New Managing Director announced for Woolworths’ beverage brand

Steve Donohue, current Director of Buying and Merchandising for Woolworths Supermarkets, has today been announced as the new Managing Director of Woolworths’ beverage brand, Endeavour Drinks.

Effective from April this year, Steve Donohue will replace current Endeavour Drinks Managing Director Martin Smith, who will retire at the end of the financial year.

Prior to joining Woolworths Supermarkets, Steve Donohue held a broad range of roles within the Woolworths Group drinks business, starting as a store manager in Dan Murphy’s when he was just 19 years old and progressing into senior Buying, Merchandising and Marketing roles in Dan Murphy’s, BWS and the broader drinks business.

Brad Banducci, Woolworths Group CEO said; “We are pleased to announce Steve as the new Managing Director of Endeavour Drinks. Steve rejoins our drinks team after spending the last five years rebuilding our Buying and Merchandising capabilities, first with Countdown in New Zealand and more recently in his role with Woolworths Supermarkets in Australia.

“He’s been instrumental in delivering our Woolworths Supermarkets pricing and range strategy as well as transforming our supplier engagement program.”

Endeavour Drinks includes Australia’s leading retail liquor brands, Dan Murphy’s and BWS, as well as Cellarmasters, Langton’s and Pinnacle Drinks.

Brad Banducci added; “I would like to thank Martin Smith for his significant contribution to Endeavour Drinks. Martin and the Endeavour Drinks team have helped build the leading business we have today.”

Martin Smith will remain with Endeavour Drinks until 30th June, working with Steve Donohue as he transitions into his new role.

Woolworths​ overhauls ​​labour relations ​in​ ​​food​ ​supply​ ​chains

As part of a review of its ethical sourcing practices, Woolworths has committed to working collaboratively with the National Union of Workers (NUW) and other interested stakeholders, to identify and address human rights risks in fresh food supply chains in Australia.

“Our belief is that finding the right solution to address human rights risks in horticultural supply chains in Australia will be best achieved by working collaboratively with farmers, governments and unions,” said Woolworths Group CEO, Brad Banducci.

“We recognise the current efforts of these stakeholders, including the NUW, and are committed to actively participating in a process to deliver genuine improvements and sensible and practical reform.”

As part of this commitment, and following discussions with the NUW and the Australasian Centre for Corporate Responsibility (ACCR), Woolworths has committed to work collaboratively towards the implementation of an agreed pre-qualification programme for labour-hire providers to ensure that all labour providers who wish to operate in Woolworths’ direct fresh food supply chains comply with labour and human rights standards.

In addition, the supermarket chain said it will support workers in its supply chains to be educated about their workplace rights, including their right to join a labour union of their choice; to have access to an effective grievance mechanism to ensure that human rights violations are reported, investigated and remediated; and to be protected if they report human rights violations.

“These commitments will give effect to our pledge in our Woolworths Group Corporate Responsibility Strategy 2020 to work with peak organisations to improve workers’ lives. They also strengthen Woolworths’ ability to manage human rights risks and ensure compliance with Woolworths’ Ethical Sourcing Policy and Policy for Employing or Engaging Overseas Workers,” added Banducci.

Woolworths commits to Australasian recycling label

Supermarket giant Woolworths has adopted the new Australasian Recycling Label (ARL) across its entire Own Brand product range.

In a partnership with leading environmental organisation Planet Ark, Woolworths, through its membership with the Australian Packaging Covenant Organisation (APCO), is the first Australian supermarket to commit to adopting the ARL across its Own Brand range. The labelling is aimed at supporting customers in the disposing of packaging correctly and efficiently.

The roll out of the ARL is in response to research showing customers are often unsure what packaging can and cannot be recycled.

The new labelling system, developed by Planet Ark, highlights what needs to be done with each piece of packaging to ensure the right elements end up in recycling and those which can’t are correctly disposed of.

