Woolworths to axe ‘Select’ range: Why the rise of Aldi could be behind the private label “price wars”

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woolworths has come under fire for breaching spam email regulations.

Woolworths has revealed plans to axe its ‘Select’ private label product line, as the supermarket giant attempts to increase its food and liquor sales by four percent.

Chief executive Brad Banducci confirmed the cancellation of the ‘Select’ line at a meeting of analysts last Friday, according to Fairfax.

At the meeting Banducci revealed Woolworths’ target to increase food and liquor sales by four percent, and volumes by two percent.

The retail giant will consolidate its private label brands into a new ‘Woolworths’ label in an attempt to achieve this goal.

The Select brand was established in 2005 as an alternative to the company’s ‘Homebrand’ private label brand, aiming to offer lower prices on over 1000 different common products.

Despite seeing growth from 2006 to 2012, the brand has recently been in decline.

The cancellation of the ‘Select’ product line comes just months after the axing of Woolworths’ 30-year-old Homebrand label in March, with the familiar red and white packaging replaced with the company’s ‘Essentials’ range.

A Woolworths spokesperson told SmartCompany this morning the new ‘Woolworths’ branded private label range will be “more competitive in the marketplace than Select.”

“This will become a food-focused brand (covering a couple of thousand products), Select currently covers both food and non-food products,” the spokesperson says.

“The Woolworths label will allow us to offer our customers fresh produce and food products that are more consistent in their promise and delivery.”

The rise of Aldi and private label “price wars”

Recent competition from grocery giants Aldi and Coles has contributed to Woolworths private label demise, according to one consumer marketing expert.

According to Fairfax, Woolworths conducted a review its private labels in 2015, after it was found customers preferred Aldi’s private label brands.

At the time of review, Aldi’s private label brands were 27% cheaper than Woolworth’s ‘Select’ range.

Teresa Davis, a consumer marketing expert and associate professor at the University of Sydney Business School, told SmartCompany maintaining private labels is an “unsustainable war” for the major supermarket chains in Australia.

Davis believes the continued growth of Aldi is the reason for private label “price wars” between Woolworths and Coles, and says consumers can no longer see a difference between the two majors.

“Aldi has positioned its brands as being of consistent quality at a great price,” Davis says.

“From a low advertising spend new entrant to a serious player, it now has a marketing strategy and spend that shows much more agility and consumer responsiveness than the big duopoly.”

With Davis describing both Woolworths and Coles as “floundering”, she says future competition in the grocery sector will likely switch to different arenas.

“Price and quality issues are rife in the private labels, I think it’s going to move into different arenas,” Davis says.

Davis says recent moves by both Woolworths and Coles are “no more than a defensive strategy”.

“Unfortunately for them Aldi is the new player with agile moves and a clear targeting strategy,” she says.

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John Robinson
4 years ago

The problem I have with all this is if I wanted ‘cheap’ products I would simply SHOP at Aldi, I continue to shop at Woolworths and purchase BRANDED products as I feel this is the best way to support brands that support farming and local manufacturing/packaging – I appreciate that in some cases ‘Select’ brands are made in the same factories however it is difficult to research the company without the company being disclosed – we can’t continue to focus on PRICE without realising that at some point our entire food supply is at risk of collapse !

Roland Lever
Roland Lever
4 years ago
Reply to  John Robinson

John, not sure where you get the idea that “this is the best way to support brands that support farming and local manufacturing/packaging”.

BRANDED products are mostly more expensive due to BRANDING costs (advertising, promotions, etc).

FWIW, Aldi manages hugely lower pricing without sacrificing supplier relationships – they prefer dealing with Aldi (especially their prompt payments, and non-bullying long-term purchasing commitments that allow planning).

Aldi seems to manufacture most of their products in Australia (maybe ask them, before you make assumptions there).

John Robinson
4 years ago
Reply to  Roland Lever

The problem is we will never know as our labeling laws are flawed, branded products still have to compete and if they DO spend money on advertising and promotion doesn’t that flow on to other business ? If I buy a product like Beerenberg Jam I can look up their website, understand their philosophy and even track the provenance of the jar, once a product hides behind a supermarket (even Aldi) that information is lost – all supermarkets have products ‘Made in Australia’ problem is the origin of the ingredients can still be doubtful oh and FWIW Aldi’s lower pricing is often supported by offering a smaller range, in a smaller store in often a cheaper location, chasing a company based on price is a mistake and will ultimately prove unsustainable, but that’s just my opinion.

Scott
Scott
4 years ago
Reply to  John Robinson

I prefer to shop at Woolworths or Coles or IGA Not Aldi as it’s German and that’s where the profits go. Woolworths and Coles I feel do their best to use Australian produce. However the fact that to produce an item in Australia is more expensive than to import an item. And the consumers in Australia shop on price that has quality. We should stop blaming Woolworths and Coles as profits go back to share holders than hopefully benefit Australians. Aldi’s profits don’t. I like the Woolworths ‘Select’ brand. Great product. Great price.

Mike at Old Bar
Mike at Old Bar
4 years ago
Reply to  John Robinson

So you would buy Heinz Baked Beans, produced in New Zealand by an American company, or laundry detergent made by an American company such as Proctor & Gamble or Unilever as opposed to the Aldi equivalents that are made here by Australian companies?
Or maybe you would buy Bega cheese (owned by the New Zealand Mainland company) over Aldi’s cheeses and dairy products that are supplied by an Australian dairy coop owned by our farmers?

John Robinson
4 years ago

I don’t tend to buy baked beans much but I would look for Australian made first, SPC which I realise is owned by Coca-Cola, but their product is made here, Aldi have removed the Australian made logo from their current ‘Corale’ baked beans so maybe they aren’t made here either? I use Earth Choice laundry liquid and all their cleaners which are Australian made and owned, and as far as cheese goes I spend a lot of time in Tassie and really only have cheese on a platter and rarely buy any cheese from a supermarket. You don’t have to shop at Aldi to buy Australian products – I think you are missing the point, with own branded products it is difficult to establish who the manufacturers are, the labeling laws apply equally so buying at Aldi just to support Australian made is a load of rubbish, I don’t have to shop based on price and would rather be able to shop based on choice of manufacturer so I can see what their position is on many issues, when you shop by BRAND the supermarket (any supermarket) has to stock the product based on demand, do you have any evidence to support the argument that Aldi pay their farmers, suppliers or staff any more than the other supermarkets? oh and isn’t Aldi a Germany company with profits (likely) going offshore? or doesn’t THAT matter either?

Brittain Ladd
Brittain Ladd
4 years ago

As I state in my article ‘A Beautiful way to Save Woolworths’, (https://www.linkedin.com/pulse/beautiful-way-save-woolworths-brittain-ladd) Woolworths is making a mistake by trying to compete with ALDI on price and/or private label.

Coldogs.
Coldogs.
4 years ago

Many people openly comment that the Aldi house branded product is packaged in a “look a like “way to the main brands. I am wondering why the ACCC has never confronted Aldi on this as it is passing off IMO.

Aldi has taken house brand product, given it a know brand face and are collecting the $$.