"don't be too harsh on yourself if you fall for a phantom brand – you might just be getting yourself a decent product for less." Choice
Coles recently announced that it was going to cut some 2,500 brands from its shelves - 10% of the some 250,000 it now stocks. Which created outrage from many, most likely summarised by the statement "The Coles move is all about profitability."
Well yes it is - and I'm tempted to say 'yes it is stupid'. It's a business and if a business does not make a profit then it goes bust and everyone loses. In the case of a supermarket - it's staff, its suppliers, its customers, its shareholders - and that last category includes anyone who has superannuation because those superannuation funds invest in supermarkets. And if one supermarket goes bust, there is less competition which gives the remaining competitors more leeway.
Of course the size of the profit is indeed a more contentious issue, but the bulk of it is ploughed back into the business, or distributed to its shareholders. But all of that, including outrageous salaries for the higher echelons in the business, is a completely different thing subject that I have spoken about before and won't continue to elaborate upon here.
No - back to the brand cutting. Back in November at a stakeholder meeting, Anna Croft, the Coles Operating and Sustainability Officer told us that:
“Even if I went hard year after year for two years on the trot and did double-digit rationalisation, I would still have more range than I had in 2019”
Why is that? Well one of those unintentional effects of COVID is that:
"supermarkets recruited more suppliers during the Covid pandemic to counteract the overwhelming demand for products. Three or four years outside the pandemic, what they’re looking at now is an overabundance of essentially the same products,” Prof Gary Mortimer/The Guardian
Something that Anna Croft illustrated with the example of table salt - 15 different items that could be reduced to 5 and she could still add 3 more different ones and be in front. I actually checked this out yesterday. And she could have made that number even larger if she had included all the different salts that they sell. She was only talking about table salt. This is an overall picture of the salt section. Below, is just Himalayan pink salt, because I decided to concentrate on just one, sort of item. Below are the pictures I took - just to prove how many different items there are in one minor category in terms of what Coles sells. You can click on the pictures to make them larger.
I counted thirteen different items from three main suppliers - Coles, Saxa and McKenzie's, plus Maldon Salt. There were different sizes, different kinds of salt - rock, fine, and flakes, and also different packaging that included grinders, shakers and refills. I'm sure the same sort of situation applies in other sectors of the shop to a greater or lesser degree.
Such a wide variety of items is a cost to the company, and so it's an obvious solution to reducing their costs, to cut the number - one of the three ways of boosting its profitability - raising prices, cutting costs or increasing market share of home brands.
"The more product variety there is, the more complicated and expensive it becomes to manage. Tasks such as stocking shelves, adjusting prices, maintaining inventory, managing delivery schedules, and disposing of expired products all contribute to higher costs." The Conversation
The protests to this approach are twofold I guess. The first is the reduction in choice. But do we really want choice when we are shopping for our household basics?
"A widely recognised study in psychology found that people are more likely to make a purchase when presented with a limited selection rather than an extensive array of choices" The Conversation
Indeed apparently and according to the same study, if there is too much choice the customer may not buy at all, because it's all too overwhelming. And people who shop in Aldi certainly don't seem to mind the lack of choice. For most people shopping in a supermarket is not a leisure activity - it's only slightly mad and obsessed people like me who do that. Whilst you might want a massive amount of choice when looking for clothes or household items, or if you just want to spend a pleasant time with your friends window shopping, most people are probably driven by value for money rather than anything else in a supermarket. And having to spend time working out which is the best value for money, let alone worrying about who made it, where it was made and what's in it is not an attractive option. It's bad enough checking all that on one item - if you have thirteen it's overwhelming.
The second protest is that the suppliers go out of business, or are at least disadvantaged. This is particularly an issue when those suppliers are Australian. Large international companies are not going to miss out:
"Coles is unlikely to cut traditional brands, especially those from companies with significant market power like Coca-Cola or Nestle. In a battle between giants, the status quo is likely to prevail." The Conversation
Actually I suspect that the battle is not between giants in this case. Coles is a minnow in comparison to companies like Nestlé, the world's largest food company. And let's not forget that many of our now supposedly Australian companies are actually foreign owned. And some of those foreign companies get dropped too. I have personally found two examples of late - Robertson's fruit mince which was dropped I was told because of erratic supply. A large supermarket chain cannot afford to have empty spaces on its shelves, and it therefore cannot keep a space for someone who doesn't supply on time. The second is my favourite Italian pasta - Delverde which Coles sold for a while, but then the supply became a bit erratic and now it has disappeared completely. I'm guessing for the same reason,
We should also bear in mind that, maybe except for a few very specialist products, the companies the supermarkets deal with are not that small. You have to be able to supply a nationwide business on a regular basis with a contracted quantity of your product - which would be very large. A boutique cheese maker is not going to be sold on the supermarket shelf, and certainly not in quantity - maybe in a corner where there is a selection of 'gourmet' products.
So what about those home brands, which is what it's really about again, because it's a logical assumption that those brands that are removed will be replaced by home brands?
It's not as simple as the one term - home brand - is it? At the bottom you have the basic stuff - the things we use all the time, and about whose quality we don't care a lot, mostly because there's not a lot of difference in quality. Things like flour, salt, sugar and soda water. Ethical considerations might come into play but probably not quality. This is a selection of Woolworths' bottom rung home brands - just to show I'm not that biased. Coles Simply range, some of which is shown at the top of the page is their equivalent.