Woolworths Food Group Head of Sustainability Adrian Cullen said; “At Woolworths we are committed to taking our environmental and community responsibilities seriously. This is one part of that commitment to minimise our impact on the environment and encourage recycling.

Planet Ark CEO Paul Klymenko said; “We congratulate Woolworths for being the first major supermarket retailer to commit to adopting the ARL across all their own brand products.

“Our research shows that the majority of Australians continue to be confused about recycling of common items. Some things we think can be recycled can’t be, while some packaging continues going to landfill when it can be recycled.

The launch of the ARL on Woolworths Own Brand products follows the supermarkets commitment earlier this year to phase out the use of single use plastic bags across stores nationwide by July 1 2018.

Woolworths has also begun the reduction of plastics and packaging in fruit and vegetables, with trials presently underway to remove or reduce plastic packaging on 28 fresh produce lines such as Kale, Tomatoes, Lettuce and Potatoes. The goal is to remove 150 tonnes per year of plastic packaging annually.

 

Woolworths posts $1.5b profit

Supermarket giant Woolworths has posted a full-year profit of $1.5 billion, a big change from last year’s $1.2 billion loss.

The company said in a statement revenue was also up 3.7 per cent to $55.9 billion. In addition, sales of Australian food gained momentum, with fourth quarter Easter adjusted comparable sales growth of 6.4 per cent.

“FY17 was a year of rebuilding the foundations of our business and we are pleased with our progress over the last 12 months, particularly in the second half. Encouragingly, we still see many opportunities to improve our business going forward and are focused on our five key priorities,” said Brad Banducci, Woolworths Group CEO.

“Our first priority is to build a customer and store-led culture and team. The key highlight in FY17 was the meaningful improvement in customer and team scores across the Woolworths Group. Over 116,000 employees provided feedback in our recent VOT survey with our sustainable engagement scores improving by five points over the last year to 82 per cent.The improvement in safety was another highlight with a 20 per cent improvement across Woolworths Group.”

 

 

 

New niche beverage category expands quickly

In mainstream grocery, strong sales performance is critical to hit hurdle rates and avoid deletion. In less than one year since launching in Woolworths, Mojo Crafted kombucha has achieved this, according to the company. Woolworths has also doubled the product range  with new flavours Passionfruit and Turmeric.

Mainstream grocery is not the only retailer expanding probiotic beverages for customers.  Independent grocery is also cashing in on the market in Australia, at a retail level pushing around $70 to $80 million a year.

Metcash Convenience recently selected Mojo Classic as the first kombucha nationally available through the independent network. IGA, Foodland, Super IGA, The Friendly Grocer and Foodworks stores will offer 13 Mojo kombucha flavours under the Classic and Mojo Crafted ranges, all in 330ml bottles.

The product is a fermented, sparkling tea containing active enzymes, organic acids and proven probiotics. According to the company, the certified organic, vegan friendly and gluten free beverage offers a range of health benefits, including gut health, vitamin B12 and immune support.

“Launching our full range of flavours in more channels means consumers win and we do too,” said Andrew Buttery, business development manager for Mojo Crafted.

“It’s a huge investment in refrigerated space in independent stores with a traditionally smaller footprint.”

When customers benefit from price wars

Prices between Coles’ and Woolworths’ private label brands and those at discounter Aldi have gone down by as much as 70 per cent in the past two years. According to the AFR, this reflects the major chain’s $1.6 billion investment into reducing prices.

At the moment, many private labels are under 10 percent pricier at Coles or Woolworths than one in Aldi. This is in comparison of the price gap of 23 per cent when Choice conducted a similar survey two years ago. This is reported as part of the larger strategy of neutralising competition from Aldi by trimming the prices of private label brands to appeal to bargain-hungry shoppers. Coles and Woolworths have also re-engineered their private label ranges to better compete with Aldi, improving packaging and product formulations to overcome consumer perceptions that their own-brand groceries were inferior to those at Aldi.

