Many Consumers Have No Plans To Switch Back To Branded Goods

A new survey suggests that some brands might find it difficult to tempt back consumers who switched to private label during the cost of living crisis.

The EY Future Consumer Index (FCI),  a survey of 23,000 consumers, 30 countries, found 28% bought private label in response to rising costs, a trend that appears to have become a sustained habit, with 66% finding the less expensive O/L satisfying their needs just as well as branded lines, with 38% having no plans to switch back.

NB the research shows this trend is not exclusive to mid- to lower-income bands. Higher-income consumers are planning to buy private label brands in the future, across every category: fresh food (60%), home and household care (56%), packaged food (52%), clothing, shoes and accessories (49%), personal care (49%), and beauty and cosmetics (39%).

According to the FCI, retailers are trying hard to capitalise on the opportunity by promoting private label aggressively – eye-level shelving and front-of-store placements – and increasing ranges. 

Instead of branded products at a lesser price, they are offering a range of product options, analysing POS data to identify early trends, (strong position to respond to buying patterns and consumer needs). EY: the closer retailers get to the consumer, the more power they have to curate buying choices, and the more they can drive lasting loyalty.

Kristina Rogers, the firm’s Global Consumer Leader, said: “..many consumer products (CP) companies are focusing on volume recovery. Simplifying the portfolio, driving down costs and unlock resources are important, but this must happen alongside innovation and marketing – they need to keep their brands inside the consumer’s circle of trust to maintain their margins and fund growth agendas.

“For retailers, better data analytics capabilities will help them target and reach consumers. They can use retail media and loyalty programs to incentivise private label purchases and create alternative revenue streams by promoting their partner brands. 

CP companies will need to take a balanced approach – promoting their brands to meet today’s goals, while also pursuing ways to keep these new consumers and earn their loyalty. Innovative new products that differentiate from private label and which consumers find valuable will be key to their future success.”

NamNews Implications:

• The brand nightmare!
• Consumer-switchers found these less expensive alternatives satisfy their needs just as well as branded lines.
• Retailers need to maintain a high level of consumer trust…
• (by delivering more than it says on the tin, every time)
• …whilst brands, the damage already having been done, have to either drop prices to a point that minimises the difference…
• …or develop the potential of Retail Media to a point where the retailer has more to gain from the brand, than from their own label alternative.

Brands Outperform Own Label While Tesco And Waitrose Make Share Gains

Latest data from Kantar shows that take-home sales at the UK’s leading grocers rose by 2.2% over the four weeks to 7 July, boosted by football fans purchasing beers, crisps and other snacks during the Euros.

Fraser McKevitt, head of retail and consumer insight at Kantar, commented: "Football fans drove beer sales up by an average of 13% on the days that the England men’s team played, compared with the same day during the previous week. Sales of crisps and snacks up 5% vs month before. With many matches played on ‘school nights’, though, some Britons chose moderation. Spending on no and low-alcohol beer soared by 38% on matchdays.”

Grocery price inflation down to 1.6% – lowest since September 2021. The drop coincided with the fastest rise in monthly footfall so far in 2024. Consumers supermarket trips up 2% this period vs one year ago.

Meanwhile, as cost of living pressures started to ease for some people, sales of branded products increased by 3.6%, outpacing own-label items, which grew by 2.7%.

After a difficult few years, Kantar noted that retailers will now be turning their attention to the King’s Speech on Wednesday to see what the newly elected government’s legislative agenda holds for the grocery sector.

Looking at the performance of individual retailers, Ocado was the fastest-growing grocer for the fifth month in a row, with sales up by 10.7% over the 12 weeks to 7 July. The online retailer now holds 1.8% of the market, up 0.1 percentage points compared with the same period last year.

Lidl saw a 7.8% jump in sales, bringing its share of the market to 8.1%. Aldi continued to struggle for growth, with its market share slipping to 10% after a 0.3% increase in sales.

Waitrose gained share for the first time since January 2022, achieving a 0.1 percentage point rise to 4.5% as spending at the retailer increased by 3.3%.

