Blog: Dean BestUK grocers emphasise premium in private label

Dean Best | 24 September 2010

"Tough economic times" has become one of the most-used phrases of political and business discourse in the UK, as the country prepares for the coalition government's cuts and waits for their impact on the economy.

That we could again fall into recession is a persuasive argument, with public-sector jobs set to go and there being few signs that the slack will be taken up by a private sector starved of funds from banks reluctant to lend. Consumer spending, some say, could soon take a dive.

Tighter wallets will, of course, affect the food sector in different ways - brand-owners have long talked up how they have benefited as consumers have stayed away from restaurants, for instance.

However, within grocery, tighter wallets will mean an intensification of the battle between brands and own label. And this week, three of the UK's grocers - Asda, Sainsbury's and Ocado - relaunched their private-label ranges.

Among some industry commentators, there is the belief that, despite the downturn and concern over a double-dip, we are seeing a trend of "premiumisation" within store. Earlier this month, Kantar Worldpanel used that very word to describe what it was seeing when looking at the sales of UK grocery retailers. The analysts said Asda, for one, had seen its sales suffer.

Asda and Sainsbury's have relaunched their standard and premium own-label ranges to, in the words of one brand consultant, to distance themselves from the assumption that private label is "implicitly budget food".

"The revamping is an attempt to show consumers that own brand can compete with brands across different categories," Ed Henry, account executive at brand consultants Dragon Rouge, said in our Talking shop column this week.

Similarly, Datamonitor analyst Malcolm Pinkerton believes Asda and Sainsbury's redeveloped ranges is down to them wanting to move people away from their value ranges and up the ladder to more preminum products - which offer even better margins.

The assumption in all this is that, despite concerns over the economy, shoppers can be persuaded to pay a bit more for quality - and retailers want a piece of that pie with their own labels.
What's more, a number of recent marketing campaigns from UK grocers have moved away from a focus squarely on price to provenance and quality. These "tough economic times" could yet provide retailers with a profitable opportunity - if they get their ranges right.


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