In addition, the price gap on leading national brands has also fallen, from 99.5 per cent at Coles in 2015 to 66 per cent in 2017, and from 101.6 per cent at Woolworths to 64.6 per cent, according to AFR.

 Even though Aldi still remains the cheapest option, the price differential has narrowed significantly across the board as the major chains attempt to claw back market share from the discounter, which is now estimated to account for about 10 per cent of food and grocery sales on the eastern seaboard.

 Citigroup analyst Bryan Raymond said Coles and Woolworths were attempting to minimise the loss of customers to Aldi by demonstrating better value with a mix of national and improved private label brands.

“In some respects it’s about slowing (Aldi’s) growth,” Mr Raymond said.

“Aldi has made material market share gains and Woolworths and Coles need to be careful they don’t lose shoppers because they don’t have a good value offer – they’ve made good progress on that over the last two years.”

 “Aldi is still growing but the loss of customers from Woolworths and Coles has moderated and some of that is rightly attributable to their private label positioning,” he said.

 According to Coles managing director, John Durkan , Coles was prepared to cut prices ahead of cost savings to ensure the supermarket chain stayed cheaper than Woolworths, which has invested about $1 billion into prices over the last 18 months.

“We’re going to carry on investing in lower prices to make sure we do what we said we’d do, which is to be the cheapest supermarket,” Mr Durkan said.

“We’re going to do it in a measured way [and] eventually our cost savings will pay for our investment in our business.”

Woolworths joins European purchasing and marketing group

Supermarket giant Woolworths has become a member of European Marketing Distribution AG (EMD), a purchasing and marketing group based in Switzerland.

This new partnership means Woolworths will maximise the EMD network to procure volume for its private label product ranges.

The move also means that EMD strengthens its position as a major purchasing and marketing group alliance all over the world.

Already before this new membership, EMD combined a revenue of 178 billion euros – its new member, the Woolworths Group, achieved a revenue of more than $58 billion in the 2016 financial year across its operations in Australia and New Zealand.

Woolworths will optimise its European purchasing procedures through the already established office in Switzerland and working in close cooperation with EMD. The agreement between EMD and Woolworths relates initially to the private label business only.

“We are delighted to partner with EMD. This collaboration will increase our access to great quality private label products that we are unable to source locally. Combined with our commitment to source Australian products first and foremost, this ensures our customers will have even more choice and convenience when shopping for own brand products at Woolworths,” commented Steve Greentree, Director, Woolworths Food Company.

“Furthermore, the agreement will provide a direct network for Woolworths’ Australian and New Zealand suppliers to maximise investment and growth opportunities with European retailers.”

 

Woolworths appoints new supermarket boss

Woolworths has appointed experienced Tesco executive Claire Peters as managing Director, Woolworth Supermarkets.

Peters brings with her more than 20 years of retail experience, most recently as Chief Operating Office of Tesco Thailand, where she currently has overall responsibility for the supermarkets supply chain and logistics encompassing 60,000 employees across 1,900 stores and six distribution centres.

In her new role, she will report to CEO Brad Banducci and lead a team of more than 115,000 team members across 992 supermarkets.

“After an extensive search for the right candidates, we are delighted to welcome someone of Claire’s calibre to our team,” Banducci said in a statement.

“Woolworths is one of Australia’s most iconic brands. The strategy for our transformation is clearly defined and starting to deliver results. Claire has a proven track record in working with teams to deliver against key strategic objectives and she is the right person to work with our tea to continue the good progress we have already made.”

Peters will assume the role on 1 July 2017.

Woolworths to continue purchasing fruit from SPC

Woolworths has agreed to purchase an increased amount of tinned fruit from SPC Ardmona over the next three years, despite speculation it would end the contract early.

The Herald Sun and others report that Woolworths made the announcement on Friday night, ending a week that saw a community backlash against the rumoured decision.