Tesco achieved its biggest share gain since November 2021, taking 27.7% of the market – a 0.7 percentage point increase versus last year – after a 4.6% rise in sales. Sainsbury’s saw its sales climb 4.7%, bringing its share to 15.3%.

Meanwhile, it was another difficult period for Asda, with its sales down 5.3% and market share slipping to 12.7%. Morrisons managed a 1% increase in sales, with its share unchanged at 8.7%.

NamNews Implications:

• Despite their efforts/initiatives, Asda continue to lose share to Tesco & Sainsbury’s.
• Given private equity involvement, anticipate cuts at Asda to improve EBITDA.
• Meanwhile, Morrisons is managing to hold share as part of a gradual turnaround.
• The switching back to brands reduces the risk of shoppers becoming loyal to own-label equivalents…
• …but the key question remains: What will Aldi do to restore growth vs Lidl?

#MarketShares
#Kantar

Tesco Aiming For Extra £1bn In Sales From Premium Range

The CEO of Tesco has revealed that the retailer is targeting an extra £1bn in sales for its Finest own-label range to meet growing demand for premium food & drink and challenge the likes of Waitrose and M&S.

Finest currently has annual sales of £2bn. Speaking to the Financial Times, Ken Murphy said: “We haven’t yet set our stall out to say ‘what would it take to get to £3bn’, but we’re very conscious it is playing an increasingly important role.”

He added: “We genuinely believe . . . that our intrinsic [food] qualities are every bit as good as anything you would get at Sainsbury’s and increasingly out of Waitrose … M&S, we probably still have a bit of work to do.”

The report notes that in the face of higher living costs, shoppers are shunning restaurants and becoming more adventurous with their cooking at home.

Data from Kantar shows that spending on premium own-label lines in the leading UK supermarkets rose 12% in the year to 9 June even as inflation eased. The figure was also nearly double the 6.9% growth in all brands owned by the grocers, including their budget ranges.

The FT highlighted that Tesco’s Finest products account for only over 3% of the group’s £61.4bn sales, although this is equivalent to about a quarter of Waitrose’s total sales and M&S’s food sales, respectively.

However, it has taken Tesco about a decade to reach the £2bn level from £1.4bn in sales in 2013. Murphy did not reveal whether there was a target date set for getting sales to £3bn, but Clive Black, a retail analyst at Shore Capital, told the FT that it would not be earlier than “the medium and long term before that number is reached” given that the industry’s annual growth is relatively modest.

NamNews Implications:

• ‘Shoppers are shunning restaurants and becoming more adventurous with their cooking at home…’
• …heightening consumer awareness of the difference made by quality ingredients…
• …and the home-cost of ingredients vs the price paid in hospitality.
• All potential threats to ‘eating out’ long term.
• Apart from increased savviness re branded equivalents in store.
• One to watch…

#OwnLabel #Hospitality

Co-op’s Retail Media Activities Boosting Brand Sales In Neighbouring Grocery Stores

Research by Co-op – in partnership with Circana – shows retail media activity for brands in its convenience stores not only boosts its own sales but also generates up to four times more sales in surrounding grocery outlets.

Brands seem to benefit from a halo effect when advertising in Co-op shops, which can boost sales in the longer term. Circana found a ‘global beer brand’ RM Co-op campaign increased sales by 12% in Co-op stores + a 3% uplift in nearby non-Co-op stores.

The non-Co-op stores uplift was 4x total incremental sales value in Co-op stores. Circana said the impact on total sales due to halo stores where the sales uplift occurred and the larger pack sizes bought in those stores.

Dean Harris, Head of Co-op Media Network, commented: “The Co-op Circana results show when brands activate campaigns with Co-op, there is an immediate positive sales impact [not only] in our store, but also with competitors in the surrounding area. As an RMN, our main goal for the brands that advertise with us is to generate sales regardless of where that customer purchases the product.”

Convenience is a frequently shopped channel for top-up missions, often in addition to a bigger shop. The data showed that Co-op shoppers engage the most with other grocers, which provides convenience retail media with an extra amplifier effect on halo sales.

