David Jones plans to increase the number of private label food products on offer to 70% of its range by 2020, as it continues its foray into gourmet food retail.
The department store’s South African parent company Woolworths Holdings delivered interim results on Thursday that showed a 1.9% increase in operating profits at David Jones, to $106 million.
An update to investors also highlighted the company’s commitment to a “best in class” food offering, which will involve an investment of between $75 and $100 million.
The department store’s gourmet food offering encompasses continued changes to the David Jones Foodhall and the brand’s “convenience” and “food market” formats.
Woolworths Holdings has been amping up a focus on food over the past year, with Woolworths Holdings chief executive Ian Moir observing there is a gap in the Australian market for a higher-end offering as the supermarkets “race to the bottom”.
“They’re not looking to the top end of the market and that’s where we want to be,” Moir said in 2016.
The business yesterday outlined its commitment to having food that is “proudly David Jones” by owning and developing a significant chunk of the products available.
In what could have implications for smaller food brands that currently supply to David Jones, this will involves a plan to increase the number of private label food products on offer from 24% to 70% by 2020, as well as reducing the number of other brands on offer from 76% to 30%.
Gourmet home brand works, when combined with reputation
David Jones is not the only Australian business to look at increasing its private label offerings to consumers, with the likes of Metcash and Woolworths rolling out new food and product ranges that are company-owned but which have unique branding.
Retail experts have told SmartCompany in the past that Australian retailers are taking inspiration from low-cost providers like Lidl and Aldi by reshaping home-brand products to increase the feel of quality.
Unlike the big supermarkets, David Jones has a reputation pull when it comes to food that should make a private label approach simple to roll out, says retail expert and associate professor at Queensland University of Technology Business School, Dr Gary Mortimer.
“David Jones has traditionally positioned itself as at the high-end on food, and they will be taking that brand identity [for this rollout],” Mortimer says.
David Jones has a retail management team with experience in food, says Mortimer, and because it has been able to position its Foodhall as a quality offering over the past 100 years, a private label David Jones item will likely be seen as a higher-end item by customers.
“While the big two major supermarkets will battle on price, Woolworths Group have identified a gap in the market and that’s slowly evolving, around the “everyday gourmet” and the fact that we are increasingly concerned about the providence of our food,” Mortimer says.
However, Woolworths Holdings has indicated that the strategy behind its food offering is a multi-year proposition.
In its results presentation, the company said the plan will run at a $5 million deficit in the 2017 financial year, with a goal to achieve profitability by the end of 2019.
SmartCompany contacted David Jones for further information about its plan to increase private label goods, but did not receive a response prior to publication.