Just last week SPC Ardmona lost  a contract to supply tinned tomatoes to the supermarket giant and, according to managing director Reg Weine, the level of community support for the company has been “incredible”.

“Support for regional Australia, its farmers and its communities, has never been more important and SPC will continue to fight for the Goulburn Valley and for a level playing field,” he told the Herald Sun.

The new contract is for three years, and covers the equivalent of nine million cans of deciduous – falling off when mature – fruit, to be sold as Woolworths’ private label product. A separate deal for tinned tomatoes ended last week.

‘‘The vast majority of the Woolworths and SPC partnership relates to SPC’s iconic branded products — in addition to buying our fruit for their private-label franchise,’’ Woolworths’ statement read.

‘‘SPC Ardmona and Woolworths have worked collaboratively and will continue to work together to reduce costs and improve efficiency in our supply chains.’’

Dick Smith blames ‘extreme capitalism’, Aldi for SPC axing

Entrepreneur Dick Smith has said Woolworths’ decisions to end its supply deal with SPC Ardmona was the fault of tough competition from Aldi, which could eventually run Woolworths and/or Coles out of business.

Woolworths has said it is reviewing the prices and volumes – as it does every year – for the coming season. It has not guaranteed it will continue its five-year, $70 million contract with SPC for tinned fruit, which began in 2014, and has dumped SPC as a supplier of tinned tomatoes.

Dick Smith has weighed in, telling AAP that this was the result of intense price competition from German supermarket chain Aldi, as well as the result of “extreme capitalism”.

“It’s clear that Woolworths and Coles will have to either replicate Aldi, that is, move to around 90 per cent home brand products and reduce their product selection from over 20,000 to just a few thousand, while sacking most of their Aussie employees, or they will be sent into bankruptcy,” Smith told AAP.

“There is absolutely no doubt in my mind that Aldi, with its incredibly low overheads – they hardly employ any Australian staff – and its private ownership in Germany – they don’t have the high costs of public listing – will mean they will eventually send one or both of our Aussie shareholder owned food retailers out of business.”

The tinned fruit deal was announced in 2014, at a time when the survival of the Shepparton operations of SPC Ardmona – and hundreds of jobs in the Goulburn Valley – were unclear.

SPC received a $22 million Victorian government grant to upgrade its facilities at the time, with parent company Coca-Cola Amatil investing $78 million of its own money.

Woolworths’ SPC tomato deal canned, fruit contract uncertain

Woolworths has confirmed it will no longer source tinned tomatoes from SPC Ardmona in Shepparton, and won’t say whether it will continue to buy tinned fruit from the Goulburn Valley cannery.

The Herald Sun reports that a “goodwill” deal to buy SPC’s tomatoes had ended, with pressure coming from federal and state politicians for the supermarket chain to continue its five-year, $70 million contract for home brand canned fruit.

“Woolworths needs to honour their contracts. Everyone in this arrangement needs to honour their contracts,” said opposition leader Matthew Guy.

AAP reports that Woolworths is currently discussing volumes and prices for the coming season, as it does every year.

Woolworths says it remains committed to the “spirit” of the partnership, which has helps support employment of roughly 1,000, plus a similar number of indirect jobs.

As reported yesterday, Woolworths is considering the end of its five-year contract with the Coca Cola-Amatil-owned Ardmona, which was announced in 2014 while the cannery operation was fighting to stay open.

“They really got on board with the Buy Australian campaign at that time and it’s pretty cynical behaviour now two years into a deal to back out,” Shepparton independent MP Suzanna Sheed told AAP yesterday.

It received $22 million in Victorian government support from the former state government to modernise its facilities.

 

Woolworths may cancel $70m SPC contract

Supermarket chain Woolworths is reportedly considering the end of its contract with SPC Ardmona, two years into a five-year, $70 million contract.

