The mantra on house brands is not good enough

Almost everywhere you turn there are now self-styled experts offering consumers advice on how to save money on their grocery bill.  Invariably their advice turns to the merits of supermarket, or house, brands versus the product brands we have grown up with.

These experts seldom dwell on the “merits” of the products, so much as make bald statements like that from a recent New Idea magazine, that supermarket brands are “pretty much the same as their more expensive cousins.”

In last week’s Woman’s Day, Sue Chetwin, CEO of Consumer NZ, offered this advice: “These [house brands] are the brands that the supermarkets do not spend money on marketing, packaging or design, but can often be the exact same products in fancy packaging at higher prices.”

Fortunately the frequency with which a statement is made is not related to the accuracy of that statement.   However it can lead to the establishment of an urban myth that has no factual basis whatsoever.

Indeed seldom are house brands the exact same products as the national brands.  My reaction to Chetwin’s statement was: prove it, particularly given that ‘accurate’ and ‘unbiased’ are two of the descriptors that Consumer NZ applies to itself. And using the word ‘often’ in an attempt to modify the claim of ‘exact same products’, doesn’t get this CEO off the hook.  Label design, marketing and the like are not the essential differences between house brands and national brands.

So what are house brands and how do they fit into the grocery continuum?

House brands are “me-too” products manufactured by the supermarkets to compete with national brands and often to take advantage of the demand for these products. Supermarkets also use these house brands to exert price pressure on categories dominated by national brands.  And don’t forget that while selling their own house brands, the supermarkets also control the retail price of national brands.

Historically house brands have been low-cost, low-quality products, although in a number of markets this is not always the case. For example, in the UK three or four tiers of house brand, based on quality, are not uncommon.

House brands are very rarely the product innovators and rarely bring new products or product formats to consumers.  This is left to the national brands which bear both the costs and the risks.  Take for example the leak-proof packaging developed by Tegel to overcome the problem of fresh chicken drip.  No sooner was this introduced than the house brands were copying this. Their attitude is: good idea; we’ll have that.

In New Idea, their expert recently compared Wattie’s Baked Beans with Budget, a house brand.  This exercise comprised of weighing the beans and calculating their price against the total cost of the product.  This one ingredients was somehow the measure of “value”.  In fact, recipe products are much harder for house brands to replicate, and the flavour profile against the national brand is lacking.

In reality, consumers determine value across a range of attributes including taste, texture, satisfaction, quantity, quality, consistency, reliability and price.  Yes, in tough times the importance of price is elevated, but it is erroneous to pretend the other attributes are invalid. The value of a product is created by the combination of these attributes.

As it happens Wattie’s Baked Beans are made in Hastings.  The Budget brand product is made in Italy.

I can imagine the supermarkets are very well pleased that the likes of the CEO of the Consumers Institute is often extolling the virtue of house brands, after all, the supermarket gets to clip the ticket at every point. The supermarkets also decide where their own products will be placed in relation to the competing national brands and how much shelf space others will receive. This has lead to the compromising of consumer choice.
As financial and business commentator Bernard Hickey commented recently, on Progressive’s roll-out of specialty brands: while it sounds like a good idea, “other suppliers get nervous when the supermarket chain starts stocking and promoting its own brands in precious shelf space at the expense of real brands.”   The result may be the loss of some special features of New Zealand’s grocery landscape.
Like what you will about house brands, but please don’t claim they are the exact same products, or almost, as national brands.

Categories: Food Industry

2 replies »

  1. I’ve sometimes thought that a useful website would be a database of house brands and who supplies the actual products for the house brand. So then if you like Watties Baked Beans and it was found Watties was the actual supplier of Pams, then that fact could be published on the website.
    Sometimes the savings on house brands is not worth the crap product inside, but other times you are getting quality product that we all love at a really reduced price in an ordinary wrapper

  2. I remember going throught the TipTop factory in Christchurch when I was in primary school and I remember seeing the processing line and watching the ice cream getting pumped into the “Tip-Top” containers of 2L icecream and then without missing a beat and without a gap or pause in production “Budget” brand containers started coming along and getting the exact same product pumped into them. After noticing this I asked the tour guide what was going on and was unable to get a straight answer.

    So some one needs to do a study based on taste and texture comparrison of expensive brands versus home brands and interview the “higher-ups” of these companies to get a real result.