The Korn Group

  • The core issue Coles & Woolworths home brands neglected

    • July 13, 2016
    • Neer Korn
    Consumers were left to their own devices to create their own perceptions and they were left confused.

    For many decades Home brands had a clear story to tell. Its packaging, or more accurately lack there-of, is what it stood for. Black & gold, red & white, black & white all meant they were a much cheaper alternative to branded products. The assumption was that these products were cheap because money was not spent on fancy graphics, pictures and colour with the savings delivered to consumers. This made sense, especially for staples like sugar, salt and flour say, where quality differentiation was a non-issue.

    Then along came Aldi. Here was home brand with packaging cues yet still cheap; certainly cheaper than the branded goods at Coles and Woolworths. For its first few years Aldi chose not to advertise. Rather it allowed consumers to trial, test and discover the worthiness of its products for themselves. Aldi offered an alluring brand story and an ironic one at that. Despite being an international grocery behemoth, in Australia is was the underdog. It offered a means for consumers to fight back against the grocery duopoly they had no fondness for. Its invisible by-line was “we are not Coles or Woolworths.” It was also European which was instantly associated with good quality. “And it’s all European standards,” said one Adelaide consumer in anticipation of the South Australia’s first Aldi opening earlier this year, “and European food standards are superior to Australian food standards.” It even managed to be Australian, with its convincing promise to source local products.

    As they experimented with Aldi’s offerings consumers discovered something new in the grocery landscape. That home branded goods can be cheap and simultaneously high quality. The paradigm had shifted. As one consumer put it, “now we’re all saying, ‘hey look, the Aldi nappies are unreal’ or ‘look, the cheaper brand of this is really good.’” The dynamics of grocery shopping changed.

    The major supermarkets fought back by launching their premium home brand offerings like Woolworths Select. These featured beautiful packaging that were in some cases strikingly similar to the branded goods they were competing against. They seemed to appear suddenly popping up in various categories without explanation or reason.

    Most significantly, they were launched with no brand story to accompany them and introduce them to the marketplace. Consumers were left to their own devices to create their own perceptions and they were left confused. Were these to be regarded somewhere below branded products or were they somewhere above the traditional home brands? Neither Coles nor Woolworths’ would tell them.

    Still, they experimented and found the quality inconsistent. In some categories they did the job, in others they didn’t. “I can’t stand Coles yoghurt so I get the Jalna tub,” said one consumer. “I know I pay a premium for that but the quality is better.” In some cases they were cheap and in others not. Often they would be more expensive than the heavily discounted branded goods. Consistency was lacking.

    For consumers a key appeal of non-branded products is a feeling that they are beating-the-system. By purchasing home brands they were beating the branded goods and by shopping at Aldi they were beating the supermarkets. Beyond savings it was ultimately about a sense of winning. “You think you’re actually achieving something. Like you’re getting something over Coles,” is how one young man it.

    As a brand Aldi hold great appeal. The endearment with which consumer hold the brand draws them to its products. Coles and Woolworths are not held in such esteem. Indeed, there is no great affection for either retail brand. “I think the supermarkets have a monopoly. Coles and Woolworths’ have such a huge monopoly,” is a typical consumer sentiment along with complaints about treatment of smaller suppliers and, in particular, farmers. “I don’t like what they’re doing to this country,” said one woman. “They’re worse than Telstra used to be. They’re crushing our industries, they’re killing our industries, and they’re driving people off farms.”

    While Coles and Woolworths engage in a price war to lure consumers, they will continue to flock to Aldi in greater numbers. Whereas the former are only about price, Aldi’s offering is much more than that.