The Herald Sun reports that the contract is under review, with unnamed industry sources suggesting Woolworths is looking to suppliers in China and India.

The deal with SPC in 2014 came when the processor’s Shepparton cannery – which supports 350 jobs directly and 650 indirectly in the Goulburn Valley – was under threat of closure.

The then-Coalition Victorian government announced a $22 million co-investment package at the time, with SPC’s parent company Coca-Cola Amatil investing $78 million of its own money to boost efficiency and innovation at the site.

The state government support could be in question, according to The Herald Sun, as this was conditional on 500 full-time jobs remaining over the five years.

“Woolworths needs to honour their contracts, everyone in this arrangement needs to honour their contracts,”opposition leader Matthew Guy told AAP this morning.

Woolworths commences roll out of Country of Origin labelling

From this week Woolworths customers will begin to see new Country of Origin labelling on a variety of Fresh Cut products in stores across Australia.

The move comes ahead of the mandatory deadline set by the Australian Government of July 2018, with 25 Woolworths own brand products to carry the new label by the end of next month.

The new labelling is part of the Government’s Country of Origin labelling Scheme and includes products that are 100% Australian through to products that include a percentage of Australian sourced ingredients.

“Woolworths is a long-time supporter of Australian-made and grown products with 100% of our fresh meat and 96% of fruit and vegetables sourced from Australia. We believe the new labelling reforms are great news for our customers,” said Woolworths Head of Sustainability, Adrian Cullen.

“We are working closely with our suppliers in Australia and overseas to ensure our products will carry the new Country of Origin labelling ahead of the deadline.”

Country of Origin labels will make it clearer to determine where an item has been produced, grown, made or packed, and will include the addition of an Australian Made kangaroo logo.

“We know our shoppers love to buy Australian products and this system will make it easier to find Australian made products and understand what percentage of the ingredients are from Australia,” added Adrian.

The first Woolworths own brand fresh produce to include Country of Origin labelling includes 120g and 280g Spinach and 120g Red Leaf mix.

Murray Goulburn loses Woolworths cheese contract

Dairy processor Murray Goulburn has lost the $100 million contract to supply Woolworths’ private label cheese, following a competitive tender process.

As the AFR reports, in what has been a bad year for MG, it lost the contract to competitor Bega Cheese. The change will come into force in January.

MG retained the contract to supply Woolworths private label mozzarella shred cheese as well as the contract to supply private label butter, which has been expanded to include additional products and increased ranging. However, these are less lucrative contracts.

MG said in a statement that annualised revenue loss will be approximately $108 million, however the financial impact on MG in FY17 will be limited given timing of existing contracts completing.

MG’s interim Chief Executive Officer, David Mallinson remained upbeat despite the bad news.

“MG continues to enjoy a strong ongoing relationship with Woolworths and they remain a valued partner for our co-operative. We believe our tender to retain this business was competitive, whilst balancing acceptable returns for our products given the current environment for our farmer/suppliers and investors. I can also re-assure our valued consumers that ranging of MG’s Devondale and Liddells products are not impacted by this decision and continue to be available at Woolworths nationally,” he said.

In April, Murray Goulburn downgraded its forecast 2015-16 profit to between $39 and $42 million, down from its February guidance of $63 million. This came after the company had quoted a figure of $89 million in July last year.

As a result, the company retrospectively cut farmgate milk prices and left dairy farmers in a perilous financial position.

Woolworths still faces problems, says UBS

Supermarket giant Woolworths may continue to struggle despite its near-billion-dollar decision to close 30 stores and sack 500 workers, according to UBS retail analysts.

UBS claims that, while the supermarket sector is expected to grow by 3.4 per cent over the next year, it will also become more competitive and Woolworths could continue to struggle.

The biggest threat to Woolworths is competition from Aldi and the possible entry of other new competitors such as Germany’s Lidl.

In addition, Woolworths faces slow market growth, low staff morale, and the pressures of market discounting.