Harris continued: “The analysis of the beer campaign shows that by influencing brand purchase decisions in other non-Coop stores, the retail media activation is able to generate higher incremental sales by tapping into larger pack sizes available in supermarket stores.

“This halo effect data is incredibly insightful and gives further confidence to talk to our clients about the power of retail media in the convenience setting.”

Mark Hurst, EMEA Head of Retail Media at Circana: “As the advertising industry continues to expand traditional retail media inventory and accelerate digital and addressable channels and privacy regulations limit traditional measurement methods, retailers are increasingly in need of more agile and accurate ways to measure campaign performance across channels and tactics.

“Being able to analyse media lift through a range of sales-based measurement approaches, including Test & Learn, tactical comparisons and mid-campaign analysis, results in faster and more cost-effective decision making, enabling retailers like the Co-op to demonstrate brand impact and how it drives incremental value.”

Co-op launched its retail media network early this year, claiming it was the first in the convenience sector.

NamNews Implications:

• Think of the halo-impact when several mults are advertising the same brand via retail media…
• “(Our Goal) to generate sales regardless of where that customer purchases the product.”
• i.e. A compelling sales proposition.
• Begging the question: Who needs blunt traditional media?

#RM

Aldi Still UK’s Cheapest Supermarket, Even When Compared To Loyalty Pricing Schemes

After including loyalty prices for the first time in its monthly grocery goods price comparison, consumer group Which? found that Aldi still came out cheaper than Tesco and Sainsbury’s.On a basket of 65 items, Aldi’s total came to £118.41. This was £14.49 cheaper than Sainsbury’s and £12.49 cheaper than Tesco for an equivalent list of items, even when discounts from their respective Nectar and Clubcard Prices schemes are included.

Julie Ashfield, Managing Director of Buying at Aldi UK, said: “With many households still struggling to make ends meet, we’re more committed than ever to remaining the UK’s cheapest supermarket. This latest Which? analysis shows that Aldi prices just can’t be matched, even with a loyalty card!

“At Aldi, we’re dedicated to having clear, consistently low, prices so shoppers know how much they’re spending long before they get to the till. And we’re really proud of the award-winning quality of the products we’re providing at these amazing prices.”

Aldi has seen its sales performance weaken this year as Tesco and Sainsbury’s step up their efforts to combat the discounters by expanding their price match schemes. Aldi has also faced price matching on new fronts in 2024, with Asda and Morrisons launching their own versions that also match Lidl.

In response, Aldi has ramped up its marketing activity and pledged to reduce more prices in 2024 than in any previous year, with it expecting to top the £380m investment it made in 2023.

NamNews Implications:

• But why the slowdown in growth?
• Aldi are determined to keep this ‘Cheapest Supermarket’ title’
• ..."by reducing more prices in 2024 than in any previous year...
•  …with it expecting to top the £380m investment it made in 2023"
• Watch this space…

#Aldi #CheapestSupermarket

Morrisons Develops App So Wholesale And Franchise Partners Can Top Up In Its Supermarkets

Morrisons is to allow its wholesale and franchise partners to top up on food and drink lines in its supermarkets at prices based on agreed terms.

According to trade magazine The Grocer, a newly developed app allows retailers within the Morrisons supply network to scan the items they need in stores using their smartphones.

Once they have completed their shop, they check out with a duty manager. However, rather than buying at normal in-store prices, the wholesale customer is invoiced on their existing agreed terms, with an electronic delivery note sent to their store EPoS systems and email.

Morrisons wholesale division currently stocks a range of over 9,000 products for delivery, supplying more than 1,600 stores across five countries. The top-up solution is seen as an extra tool for its customers, who will continue to be serviced by the existing delivered model.

NamNews Implications:

• Morrisons have, in effect, increased their wholesale/franchise distribution points…
• …to include all of their retail branches as a top-up facility.
• Neat!
• And probably makes them the best UK wholesaler in terms of coverage…

#Wholesale #Cash & Carry #Morrisons

Morrisons Rolls Out WIGIG Range

Morrisons ‘when it’s gone it’s gone’ (WIGIG) range has been rolled out to nearly all its supermarkets.

