You’ll Love Coles now, but will you still Love Coles in a few years?
I was recently talking to marketing guru Stu, who told me some disturbing news about supermarket branded products, such as the You’ll Love Coles range.
Stu explained what had happened in the large UK supermarkets over the past few years when the big supermarket chains over there started initiating their own house brands at low prices.
It seems that the large supermarkets can offer these products at a very low price for a year or so, which is long enough to put major pressure on smaller labels and close many of them down. I mean, let’s face it, when the average mum on a budget is faced with a bag of frozen house branded peas at 99 cents, or Farmer Joe’s frozen peas at $2.50, she’s going to choose the house brand. Farmer Joe can’t stand the loss of business for very long, and before you know it his peas have disappeared from the shelves, along with a few other brands.
Next, we see the price of house branded peas creep up from 99 cents to $1.50, then to $2.00. Before we know it, the supermarket brand has a monopoly on the peas you can buy, and can charge a higher price for them. Farmer Joe’s brand isn’t around anymore, so we can’t turn back to them. There’s really no choice other than to buy the supermarket brand and pay the price the supermarket asks.
So much for competition.
When you multiply this across all the products you buy in your weekly grocery shop, it’s a bit scary. House branded products are everywhere - laundry detergent, honey, butter, breakfast cereal. You’ll Love Coles tinned tomatoes are made in Italy. What about all our Australian tomato farmers who produce a great product and supply jobs here?
It’s important to think about factors other than just price when you’re in the supermarket, because the food you buy today can impact on the food you will be able to buy tomorrow. I know this is hard for some people who are stretching the grocery budget as it is, but I see it as safeguarding my rights as a consumer and a food lover.
Stu’s little lesson really opened my eyes as to how our everyday purchasing choices have an impact on a whole economy. So next time you’re in the supermarket, I urge you to think about whether saving a few cents now is worth having no choice but to shop in a monopolised grocery market later on.
Stu and I aren’t the only ones talking about this. You can read more about it in a Sydney Morning Herald article, Choices fade as Coles Stacks Shelves.
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16 Responses to “ You’ll Love Coles now, but will you still Love Coles in a few years?”
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Beck says:
July 11th, 2007 at 4:16 pm
Well, I guess we can all pat ourselves on the back, for contributing to Coles’ highest quarterly profit in 20 years.
Lorena says:
July 11th, 2007 at 4:34 pm
What a good point- I usually avoid ‘house brand’ food from a food snobbery point of view, but now I have another reason. Viva la farmers market!
Ali-K says:
July 11th, 2007 at 5:10 pm
Thank you for raising a great point. I often find myself choosing between the more expensive Australian products and the imports. I try to make an effort to buy Australian regularly but not religiously. I can’t say I avoid house brand from a food snobbery point of view, surely certain things can’t really be too different, I often wonder if some things come from the same factory with a different label? Call me a sceptic! However I have never considered the implications of house brand from a competition point of view. I’ll be more considerate next time I shop. Although, I’m with Lorena, markets as often as possible.
StuPOT says:
July 12th, 2007 at 5:00 pm
Go ladies… Viva la revolution. Long live independent companies and the choice they provide.
Lady Lunchalot. I couldn’t have put it better myself.
Stu
Lorena says:
July 12th, 2007 at 7:55 pm
I probably misrepresented myself a little there. Really, food snob I am not, but I do try to choose local quality produce whenever I can. I live in Castlemaine where we have a fabulous selection of markets within a half hour radius (Wesley Hill, Harcourt, Daylesford, etc) and we visit at least one of them weekly. Our local supermarket has evolved a lot in the past few years, and stocks a lot of locally made produce.
Another important consideration, I think, is the energy used in transport. A cherry shipped from California has far more cost than one from the farm up the road; in terms of money, freshness, local employment, and environmental costs.
ben says:
July 12th, 2007 at 9:39 pm
safeway have their own version of this as well. they are bad news and i stay away from them. soon safeway and coles will be just like teskos in the UK.
@Lorena - Peter Singer has some excellent work about the environmental costs of producing/transporting food.
clarkabrese says:
July 13th, 2007 at 2:21 pm
LL has turned public advocate - I love it! Will you be supplying how to vote cards come November?
Lady Lunchalot says:
July 14th, 2007 at 10:41 am
Lorena makes an excellent point about the embedded energy in food. I think it’s really weird that there are cherries in the supermarket now when I am freezing cold and running around in jumpers and jackets. They’re imported from the US, but I just can’t bring myself to buy out of season imported fruit and veg. It’s never going to taste as good as the real thing, you deny yourself the pleasure of seasonal eating, it’s bad news for the Aussie farmers who miss out on you buying their produce, and the environmental costs are enormous and so unnecessary.
Maybe this should be a topic for another blog posting?
clarkabrese says:
July 16th, 2007 at 5:49 pm
Oh what a circus! I found today that if we don’t ‘Love Coles’ there’s very little choice left - which, I suppose, is the point.
I look at few ingredients in detail before popping things in my basket - mostly I go for what I always go for - except when it comes to tinned tomatoes.
But having just relocated from ‘near a Safeway’ to ‘near a Coles’I'm finding the need to examine much of my trolley because many of my fav goods just aren’t on the shelves.
But in replacing my Angelina tinned tomatoes (which were the only Safeway tomatoes without added nasty ingredients) I’ve discovered something odd.
The only can of tinned tomatoes without additives (whether they be fake basil or a numbered colour) is You’ll Love Coles Italian Tomatoes.
