es with the inherent risk that shoppers may feel duped into buying a brand which is not really a brand. How supermarkets communicate these brands will be vitally important to their success. Private label growth Australian shoppers have warmed to the supermarkets’ private label products. Research by Canstar Blue earlier this year found that the number of Australians who purchased private label groceries over big name brands rose from 44 per cent to 65 per cent in the space of just six months. Market research firm IBISWorld estimates that private label products currently make up about 20 per cent of supermarket brands and this is projected to grow to 35 per cent of all food and grocery sales by 2020/21. Yet, 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, Germany and Spain have already reached more that 50 per cent. Private label challenges Despite shoppers’ apparent appetite for such products, there is still a stigma attached to buying private label. Consumers don’t really want to feed their much loved felines Coles Cat Food or apply Woolworths Facial Moisturiser. There are supermarket categories where private label simply doesn’t work. Aldi’s private label ranges mimic the packaging of nationally branded products. Much of this stigma stems from history, as supermarket private labels evolved from no-name generic 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 to its benefit. However, Aldi’s entry into the Australian market in 2001 changed the way shoppers looked at private label products. While Woolworths Homebrand and Coles Smart Buys were generally as cheap, if not cheaper than similar Aldi products, consumers considered the quality of these no-name generics to be substandard. As a result, supermarkets implemented a “good, better, best” strategy for private labels. Notwithstanding the recent efforts of the big two supermarkets to rationalise and re-launch their private label ranges by essentially removing the bottom rung, even their very best offers, “Select” and “Finest”, are still adorned with the supermarket brand and logo. Where these current private label ranges fall short, “phantom brands” will succeed. Why phantom brands work Aldi’s private label ranges do not carry the Aldi moniker, instead they carry a plethora of exclusive brand names like Lacura Skincare, Choceur Finest European Chocolate and Mamia Baby. Aldi’s private label ranges mimic the packaging of nationally branded products – take a look at Aldi’s copy of Kellogg’s Nutri-Grain, called Power-Grain, or its Sunny Crumpets that look remarkably like Tip Tops’ Golden Crumpets. Such phantom brands infer quality but also value, due to Aldi’s low prices. Aldi’s private label ranges do not carry the Aldi moniker, instead they carry a plethora of exclusive brand names. As grocery shopping remains a mostly low-involvement, routine shopping task, supermarket shoppers will often employ simple logic, often brand or price, to determine quality and value. In such a context, shoppers are presented with national brands and think, higher priced, excellent quality, good value. At the other end of the spectrum, shoppers also encounter supermarket private label products and think, low price, acceptable quality and better value. Phantom brands will fill the gap in the middle, priced a little higher than supermarket private labels, but under national branded products. Shoppers will perceive a new “brand”, moderately priced, good quality and excellent value. A risky win for supermarkets The introduction of “phantom brands” last week by Australia’s largest food retailer, Woolworths, is a strategic move away from the deepening price wars. Such brands will attract a new value-seeking shopper, who is willing to pay a little more for a better quality product, while their Woolworths Essentials range will continue to satisfy the budget-shopper. These new brand names like Your Majesty Cat Food, Apollo Dog Food, Bell Farms and Baxter’s will give the impression that there is a greater choice of brands to choose from in the store. Being essentially supermarket owned brands, higher profits would be achieved. It also allows Woolworths to capture a larger slice of category sales where private labels don’t work, like health and beauty, haircare, pet food and baby needs. The risk Woolworths will face is in the communication of launching such brands. While shoppers understand the Aldi offer (brands that aren’t really brands), they may feel they’ve been duped into buying a brand that is in fact a supermarket private label in disguise. Dr Gary Mortimer is associate professor in marketing and international business at QUT Business School Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.