Supermarket own brand groceries now account for 40% of all supermarket grocery sales in the UK, according to the FT. They are important to supermarkets for three reasons.
Firstly, they give supermarkets a firsthand understanding of the dynamics and consequences of changing commodity prices, to which they can respond accordingly.
Secondly, they provide differentiation. With nearly all supermarkets selling the same brands, private brand goods are significant points of product difference, which can be used to attract new customers.
Thirdly, they offer higher profit margins than branded groceries, whilst still being generally cheaper than branded groceries.
This last point raises the question, “Why do people continue to buy branded groceries if they are generally more expensive?”
I posted this question on our online community, The Street.
For some people, it’s about routine:
“I think that it is just force of habit really. We know full well that everybody in the household will eat a certain brand of bread, so we just tend to put that in the basket, without looking or thinking about other options, be they cheaper or otherwise.”
For many people, it’s about experimenting with different brands to find out what’s best for them:
“For us it's a case of trying the cheaper brands and if they're not very nice or of a decent enough quality, we stick with the brands we do like.”
“I will try anything that is own brand, then compare and decide whether to buy it again. I prefer to buy branded ketchup and brown sauce, cornflakes, washing liquid/tablets, cheese, coffee just because we prefer them and don't mind paying a bit extra.”
Some other people won’t even try supermarket own brands:
“I have a perception that branded groceries taste better / are better quality. I suppose I can’t be bothered trying a supermarket brand it there's a risk that it may be poor quality and I then have to replace it with my usual brand.”
Many Street members do buy supermarket own brand products, but these tend to be commoditised staples. One member looked in her cupboards for us, and listed pasta, rice, chopped tomatoes, herbs, spices, and baking ingredients such as sugar and flour as being groceries that are supermarket own brand.
Among groceries people often do not consider replacing with supermarket brands are: bread, squash, ketchup, beans, cornflakes, tea and coffee, spreads, yoghurt, washing liquid and dishwasher tablets.