Blog: We do value brands, insists Sainsbury's
Dean Best | 15 November 2012
Sainsbury's, the UK retailer, spent much of its half-year results briefing talking up its own label, which when combined with the commodity pressure all manufacturers are seeing, left one wondering what brand-owners would be thinking.
Inflation is creeping back up in the UK and, speaking after Sainsbury's first-half numbers were published, chief executive Justin King highlighted own label as one way cash-strapped consumers could limit the impact of rising prices. He also explained why he believed shoppers would look to own label this Christmas - and why he believed Sainsbury's had an advantage over its rivals on own label.
Now, few retailers are going to lose much sleep over upsetting the likes of Nestle or Coca-Cola but, with brand-owners facing pressure on costs, as well as the ongoing promotional pressure in the UK, the emphasis on own label could leave those marketing brands concerned they face a stiff fight on their hands convincing retailers to, say, accept price increases or take on new products.
Speaking to just-food on the sidelines of the briefing, Sainsbury's chairman David Tyler said the retailer was "building good long-term relationships" with its branded suppliers.
"We want to develop the market together. Of course, if one supplier wants to have a larger share of our market than its rivals, we want to make sure that we have some benefit of that," Tyler said. "There's always, as you might expect, cut and thrust."
And as you might expect, retailers the world over insist suppliers can not assume they can secure price increases to offset the prolonged pressure on commodity costs. Ian McLeod, MD of Australian retailer Coles, told just-food as much in September.
That view was echoed by Tyler. "There is nearly always an alternative and we have a own-label machine that is extremely important and there is only so far that a branded manufacturer has power when there are alternatives. Eventually, they will damage themselves if they push it too far, so there's a balance and that's always been the case," he said.
However, Sainsbury's believes it can offer its branded suppliers different ways to target consumers than other retail customers in the UK. One is through its Brand Match price comparison scheme and the other is via a new venture with Nectar card partner Aimia.
Sainsbury's and Aimia have set up a venture called Insight 2 Communications, which the retailer says will help branded suppliers more effectively market to shoppers in and around its stores. The I2C venture will manage the ways suppliers seek to market shoppers and, Sainsbury's says, measure how successful the campaigns have been.
"Our FMCG partners will have one organisation to go and get great analytical data on their campaigns," Sainsbury's development director Luke Jensen told just-food.
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