It may have made up nearly half our grocery basket for years, but for so long own label has played cheap second fiddle to brands, with shoppers hiding supermarket cornflakes behind their box of Kellogg’s and grabbing own-brand booze on those tight weekends before pay day.
But as a programme of expert speakers revealed today at The Grocer’s Own Label Conference, that paradigm has well and truly shifted.
Growing at 4.5% in the past 12 weeks alone and worth more than £50bn annually [Kantar Worldpanel], own-label listings are now a coveted prize for suppliers. And as shoppers cotton on to the lesson of the discounters – that cheap doesn’t have to mean cheerful – that prize only looks set to get bigger.
So what were today’s top titbits on how to shift own label to the supermarkets?
1. Follow the own label equation
It might not quite be Hawking’s ‘Theory of Everything’, but believe it or not there is a simple equation that sums up what retailers are looking for from an own-label supplier. “White space + unique + efficient = mutually profitable” summed up Tesco’s commercial strategy and development director Rob Cooke. In other words, “a product that meets a previously unmet customer need” and can be delivered efficiently across every metric. Even on packaging. A product that takes only one second longer to open can result in an extra 300 hours of extra replenishment time for Tesco staff, revealed Cooke, and could be enough to put a buyer off a new product.
2. Engineer quality in, not out
When Co-op’s commercial director Michael Fletcher joined the business in 2013 and tried to understand how the retailer’s food offer had slipped so far, “they told me a story you’ll have heard a hundred times”, he said. Buyers had Sample A of a perfectly good own-label product, but when Sample B came along it was a little cheaper and only ever so slightly different on quality. It was a no-brainer to make the switch. “Sample C was a similar story,” he added. “And then you get down to Sample F three or four years down the line and Sample F might not be that dissimilar to Sample E but the difference between Sample A and Sample F is a very different kettle of fish.”
The lesson, he said, was to “engineer quality in, not engineer quality out” on own-label ranges, with customers now savvy enough to understand they can demand both low prices and high quality, without compromising on either.
3. Treat own label like a brand
For David Hills, Aldi’s group buying director, all retailers should make like Aldi and Lidl and treat their own-label innovation like they would a brand. That’s the secret of the success behind some of its biggest own label wins. Just look at its premium dry aged steak. “We sell more than any other retailer,” he said. “That’s a 6% market share retailer delivering a product in a branded manner with huge volumes off the back of it.”
Or its Norpak spread. While branded Lurpak will deliver 63g of butter per 100g, standard supermarket own-label varieties can be as little as 23g. Aldi scraps that difference and matches the 63g of butter content, but for a cheaper price than Lurpak.
“It’s about delivering a brand-like quality, then we benchmark the own-label price and discount it. So we’re not only providing a discounted retail price but at a brand quality, and that’s been part of our success.”
4. Nobody offers volumes like the discounters
With 92% of its “curated” range made up of own label, Aldi offers big volume orders to suppliers that meet their criteria, added Hills. He gives the example of its tomato ketchup. While rivals cram shelves with up to 23 varieties of own-label ketchup, the discounters settle for one. “That means all our volume is in one SKU and what we can offer you as a supplier in volumes is way above what will be delivered elsewhere.”
5. But don’t let them down
Buyers are seriously busy people and the one thing they hate is surprises, warned Total Negotiation expert Nick Parkes. Own-label suppliers must be sure they can meet orders at the price they’ve offered or risk tough renegotiations with a frustrated buying team. “That’s not letting them down on supporting the process, not communicating any issues affecting quality, cost, availability,” he said. “I don’t need you to come to me in the middle of a contract and say ‘I can’t deliver those minimum production runs and so the cost is going up’.”