It has finally done it. After years of speculation, Marks & Spencer has decided to bite the bullet and trial branded products such as Marmite, Lemsip, Whiskas, Smirnoff and Kit Kat alongside its own-label products.
Nineteen stores in Teesside and Tyneside will sell 350 branded lines for a four-month period from July. If the trial is successful brands will be rolled out nationwide. Steven Esom, M&S head of food, says it is a move Sir Stuart Rose has been considering since he rejoined the company back in 2004.
M&S is not the first own-label retailer to break with tradition and look to heavyweight brands for greater success. At the other end of the pricing spectrum, Lidl made the decision a year ago to stock Heinz beans and other iconic brands alongside its cheaper, less well-known offerings. While M&S may be worlds away from the discounter in terms of pricing and store ambience, both have faced the dilemma of how to get shoppers to do their full weekly shop rather than cherrypicking a select few items.
Like Lidl, M&S clearly believes stocking brands is the way to do it. Its introduction of ingredients such as flour and sugar earlier this year was a tentative step , but its move into brands is a more conclusive sign that it wants a bigger share of the everyday market.
"People write to me and say 'listen, your shop is fantastic, your food is fantastic, but my husband wants Marmite," said Rose, speaking at the publication of M&S's full-year results on Tuesday. "I am a great aficionado of Tabasco and you can't buy Tabasco at M&S. So where it doesn't compete with our own brand or the alternative brand is a must-have, we will put a trial out and see what happens."
M&S is rolling the dice to boost underperforming food sales. Although profits broke the £1bn barrier for the first time in 10 years, rising 20.5% to £1.1bn, like-for-like food sales were down 0.4%, taking account of store opening costs.
Yet analysts are divided on whether ditching 120 years of own-label heritage is the solution. Moving into brands is sensible and will lead to better deals with manufacturers on promotions, says Shore Capital analyst Clive Black, particularly as M&S seeks to make cost savings with its new Project Genesis supplier terms. "There has been a lot of promotional activity around brands recently, especially at Morrisons, Asda and Tesco," he says. "M&S gets left out of the party - and it lacks oomph as a result."
However, some critics argue that rather than helping its cause, selling brands could undo the good work M&S has achieved on own label. "Bringing big brand players in gives customers another excuse to reappraise M&S's own brand," says Piper Jaffray analyst Mike Dennis. "Why pay £2.99 for own-label chocolate biscuits? People will take a closer look at their basket and realise they are paying a premium for own label. They will pay £1.50 for their M&S bananas because they're organic and Fairtrade, despite the fact they could be paying 76p in another supermarket. M&S must not lose its premium customer base by becoming like any other supermarket."
Whether M&S will price match on brands is a moot point. There is speculation that it will employ the same pricing policy as it currently does with its BP garage franchise deal for Simply Food, which already sells branded items such as Mars bars at slightly higher price points than the mults. If it can't price match it risks portraying itself as poor value for money at a time when people are watching their pennies, critics say.
So far, the company is keeping tight-lipped over its pricing policy. "We are very good value for money," asserts Rose. "In terms of pricing we will be competitive and I don't want to be more specific than that." However, Esom hints that price is being taken very seriously. "We will do something that will delight our customers. I am not going to say [anything about price] because clearly we want to keep that under wraps."
Whether it can match on price or not, stocking brands could still cause problems, according to one source, who previously worked closely with M&S's top management.
"Ingredients makes sense, stocking brands does not," he says. "One of the hallmarks of when the business previously lost focus was when it started to bring in labels. It introduced Orange mobile phones and a variety of brands in homeware. The key to M&S's format is that it relies 100% on own label."
Rose evidently understands the risks himself.
"Clearly if it doesn't work we won't do it again and if it does work we will update you," he adds.confirmed brands