Big brands watch out - own brands in the independent sector are gaining popularity as symbol groups work harder to ensure that their labels are meeting consumer demand for both value and quality
What once was seen as a poor relation of the big brands and the domain of the supermarkets, own label is seeing something of a change in fortunes in small stores. Indeed, c-store retailers of all stripes are reporting rising sales of own brand across the categories, as symbol groups respond to growing consumer demand by improving the quality and range of their product. HIM research shows that demand for both value and premium own brand is growing, with 21% of shoppers planning to buy more of the former over the next 12 months, and 20% the latter.
Spar UK brand director Susan Darbyshire says own brand shoppers spend 50% more on each basket spend compared with the average at £4. “Giving customers a strong own brand offer in stores increases basket spend, encourages repeat purchase, and gives Spar stores a point of difference from other stores locally,” she asserts.
Darbyshire is so confident in Spar’s own label offering that she is aiming to get the proportion of own brand sales up to the multiples’ standards. At the moment, the Spar average is 29%, whereas the likes of Tesco and Sainsbury’s are at about 50% own brand sales.
Retailers echo Darbyshire’s confidence. Premier Whitstone retailer Dan Cock says own label is pushing up basket spend as Happy Shopper and Euro Shopper products take centre stage in his Devon store. “Own brand is really strong now. Big grocery brands are more distress purchases now, whereas the grocery shoppers who do a weekly shop are going for own label,” he says. “Our proportion of own label is growing all the time. We have huge sales, especially on multibuy, which means margins are slightly down, but cash profit is still up because of such strong growth. Own brand is great, it enables c-stores to compete on price. We’re over 50% own label now.”
Nisa retailer Saki Ghafoor, who owns two stores in the North East, credits the multiples with improving public perception of own brand. “People don’t notice the quality difference now. Aldi and Lidl have really helped - people think that if Aldi has a good quality own brand, then everyone else can, too. It’s really helped independents,” he says.
Londis Bracknell retailer Arjan Mehr agrees that own label’s image has improved. “Own brand is getting more street cred now. People have more faith regarding quality and value. The mults have brought credibility.”
Bestway category manager for own label Nick Brown acknowledges that the discounters are helping to change the perception of own brand. “Brands are not as sacred as they once were. This can be seen by the prevalence of own label on independent retailers’ fixtures and the success of Aldi and Lidl, which stock very few brands in relation to the major multiples.”
But he also believes symbol groups have played their part in increasing the perception of quality, too. He says own brand in the independent sector is now meeting consumers’ demand for quality and value. “Consumer expectations have become more exacting, leading to a rise in product quality, but consumers are willing to compromise on quality if it means a saving. There is perceived trade-off in quality in the consumer’s mind, but the standard of own label is developing faster than the innovation in brand, so inevitably the quality gap is shrinking,” he insists.
So in which categories are own brand thriving, and how are symbol groups and retailers exploiting this growth? One category receiving a lot of attention is fresh, and in particular ready meals. Spar launched its Italian range in October 2012 and revamped its Winter Warmers range in autumn 2013, as ready meals play a key role in the group realising its own brand ambitions.
The Italian range has proved highly successful, achieving sales of £5m in its first year. The 17-strong range includes four fresh pastas, two pasta sauces, five Italian ready meals and two variants of garlic breads. But the best-performer in the range has been the four pizza lines at two for £5.
Spar own brands show their strengths
A clutch of prestigious awards show that own label wines are on a par with their branded counterparts. Spar’s own brand wine range won 70 awards at the International Wine Trade Fair last May, while the Spar Californian range won five bronze accolades in the International Wine and Spirit Competition awards. Spar Chablis also collected a silver award in the International Wine Challenge.
In C-Store’s Top Convenience Products 2013 survey, Spar wine was the only own brand to feature in the top 10 best-selling wine brands in convenience.
Isle of Wight retailer John Perrett says about 60% of wine sales are now Spar brand across his 14 stores. “Spar brand wines tick all the boxes for our customers, who find them really drinkable and at the right price points.”
Spar promoted the lines in its recent TV advertising campaign to great effect. South West retailer Clive Sheppard said sales of the pepperoni pizza increased from 36 to 51 in the 20 days following the launch of the Italian range adverts on October 10, compared with the previous 20 days. Sales of prosecco brut increased from zero to 42 bottles over the same period, while prosecco rose sales went from one to 11.
John Perrett, who owns 14 Spar stores on the Isle of Wight, says ready meals have become a crucial part of his business. “Ready meals are very important now. It’s almost a whole new category for us,” he adds. “You have to get the whole product right: the labelling, packaging quality and price. Margins are also good - they have to be to allow for a bit of wastage - but they give us good dates to mitigate that.”
Peter Sichel, who owns two Spar stores in Buckinghamshire, is equally enthused. “We have fantastic products in the chiller now from Spar. I never thought in a million years when I bought the shop eight years ago that we’d be selling Spar fresh pasta and four types of houmus and a range of dips,” he says. “We have every product in ready meals range, which shows how popular they are.”
For Peter, it’s all about the chilled category as a whole. “It’s not just the Italian range which has changed perception of Spar in terms of quality and value for money - the muffins and bites range has contributed just as much. And the £1 pack of muffins fly out,” he says. “I now have to refurbish the Aylesbury shop to put in another four metres of chilled. It’s great as margins are about 30% that’s so much better than on other brands.”