Now Mr/Ms Coles Marketing Manager Who Reads Blogs To Keep Tabs On We Consumers, tell me this: Why does the You’ll Love Coles Australian Tomatoes include ‘Firming agent 500′ and ‘Food acid 330′ when the imported variety contains just good old tomatoes?
Hmmm.
Stu - you opened a can of wormed tomatoes!
Janie says:
July 17th, 2007 at 12:38 pm
I have started to avoid the multinational supermarkets since the greater chain branding of products has been introduced. I try to shop at the locally owned IGA’s for the non-perishables. Sometimes resort to the biggies for particular products. Also try to support the farmers markets, the lovely Vic market a local butcher, fruit & veg shop, deli.
Sometimes hard though to do the rounds for everything when we all have busy lives.
Love the blog … my first comment!
inthebiz says:
July 19th, 2007 at 4:16 am
Couple of additional thoughts…
These products are born because competition between the supermarkets is so fierce and margins they make are low. They think they can make extra money by ‘cutting out the middle man’ (the brand) and putting the product under their brand. This happens even by keeping the product at the same price.
Usually, they ask ‘the brand’ to make it for them (so yes, it does come out of the same factory…), if not, they say they will simply go elsewhere and make other kind of threats to the brand owner (such as de-listing). ‘The brand’ then has to decide whether they make a tiny amount on producing it (and keep production up in their factories), or whether they get in the supermarkets bad books and let their competitors take the business.
The experience from the UK is not so much that they raise prices, but they limit choice of other brands (because the shelves aren’t elastic…). Competition between the supermarkets generally ensures that pricing remains quite ‘hot’. The other thing that supermarkets like is that these products are ‘exclusive’ to them, therefore, shoppers can’t directly compare prices.
What happens over time is that the supermarket-label product becomes such big brands that they then force their suppliers to work for very small margins — or threaten they’ll go to their competitors to make it. Often, the manufacturer is forced to accept the supermarkets terms because these products make up such a large part of their production (the sell less of their own ‘brands’ these days)> Either way, the supermarket wins because they’re making the profit they used to make, plus making the profit that ‘the brand’ used to make.
All this said, there is one supermarket in the UK that any foodie would die for: Waitrose. And many of their best products are own-label. The difference is most of the products are local, they taste delicious and the packaging is amazing. Of course, they cost a little more, but you know that before you go there. Indeed, the reason you go to their stores is to buy ‘Waitrose-branded’ products. Go figure…
grocer says:
July 20th, 2007 at 12:03 pm
funnily enough, I recently started a blog spot and a business (in Sydney) as a result of my thoughts on this subject matter.
in the UK supermarket “home brand” is a different concept entirely from what we in Australia perceive as home brand. as inthebiz says, it has become a point of differentiation whether it be waitrose, sainsbury, M&S or tesco (the tesco finest range is impressive indeed)
unfortunately our senior supermarket execs do not realise that our marketplace is not comparable to the UK supermarkets, our geography, demography and population density differ enormously, and the items they are trying to “home brand” are different to what the UK model is.
then again, why do we care about brands at all? shouldn’t we be more concerned about the quality (and freshness) of what we purchase at good value at any given time? (and this is what many of the NW European chains have gone for as a business model)
the big brands are all owned by major FMCG anyway, and negotiate their promotions within the retailer’s 13×4week promotion cycle. These major FMCG can cope with this and they already have a lot to answer for in terms of the cr@p that’s fills our supermarkets.
it’s the little guys that face loss of business, and that’s where we, the consumer, will lose out. so for example (and this is completely off the cuff and not a real life suggestion) if you want to buy crackers, you might struggle to find Kurrajong lavosh, but will probably always find ritz/jatz
that’s enough for one rant (sorry); i’m a newcomer to your blog as it is!!!
bliss bubble says:
July 31st, 2007 at 3:59 pm
Great topic, and certainly worthy of further examination. I try to support local markets/independent grocers but hadn’t thought so much about what I put in my trolley when I do shop with the ‘big guys’.
I will certainly take more care now. I have noticed some brands of certain products seem to be more difficult to find. Examples such as grocer’s above would be horribly sad so I am definitely on the campaign to ensure what goes in my trolley supports the ‘little guys’.
stickyfingers says:
September 20th, 2007 at 5:55 pm
Another thing that these house brands are doing is eliminating local jobs. Even major brands in Australia are being squeezed out of shelf space by supermarket homebrands. On top of that, they have been put in a difficult position by being asked to produce home brand products at such low prices that it is impossible to produce the goods for the price in Australia.
In the next five years we will see a steady rise in the amount of packaged food being imported into Australia. Some brands have already oved their production up into Asia in order to deliver the ridiculous prices being asked by the supermarket chains. Sadly these low prices are not always reflected in the price of the goods, but absorbed into profit, which is the major motivation in the first place.
But even more devastating is the loss of a livelihood for many Aussies when manufacturing plants and factories are closed and associated industries such as printing, packing and logistics lose their business.
Coles has recorded its worst figures this year, though they are attributing it to their merging of Bi-Lo into the Coles brand. It does not acknowledge the increased popularity of Aldi, nor the public’s dissatisfaction with the removal of brands they prefer to buy, nor the upswing in the popularity of fresh foods purchased at markets.
nerdburger says:
January 23rd, 2008 at 8:06 pm
You people are all idiots. Alot of the housebrand products are made by the small to medium size companies that deal with Coles & Woolworths. Why don’t you do some research before mouthing off about things you know nothing about.
Amelita (Squishy) says:
April 20th, 2008 at 8:57 pm
I buy as many Australian products as possible looking after our own backyard is our future and the future for our children.