German supermarket Aldi appears to be winning the private label race, with research released this week by Canstar Blue showing 65% of Australians prefer buying private label groceries over big name brands.
Aldi has been chosen as the preferred provider of white bread, wholemeal bread, butter and eggs, according to a consumer survey from Canstar Blue.
The survey of 3000 Australian consumers, conducted in December last year, shows the proportion of Australian grocery shoppers buying private labels increased from 44% to 65% in just six months.
Consumers were asked to choose their preferred brand of eight basic items they had purchased within the past three months, with Aldi’s offerings coming out on top in four of the eight categories.
Three quarters of shoppers believe private labelled Aldi, Coles or Woolworths items are ‘good quality’, up from 59% in June 2015, and almost half of all consumers said the price of necessities like milk, bread and eggs is big factor in where they choose to shop.
Market research from IBISWorld shows private labels make up around 20% of supermarket brands. This figure is expected to grow to 35% of all food and grocery sales within the next five years.
A spokesperson for Canstar Blue told SmartCompany the research indicates Coles and Woolworths are reacting to the success of new market entrants such as Aldi when it comes to their private label offerings.
“What we know is that price is king really but in terms of the private label debate it’s not all about the price because ultimately the supermarkets have to find the perfect combination between quality and value,” the spokesperson says.
“Really the Aldi factor has helped to make consumers more price conscious.”
Further expansion in Australia by US bulk shopping retailer Costco may continue the push towards private label groceries, however, Canstar Blue expects it will take a while to see the impact of the bulk shopping giant.
What does this mean for small businesses?
Peter Strong, executive director of the Council of Small Business of Australia, told SmartCompany this morning plain labelling on groceries limits consumer choice and he is concerned about the survey results.
“That is really worrying,” he says.
“I want to see the questions for the survey and I’d like to know who funded the survey … no one has ever said ‘gee, I prefer no labels’.”
Strong believes marketers and big businesses are making assumptions that customers want private label products, when customers say they want quality, diversity and a good price.
“Plain labelling destroys the opportunities for business to grow because in most cases the producer is forced by the big retailer to [use] plain labels,” he says.
“The choice is to close down or do the plain labels.”
Strong says small businesses are at risk of being edged out of the grocery market as larger brands limit the range of brands on offer.
“We’re getting closer and closer to a command economy where decisions are being made by oligopolies of the economy rather than by market choice,” he says.
“We need changes in the Competition Act, particularly section 46. That needs to be strengthened to help the Australian Competition and Consumer Commission ensure we have competition in Australia.”
The eight categories and highest rated brands in the Canstar Blue survey are:
Fresh milk: Devondale
Long life milk: Coles
White bread: ALDI Bakers Life
Wholemeal bread: ALDI Bakers Life
Multigrain bread: Burgen
Butter: ALDI Beautifully Butterfully
Eggs: ALDI Lodge Farms