In Devon, Premier retailer Dan says the new Happy Shopper ready meals range has been going down a treat. “Customer feedback is very positive. It’s the first quality ready meal range. Chicken korma and chicken tikka, sausage and mash, and macaroni cheese are all doing very well,” he says. “Booker has reacted very well. Happy Shopper wasn’t a sought-after brand a few years ago, now it’s respected.” Similarly to Spar retailers, the margins also whet the appetite. “We’re guaranteed 20% on Happy Shopper multi-buy and 30% for single unit,” Dan reveals.
brands on the run
Certain own brand lines are cannibalising the big brand equivalent, usually driven by competitive pricing. “The Heritage digestives are best-selling for me and have picked up momentum over the years,” Gloucestershire Nisa retailer Harj Dhasee says. “It helps that they’re sold at two for £1.20, compared with McVitie’s at £1.70, which has really suffered.” Ramesh Shingadia, of Londis Southwater, West Sussex, says sales of the Daily Basics Jaffa Cake range have soared by 300% in his store since a five for £1 promo. Devon Premier retailer Dan Cock (pictured) says he delisted Tropicana after the Happy Shopper orange juice “killed sales”, while branded pet food has been “decimated” by the Happy Shopper range.
Nisa retailer Harj Dhasee says sales of the Heritage ready meals range increased by £5,000 this year in his Mickleton, Gloucestershire store. “Ever since Nisa revamped the range in September 2012 it’s been flying off the shelf. People absolutely love it. The lasagne, chicken tikka, jalfresi and shepherd’s pie all do really well,” he says. However, retailers need to put in the work too, Harj adds. “You need to keep on top of the range and ensure you’re tweaking it with the seasons.”
Overall, Heritage accounts for 43% of total chilled sales, according to Nisa business manager Nigel Ashton. “Top-selling lines will be fresh milk, bacon, Cheddar, cooked meats, fresh fruit and veg, and fresh meat,” he says. “There are some categories that today are dominated by our own brand: ready meals, wet salads and creams are areas with very little branding, so we have had to develop Heritage ranges to compete with the major multiples in these sectors.”
Budgens launched the Discover the Taste range last year to capitalise on shoppers’ growing desire for high-quality ready meals. Budgens retailers have complimented the quality of the product, although some have raised concerns about availability. Budgens sales director John Pattison says they been working hard with the supplier to resolve these issues “and we are now in a position to be able to meet these exceptionally high levels of demand”.
Londis retailer Arjan says he is looking forward to Musgrave launching Discover the Taste in Londis stores. “There’s a trend towards upper-end premium meal deals - that’s where growth will come from and that market isn’t saturated. The premium product market is growing despite the recession, and margins are bigger as products are more expensive than other areas,” he says.
Arjan says that Londis own brand now accounts for 60% of chilled, with fruit and veg driving the growth - a trend which Saki is also experiencing since Nisa expanded its veg and pre-packed fruit range. Best-one Isleworth retailer Alkesh Gadher believes Bestway is also set to exploit this growing demand with the rollout of a revamped fruit and veg range under the Best-in label in the coming weeks.
Soft drinks are another strong area for own brand. Saki, for example, says the category has seen “big growth” in his Nisa stores, especially the Heritage 2ltr soft drinks at two for £1.20. But it is energy drinks which have boosted own brand growth so notably. The Best-in Stimulation drink, pricemarked at 35p, now outsells all other soft drinks throughout the Bestway estate, says the company’s Brown.
Dan Cock adds that the Euro Shopper Energy Drink (pricemarked 35p) flies off the shelf in his Premier store, while Londis Southwater retailer Ramesh Shingadia in West Sussex says the Londis Dart energy drink (pricemarked 39p) often outsells Red Bull, rrp £1.29.
Obviously own brand isn’t yet the finished product. Nisa retailer Harj says some of the Heritage ambient lines lack credibility, such as Heritage Cornflakes. “The packaging makes it look plain and boring. The Euroshopper equivalent has better perception,” he asserts. Peter Sichel says Spar own brand’s “one weakness” is the quality of its desserts. But he believes chilled is where its strengths lie, and that is where he has focused his attention.
As Arjan says: “People are looking for quality now, while attachment to big brands is no longer there. If your own brand has credibility, then go for it.”
Costcutter launches three-tier own brand range
Costcutter and Palmer & Harvey are set to roll out a three-tier Independent range to symbol members, plus P&H’s independent and ‘mini-mult’ customers.
The new range - comprising Trader at the value end, through to Core and Specialist at the premium end - will be distributed through P&H in anticipation of Costcutter’s changeover from current supplier Nisa in July.
“To be able to compete it is vitally important for our members that they are able to offer their customers a broad choice of quality products, and Independent’s three-tier range allows retailers to offer the most appropriate product range for their store and customer needs,” says Costcutter marketing manager for Independent Lucinda Cawood.
Feedback from the launch of 60 lines in trial stores has been “excellent,” she adds. The range will eventually cover at least 1,000 lines.
Costcutter retailer Paul Cheema, of Malcolm’s store group, is equally enthusiastic. He says: “The packaging is great across all categories it looks like another big brand.”