Then there what I call the cheat home brands, of which Aldi is the supreme exponent of course. Virtually everything they sell is a home brand, except for a few known brands that come and go. But Aldi's brands are not branded as Aldi. They really go close to breaking the law by making the packaging almost identical to the competing product, and by giving it a name that sounds like it's coming from a genuine supplier. You have to look at the small print on the back to see that it is an Aldi product. And that price difference they advertise as shown here is also not fair as they are comparing their 'brands' with real brands not the equivalent home brands.
Now it seems that Coles and Woolworths are edging into that space, to a greater or lesser degree as far as visibility is concerned with 'phantom labels' as this category is increasingly being called. These are just a few that Choice singled out, but there are lots more. Dr. Louise Grimmer on the ABC website says that they are:
"often used to bridge the gap between the cheapest, private-label options and the more expensive, national labels. However, in the case of peas, both Woolworths' Bell Farms and Coles' Four Farms packets were roughly half the price of the home-brand options" Dr. Louise Grimmer/ABC
Which rather begs the question of why they are doing this? Personally I can't see the advantage. Surely they have to negotiate yet another deal with a supplier and also get a different design. Although no advertising. K-Mart's inhouse anko brand - almost everything in the store these days - is hugely successful, and, I would suggest, pretty good quality - at least for the price - although ignoring the ethical thing of course. It is so successful that they are exporting overseas.
Then there are the posh end labels. Coles Finest is the prime example here. Woolworths do have posher home brand products but there doesn't seem to so much uniformity in design and placement.
These are 'superior' products. And indeed they are - well I've only tried a few from Coles, but I certainly would recommend their sausage range. The packaging looks more exclusive - what is it about black that makes food more gourmet and superior? The prices are higher but not as high as real gourmet. For example I currently have two red Leicester cheeses bought from Coles - one is the Ashgrove version from Tasmania at $63.34 per kg and the other is the Coles Finest - imported from England at $24.50 which I suspect may come from the same source as Aldi's Red Leicester (currently not available but about the same price as the Coles Finest). I haven't yet tasted the Coles one but if it's like the Aldi one I would say it's tastier than the Tasmanian one.
And if you're looking at Finest, then taste matters when it comes to food.
In the UK their supermarkets are aimed at different sectors of the market with Marks and Spencers at the top of the tree and I think it's either Asda or Lidl at the bottom. I think everything in Marks and Spencers is home brand and supposedly better quality and Waitrose - next down the line - has a very large number of home brands. More expensive, both of them, but still affordable - indeed I saw one lady claiming that her weekly shop in Marks and Spencers cost less than in Aldi. Rebutted by others, but that's what she said.
Now here's a question - just to throw into the mix - can you count Fortnum and Mason's groceries as home-brand? After all that's the name on the items. But nobody would be talking about cheap and nasty here.
“It’s a complete misnomer that people want to buy the cheapest of anything, especially something you put inside your body or on your skin – you want the best you can afford,” Adam Ferrier - Founder of Creative Agency Thinkerbell
Fruit and vegetables do not neatly fit into the home brand scene. Most of the fruit and vegetables we buy are sort of home brand, in that we do not know who grows them. There are a few exceptions - for packaged fruit in particular and some salad and organic foods. If you've got strong glasses or magnificent eyesight, with some fruit - the ones with those annoying stickers on them - you can find the producer's name in tiny print at the bottom of the label. (I wrote about them way back in 2021). So do they all count as home brand?
And who makes those home brands anyway? Supermarkets do not make things. They sell things. Other people make things and those other people are often the people who make the brands. It is apparently very hard to find out who makes them. Somebody discovered a few by checking recalls of items - Smith's crisps was one of them. Normally though you cannot know becauce of 'commercial in confidence' contracts. Yes they will be paid less for making the home brands, but on the upside they will get contracts:
"these contracts are often huge, long-term contracts that will pretty much guarantee a producer a market for a certain period. And generally the contracts include clauses that give preferential treatment to the producer’s brand." The New Daily
Not the same I'm sure. Security and quantity over price I guess.
I have seen several articles that maintain that many of the home brands are imported whereas the brands are not. I have not looked into this and I am sure there is some truth to that, but also some misinformation. Certainly most of the very big brands are owned by overseas companies anyway, but yes it would be sad if overseas companies took over niches previously serviced by Australian ones.
Overall if we see more home brands, and fewer name brands in the supermarkets, it's probably not the customer who will lose out. If you are poor, then you may even benefit as there may well be more products available at a low price. And that confusing plethora of brands might make your shopping expeditions easier. Plus it might mean that the supermarkets can also go bigger in the gourmet section tucked away in the corner. Increase the variety but reduce the choice in the everyday items. I gather, that the Coles Finest brands, for example, represent one of their largest sales growth sections.
I guess that, sadly, the people who will lose out are all the medium and small sized companies who provide branded goods. It will be up to them to find other solutions or go out of business - maybe go upmarket, charge more and find gourmet outlets, export? I really don't know but I guess that's the cost of doing business. After all some companies who started really small - like Patak in an immigrant's kitchen are now big business.
It's all a bit of a minefield. It will be interesting to see how it plays out.
W - from a walk I did yesterday. Too hot to walk today. A glorious wheel, well more than one, on an ancient steamroller at Montsalvat. I also saw wheelbarrow, wires, waterlillies and water, windows, weeping willows and walkers.
YEARS GONE BY
I forgot to note that yesterday was one of those magic number days - 25/2/25
Today it's February 26
2024 - Bay leaves
2018 - Nothing
2017 - A word from Michelangelo
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