are brands in trouble?

branded suppliers were left reeling this week as Tesco and Sainsbury’s both launched concerted campaigns promoting their own-label ranges at the expense of brands.

Sainsbury’s announced a massive Switch & Save campaign, across all media, that will encourage shoppers to buy the retailer’s 15,000 own labels; while the Tesco website, Tesco.com, now flags up a cheaper alternative, usually own-label, when shoppers select a brand. Tesco’s initiative is backed by TV ads showing brands being replaced by cheaper alternatives.

Branded suppliers have reacted angrily to the initiatives, suggesting retailers were deliberately trying to damage brands. The CEO of one leading brand said the push showed the multiples were in trouble. “We are doing well. Evidently they aren’t,” he said. “It says more about them than it does about us.”

Another supplier said he was worried his business would suffer. “I see this as a deliberate attempt to damage my business by promoting competitors. I thought we had been singled out as some form of punishment for not toeing the line,” he said. “We were not told Tesco were doing this: we found out by accident because we check the retail price every day. I’m not happy. Of course it will damage sales.”

A Tesco spokeswoman said the new web feature was just part of its efforts to improve online shopping. “This feature just lets customers do what they can do in our stores – see what’s on offer,” she said. 
A Sainsbury’s spokeswoman said: “Our customers can make significant savings by switching from a brand to any of our own-label products.”

Sainsbury’s surveyed 1,000 people on their attitudes to brands and own labels. The survey showed 51% of consumers believed big brands were losing their importance and 35% thought they represented “pointless added expense”. Sainsbury’s said customers could save 20% by switching to own-label products.

Despite the lower retail price, supermarkets enjoy higher margins on own labels than brands. But The Grocer 33 database suggests own-label products are rising in price more rapidly than brand counterparts.

The Grocer Price Index indicates that while own labels remain significantly cheaper, the gap could be closing. The cost of an average The Grocer 33 basket is up 13.9% year-on-year. Own-label products increased by an average of 18.9% since last year, while brands rose just 8.6%.

The figures suggest Sainsbury’s has the smallest gap between own-label and branded price growth, at 6.9 points. Morrisons appeared highest at 13.9 points, with Waitrose, Asda and Tesco spread evenly in between on 8.7, 10.9 and 12 points respectively.