaize, Ahold and Sainsbury. And of course, we have all heard about the re-launch of Walmart's Great Value. So what's a retailer to do?
Tesco, the best penetrator in the business, always has had the "good, better, best" approach. They have three brands that cover three distinct quality levels, and all appeared to have been well covered at the show.
Those great retailers with only two tiers are facing the same thought about the economy: What to do about value? Introduce a new tier, or promote the existing lower tier like crazy. Loblaws in Canada, Woolworths in Australia and Walmart everywhere are facing that dilemma right now. But the most interesting approaches to me are those of Carrefour and Tesco. They have three straightforward, no-nonsense brands that seemingly have all options well served. But did they always? And, if not, what happened to change that?
Aldi, of course, had a lot to do with it. The "fantasy brand" (as some call it) approach has served them really well up until now. A store with limited selection, most of the mainstream areas covered and quite a few unique destination-type items for fun (and profit).
Now we hear Aldi is trimming the number of brands so they can get better customer recognition for what they are offering. Yet Tesco is launching what appears to be a whole range of Aldi-style fantasy brands, but with the "Discount Brands at Tesco" logo clearly identifying them as lower-price alternatives.
When I first saw this, I thought it might be a diversion from what has clearly been an extremely successful three-tier strategy. But times change. Where Aldi competes with Tesco, they are clearly taking some market share. So in comes a whole series of new brands (e.g., The Curry Leaf, Country Bran, Snacksters). Carrefour launches them all under one name: Carrefour Discount.
So Tesco starts to make its discount brands look like real brands. Is this bait and switch? Or is it customer boredom and fatigue with the old plain value line?
Is it a diversion, or is it sound strategy? Take your pick and watch for the reports. My guess is that like most diversions, that's all they are. Once you get past the sign, it's smooth driving from there on in.
It's like they say in F1 motor racing. Is it a two-stop strategy or a three-stop strategy? I think we'll see a few two stoppers go to three and a few three stoppers go to multiple brands. Let's all rev our engines and see what happens because a lot of keen spectators are hoping to see an exciting race.
Discussion Questions: How should retailers' private label brands be repositioned to show more "value" in the current climate? Should they introduce a new lower-priced tier or aggressively promote the existing lower tier? How does the use of a three-tier (good, better, best) versus a two-tier private label strategy affect this decision?