Having first been introduced in February, trade magazine The Grocer reveals that the chain’s WIGIG range has now reached its 450th store. It offers shoppers discounted general merchandise, similar to the offer in Aldi and Lidl’s middle aisle.

Morrisons is said to be working with several new suppliers to offer a range of products, including cookware, toys, homeware, electricals, garden, and car care. Some health & beauty, household cleaning, and food & drink lines have also been featured.

The offers are displayed on wooden crates with ‘When it’s gone it’s gone’ signage. They are live in store for three weeks at a time, with new products added weekly.

Speaking to analysts last week, Morrisons CEO Rami Baitiéh said: “Our trading mentality is growing – and nothing illustrates this more clearly than the way the whole company has got behind our range of outstanding value WIGIGs.

“For us, WIGIG is not a gimmick. It’s a strategic lever for sales growth and customer delight. The offers have to be great quality… but at genuinely outstanding prices. And while we build our strength in WIGIG, we are also building up muscle, experience and supplier relationships in GM and home & leisure… which is an area where we under-index.

“We are still at the start of our WIGIG journey, but the best traders in Morrisons now see the potential, have got behind it, and we are improving every day.”

Last month, Morrisons delivered another “solid quarter of progress” as Baitiéh implemented his recovery plan, which has focused on improving the chain’s product availability, loyalty scheme, and price competitiveness.

NamNews Implications:

• When shoppers fully understand WIGIG…
• …it becomes an opportunity and incentive to buy ‘before stocks run out’.
• With Morrisons becoming a source of once-only bargains…
• …‘providing great quality… but at genuinely outstanding prices’.

#Morrisons #WIGIG

Aldi Starts Testing Its First Loyalty Scheme

Following long-running rumours that Aldi has been developing a loyalty programme, it has been reported that the discounter has started trialling a digital-based scheme in Belgium.

The platform is accessible through an updated Aldi app, which enables shoppers in 70 stores across the West Flanders and northern Hainaut regions to earn points on purchases by scanning a QR code at the checkout. These points can then be redeemed for free products or discounts.

A spokesperson for Aldi Nord told a local news agency: “We are adapting to changing customer preferences. This digital card complements our existing discounts and promotions, offering loyal customers a way to save even more.”

Reports stated that the test is being co-led and monitored in Germany by Aldi Nord with a view to a possible international launch.

Last month, Aldi said that it had no plans to launch a loyalty app in the UK after scanners identical to those used by Lidl for its rewards scheme were spotted at its checkouts. Aldi stated that the devices had nothing to do with a potential new scheme and were instead for electronic gift cards. However, the report noted that the new scanners were only in some of the discounter’s stores.

Members of the Lidl Plus scheme scan the app at checkouts to claim discounts and personalised rewards. The app has been credited with helping Lidl become the fastest-growing bricks & mortar supermarket in the UK over the last 10 months.

In contrast, Aldi’s sales growth has lagged behind its rivals in recent times after facing tough comparatives with its strong performance last year and increased price competition.

Marc Houppermans, executive partner at Discount Retail Consulting and a former Aldi Netherlands board member, told trade publication The Grocer last month that Aldi was working on an answer to Lidl’s app at an international level but “will do it differently as many Lidl customers complain that they do not get the same discounts if they do not have the app”.

NamNews Implications:

• Truly a Reward for Loyalty and should work well on that basis.
• Unfortunately, given the low % of brands in the Aldi model...
• ...the discounter will miss out on the key benefit of branded data i.e. First Party Data that can form the backbone of optimising Retail Media Revenue
• Thereby placing Aldi at a significant disadvantage to the Mults.
• In other words, Aldi will need to radically change the % of Branded vs Aldi Surrogate brand...
• ...(say 50/50, minimum) to restore parity with the mults.

#AldiBusinessModel