Announcing the store closures and job cuts yesterday, Woolworths chief executive Brad Banducci was confident the company was back on track.

“While we have had to make some tough decisions and this has ramifications for many of our team, we are confident we are putting in place solid foundations for the future and early results give us confidence we are on the right track,” Banducci said.

Woolworths and Coles should heed simplicity lesson from Aldi

Woolworths is ditching its Select private label range. It intends to launch a new brand for a more focused range of products that promises more bang for the buck. The move comes after Woolworths decided in March to axe its Homebrand label as part of its strategy to compete with Aldi.

The move makes sense, but will likely do little to restore consumer trust and sales growth.

Management guru Michael Porter has long argued that products need a clear positioning in consumers’ minds as either special and expensive or convenient and cheap. Woolworths Select was neither, stuck somewhere in the middle. This positioning was confusing for customers.

But will fixing this problem make a difference, and perhaps even keep growing Teutonic supermarket force Aldi at bay?

Unlikely. After all, similar efforts are only baby steps towards what truly distinguishes growing companies: the ability to make consumers’ lives simpler. Think of Uber, Netflix, Amazon, but also Aldi. That’s the common denominator.

And yet, research shows that most companies keep confusing the gobbledegook out of us. A lot has been written about how consumers get more than they want, and how more product choice often makes us less happy.

But consumer confusion extends to other tactics too, like pricing and discounting. Shoppers increasingly ask questions such as: why are some products almost always on special (while others never are)? Do half-price offers mean that we usually pay twice as much as we should?

At best, discounts have become meaningless. While discounts were used successfully in the past to move excess merchandise, they have become ubiquitous and permanent, providing little incentive to respond. It’s a bit like the guy in the audience of a stadium that stands up to see more: it’s an effective tactic so long as not everyone else is standing up too.

Another major concern that emerges is product claims and packaging; for example, most consumers do not know the difference between “Product of Australia” and “Made in Australia”.

Also, products claiming to be “natural”, “real”, or “healthy” are usually hiding behind meaningless terms, undefined in labelling law and merely meant to persuade rather than inform people. The result is ever more confusion.

So what should brands do to simplify the consumer experience? Ironically, the answer to this question is not simple. It takes an awful lot of work to make things less confusing. An app that you visit once in a while and find easy to navigate may be the result of years of painstaking work, with many difficult decisions made behind the scenes about what should go where, and just as importantly, what to leave out.

Companies should start making every aspect of their product offerings simpler. Consumers do not appreciate clutter; they appreciate everything being transparent, clean and easy.

Marketers should understand that consumers rarely inherently care about brands. In some countries, only about 5% of brands would truly be missed. Whether consumers order an Uber ride, or buy a carton of milk, they often want to invest the least amount of effort and time in making the right decision.

Overloading consumers’ already saturated brains with all kinds of marketing tactics, including dynamic pricing and even heavy discounts can backfire or fall flat. This was clear when consumers showed a lack of interest in even 90% discounted product at Dick Smith’s closing down sale.

Instead, every decision brands make should be guided by a desire to help customers feel confident about their choices. Fortunately, we can learn from a handful of companies that have long understood the principle of simplicity in driving customer satisfaction.

Aldi’s success, for example, is often attributed to its simple business model of providing consistently low and transparent prices for a reduced range of high quality products.

No discounts, no confusing ads, no loyalty cards, no bullshit.

The Conversation

Richard L. Gruner, Asst Professor, University of Western Australia

This article was originally published on The Conversation. Read the original article.

Aldi winning shoppers from Coles, Woolworths

Aldi is the most profitable retailer in Australia and it should grow by about 15 per cent a year for the next three years, according to a new report.

According to AAP, the report by UBS analysts found that the German supermarket chain is growing four to five times as fast as the overall Australian grocery market and that it could grow to $14.8 billion by 2019 if the company focuses on fresh food on customer service.

