The launch of the premium Waitrose 1 range this week suggests that the notion of own-label lines as budget options is now long gone. Private-label products are frequently competing - and winning - against established brand names, and the own-label market is flourishing.
The growth of own-label is driven at both ends of the retail spectrum by premium and value operators Waitrose, M&S, Aldi, and Lidl. In contrast, total own-label sales across the mid-market big four saw a steady decline towards the end of last year.
Over 97% of the population will visit one of Asda, Morrisons, Sainsbury’s and Tesco in a four-week period, but customers still aren’t buying into the premium own-label offer from these traditional retailers. There’s a huge opportunity for the big four to have customers trade up to their premium lines that’s currently being missed.
Own label offers the chance to create standout products with price differential that branded products don’t - the discounters currently have the edge, having achieved this through both their value and their premium ranges. Split your weekly shop across retail tiers and you’ll be able to buy discounter premium lines that are cheaper than premium retailers’ value lines, broadening the discounters’ appeal and leaving shoppers spoiled for choice.
The price war in branded goods has allowed retailers to get more creative with their own-label products. Having cottoned on to the added value delivered by more premium own-label lines, retailers are adjusting their ranges accordingly. While overall own-label SKU counts have stayed constant over the past three years, the number of value lines has been reduced while premium labels have grown.
Having realised quality own label is a key differentiator, the big four are beginning to see results, with an upturn in own- label sales in the past quarter. The challenge now is to stem the flow of shoppers trading out into premium own label elsewhere.
Waitrose’s newest brand is a case in point - while Waitrose 1 might include over 500 products in its initial run, almost three quarters of these are set to be repackaged from its other lines such as Seriously and From Waitrose. The question is whether this is led by the consumer or the retailer, eager to drive sales towards more profitable premium lines.
Now that consumers realise own-label lines offer a credible alternative to brands, the big four must address their underperformance long-term. But they need to ensure their responses are driven by consumer needs, rather than being seen as a gimmick or internal profit-led initiative by customers.
More than ever, retailers need to be willing to innovate and differentiate from their counterparts. Waitrose’s launch sees the big four being pushed on innovation and quality - something they’re facing from both the value and premium ends of the market.
But the challenge goes wider. Price can no longer be the sole differentiator - quality, creativity and provenance will all play an increasingly large role.
Kirstin Knight is retail director at Kantar Worldpanel