How a strong own-label offer got non-negotiable

C-stores no longer need play second fiddle to the mults when it comes to own label. After multimillion-pound facelifts, own brand ranges served up by symbols are bigger and bolder, with 94% of retailers happy with them and 66% watching sales rise, according to our barometer (right).

It’s a huge shift from the brand-centric c-stores of a few years ago. So why such a change? What have symbol groups come up with? And how does it pay off for retailers?

Cash-strapped consumers have gravitated toward private-label products to slash grocery bills, says Nisa Heritage brand manager Erin May. And that trend has filtered down into convenience as “the multiples have made consumers comfortable with the concept”.

The rise of the mults’ own convenience estates, stocked with their own-label lines, has forced indies to keep up. “Shoppers are now conditioned to expect strong private-label ranges wherever and whenever they shop - and at prices that are keen,” adds Catherine Shuttleworth, CEO at retail marketing agency Savvy.

Faced with these expectations, retailers have looked to their symbols to reinvigorate tired own-label offers. Some have even gone so far as to switch allegiance. In November 2014, Costcutter retailer Paul Cheema left for Nisa, citing its “better than ever” Heritage range as one of the main draws.

After unveiling a new look in June 2014, Nisa announced plans to increase value of the range by150% to £500m, although they haven’t provided a deadline for that target. The three-tiered ‘good, better, best’ approach remains but with a “strengthened brand perception” says May. ‘Value’ SKUs are now Pantry Essentials packaged with a far more premium look and feel followed by Heritage and Heritage Gourmet.

More than 800 lines have been overhauled, with chilled shown the most TLC as “consumers now expect a strong own label chilled offering” May adds. It’s paid off, too, with revamped chilled and frozen ranges delivering £53.4m in sales by August 2015. Ready meals sales are up 36% with overall year-on-year growth across the range of £2.7m.

Expanding and improving

They aren’t the only ones to rethink own label, though. Costcutter may have lost Cheema, but it’s arguably undergone the biggest change among the symbol groups - launching a new three-tier range from scratch in late 2013 after teaming up with Palmer & Harvey.

The Independent range now has more than 600 products and is still growing, with sandwiches, confectionery, biscuits, cereals and handheld ice creams all added in 2015 and its first dedicated TV ad launching in June.

“We’ve invested heavily in expanding and improving Independent,” says Jodene Rogers, head of marketing for the range. “Food-to-go, particularly our sandwich range, is a key focus for us and sales are very strong.”

Over at Spar, own label has undergone a “complete transformation” too, says UK brand director Susan Darbyshire. The symbol group announced in 2014 its plans to grow own label from 29% to 40% of sales in five years. That’s meant reformulation of 750 Spar brand products and several new lines, including the Daily Deli range, wine and coffee. 

The investment has already begun to pay off with a 3% growth in year-on-year sales, bringing own brand revenues to £300m. The results leave Darbyshire supremely confident. “We have the best own brand range in the convenience market,” she claims.

Stelios

Booker might disagree. It claims its budget Euro Shopper range is now the fastest-growing convenience brand in the UK since a 2011 redesign with the higher-tier Happy Shopper offering retailers at least 30% PoR across 400 products. It was enough to impress legendary entrepreneurs Sir Philip Green - who stocked the ranges in BHS Food in 2014 - and EasyJet founder Stelios Haji-Ioannou - who sells both Booker ranges at his pilot EasyFoodstore in London for 25p.

The “million-dollar question,” says Premier retailer Dan Cock, is what will happen now the symbol has snapped up Londis and Budgens for £40m, each with their own private label offer. The Londis SuperValu and SmartBuy range (which launched in 2014) and the new Budgens rebranded own label are still available but are currently being phased out to make way for Euro Shopper replacements, say the symbol. And the consolidation of these top buying groups will help them now fund bigger and better own label offers, believes Shuttleworth.

Paying for multimillion-pound rebrands won’t be the only challenge, though, she says. “With a comprehensive private-label range the challenges of not just selling but marketing, forecasting and supply chain management sit squarely at the heart of the organisation. When your name is on the tin the buck stops with you.”

To adapt, symbol groups have hired traders and brand managers from the big four to upskill quickly, she adds. And the reward is more cash spent in c-stores. Consumers picking up own label have a higher average basket spend than those buying brands, says Rogers, so retailers get bigger margins.

“Own label for us is very strong and sales are very good,” agrees Cock. Costcutter retailer Baz Jethwa says own label sales now account for about 18% of total sales.

So where collective buying power and a slick fascia were once a symbol’s biggest bargaining tools, an own label offer fit to compete with the multiples is fast becoming the new non-negotiable.