In addition, by 2019-20 Aldi is expected to grow its share of the national grocery market from 7 per cent to at least 10 per cent and take a significant share of business from industry heavyweights, Coles and Woolworths.

Indeed, according to the report, Aldi could claim $450 million in sales per year from Woolworths over the next three years. It added that Coles is handling the challenge better than Woolworths.

UBS analyst Ben Gilbert pointed to the experience of Aldi overseas as having similarities to what is happening here.

“In the UK the tipping point came when the discounters (Aldi and Lidl) lifted their share of main shops to more than 10 per cent,” he told Fairfax Media.

“We think Aldi’s share of main shops is 8 per cent nationally, 10 per cent on the east coast and 15 per cent in their catchment.”

Woolworths appoints SAI Global to Supplier Excellence audit program

Woolworths today announced the appointment of SAI Global as an approved service delivery partner of their new Supplier Excellence program, which focuses on improving quality and product safety standards across its extensive global sourcing network.

SAI Global is one of four certification bodies to be appointed by Woolworths to conduct audits across their food supplier base in Australia and New Zealand following an extensive tender process.

As the largest food retailer in Australia, Woolworths is committed to delivering the highest food standards to its 28 million customers and as a result has made changes to their roster of approved auditing bodies. SAI Global will continue to support Woolworths, ensuring that Australians can be confident that the food they are purchasing is of the highest quality standard.

“We are excited to be working with Woolworths to help manage its food safety compliance through the supply chain,” said Paul Butcher, Chief Commercial Officer, SAI Global.

“Customers are at the heart of the brand and giving the company more control over its food quality, safety and compliance to ensure the best possible experience for consumers is key to the business. SAI Global is committed to helping Woolworths achieve this goal and using our extensive capabilities, specialist knowledge and technical skills in this field to drive the business forward.”

This appointment further demonstrates SAI Global’s commitment to providing risk management solutions to Retail, Food and Agribusiness (RAF) industries. SAI Global helps customers of all sizes throughout the entire supply chain across more than 100 countries.

Consumers are highly informed and concerned about food safety, so compliance to safety procedures is a vital part of running food supply chains. SAI Global is taking a leading role in helping to embed product safety processes and culture within RAF industries, ensuring higher consumer satisfaction and safety.

SAI Global looks forward to working with Woolworths in helping to ensure the safety and quality of the products sold to their customers.

Herbert Adams’ Slow-Cooked Pies available in Woolworths bakery section

A new range of Herbert Adams “Slow-Cooked” pies are now available in the chilled bakery section of Woolworths supermarkets.

The gourmet pies are slow-cooked “sous vide” style for six to eight hours to maximize the flavour, tenderness and succulence of the meat.

The new range includes Chunky Beef, Chunky Beef and Mushroom, Lamb and Rosemary, Smoky Pulled Pork and Chicken Leek and Camembert Cheese.

“They are gourmet quality, great value and quicker to heat and serve, providing an easy meal option for a whole new range of customers,” said Steven Chaur, Patties Foods MD and CEO.

“We are bringing a whole new level of quality, value and convenience to the bakery shopper,” he added.

The new Herbert Adams Slow-Cooked pies are available in the bakery section of Woolworths supermarkets nationally with a recommended retail price of $4.99.

Woolworths private label strategy will play directly into the hands of Aldi

Woolworths’ plan to rebrand its private label ranges in an attempt to meet changing shopper demands and combat the growth of Aldi will simply play into the hands of this German discounter.

This new strategy, a replication of what Coles did in November 2015, will see their existing “Homebrand” and “Woolworths Essential” product ranges combined under the “Essentials” brand name. However, in focusing on price and private label ranges, supermarkets are in a race to the bottom where there are no points of difference in products except for price.

The risks with the private label strategy

The fastest, although not the smartest, way to compete with a competitor like Aldi is to replicate; and that’s exactly what Woolworths and Coles have been doing for the past five years. With both major supermarkets driving a message of “price” and increasing their private label ranges, more shoppers also started frequenting Aldi.

Internationally, grocery discounters like Lidl and Aldi continue to steal market share from the major full-line supermarkets, while supermarkets continue to discount heavily. The practice of deep discounting and private label expansion limits the differentiation between the grocery players and accordingly reduces shopper loyalty. As such, with no supermarket providing a point of difference, more and more customers simply shop around for the lowest price.

The problem with “no-name” products

Franklins No Frills was Australia’s first low-cost grocer, with a narrow range of very low priced, generic, “no-name” grocery products. This concept of “no-name” products was new to Australian shoppers at the time and Franklin’s market position initially worked in its favour.

However, Aldi’s entry into the Australian market in 2001 changed the way we looked at private label products. While Woolworths “Homebrand” and Coles “Smart Buys” prices were generally as cheap, if not cheaper than similar entry-level private label products at Aldi, consumers considered the quality of these basic “no-name” products to be substandard to higher tiered private label products.

These lower perceptions are related to packaging. In a low involvement, routine shopping task, supermarket shoppers will often employ simple logic (often brand or price) to determine quality and aid selection.

Woolworths “Homebrand” and Coles “Smart Buys” were designed in plain packaging with no pictures to infer low price. However, shoppers also related low price and plain packaging to mean low quality.

In contrast, Aldi’s private label ranges mimic nationally branded products. As such, shoppers perceive Aldi’s private label ranges to look similar to the nationally branded alternative and correlate quality. The lower price then creates a positive value experience for the shopper.

Woolworths’ new strategy equally is about improving perceptions of brand, through new packaging, while maintaining, or even lowering price.

The rise and rise of supermarket private labels

Aldi has legitimised private label products and forced other players to lift their game. This left Coles and Woolworths scrambling to improve the quality and packaging of existing home brand ranges.

Where once private label grocery products were considered a “cheap and nasty” alternative for the branded product, supermarket quality assurance teams have changed this mind set. Today’s supermarket private label products, offer quality on par with national branded alternatives, with some, so closely resembling the market leader, one would be forgiven for grabbing the wrong box.

Australian consumers appear to be warming to the supermarkets’ private label products. Research last year indicated that the number of Australians who tend to buy private label groceries over big name brands rose from 44% to 65% in the space of just six months. In comparable markets, like the UK, the proportion of private label sales is almost at parity with national branded products and across Europe, countries like Switzerland and Spain have already reached more than 50%.

The strategy of increasing the proportion of private label products will meet the needs of shoppers who seek value over brand, but also provides sufficient margin to allow supermarkets to slash prices further.

How will private label impact supermarkets in the future?

When it comes to choice in the supermarket, some is certainly better than none, but more is not necessarily better than less. Australian shoppers can expect less choice in the supermarket of tomorrow and this may not be a bad thing.

For many years, Australian supermarkets promoted vast ranges of brands and products, believing that broader, deeper ranges would satisfy shoppers. However, recent research suggests that, psychologically, this assumption was wrong. In fact, shoppers faced with excessive choice found it difficult to choose and were less likely to purchase.

Aldi has demonstrated the power of “less”. Selling only 1700 products, the supermarket’s small ranges may deliver less choice, but saves shoppers time, this creates less confusion and satisfies most.

Globally, where German discounters like Aldi or Lidl have entered the market, incumbent supermarkets have slashed range. Recently, Tesco cut 20,000 product lines from their 90,000 range, similarly Coles in 2012 reduced its range by some 7,000 products.

While this strategy responds to customers who are looking to make their grocery shopping more efficient, it also reduces supply chain costs for supermarkets.

 

Gary Mortimer is Senior Lecturer, QUT Business School, Queensland University of Technology.

This article first appeared in The Conversation. Read the original here.

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