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The price battle which formed a large part of the private label war has ended in something of a truce between Sainsbury’s, Tesco and Asda. While competition remains fierce, there has been a palpable shift in strategy from cheap and cheerful private label to private label ranges that offer consumer lifestyle solutions, particularly among the top two grocers; Tesco and Sainsbury’s.

Consumer lifestyle solutions are fast becoming a powerful vehicle to develop Tesco and Sainsbury’s into brands in and of themselves.

Diversification among private labels

The immediate impact of this change in dogma has been a revitalisation of private label with private label sales of packaged food growing by £438m in 2001 following several years of steady and slow decline. Premium ranges of private label food including the recently introduced FreeFrom range from Sainsbury’s as well as rapid expansion of Tesco Finest and the introduction of Organic ranges from both retailers have added value.

Segmentation of private label has expanded the offering from one retailer brand to several sub-brands to cover the full spectrum of consumer needs from budget to gourmet to organic to, more recently, special dietary needs, with the launch of FreeFrom by Sainsbury’s in 2002.

In fact in 2002 Sainsbury’s launched three new private label ranges. In addition to FreeFrom, it launched active:naturals, a range of premium toiletries, and Perform + Protect which rationalised several Sainsbury’s branded products into one range covering home care and health and beauty. Among the brands assimilated into this range was Novon, Sainsbury’s popular textile washing product.

The bigger picture for the multiple grocer

Most interesting was the launch of FreeFrom which, according to Helen Touchais, Sainsbury’s Marketing Manager for own brand innovation, was launched with the expectation that it would generate significantly lower sales turnover than other Sainsbury’s private labels.

According to Touchais the value of the sub-brand is in the demographic which it attracts to Sainsbury’s stores, namely high per capita spenders who go on to do their weekly shop in Sainsbury’s purchasing across a wide range of product categories. FreeFrom differentiatesthe retailerfrom its competitors, Asda and Tesco and encourages loyalty among a valuable demographic.

Similarly, Sainsbury’s Taste the Difference appeals to a similar group of very food aware consumers who fill their baskets with premium products. Currently one third of Sainsbury’s shoppers buy from the Taste the Difference label on a weekly basis. These same ‘foodies’ go on to purchase premium branded products such as Ben & Jerry’s ice cream and Nando’s Peri Peri sauces.

Safeway follows the leaders

Contrast this with Safeway, which has not yet managed to develop its private label brands including The Best and Eat Smart, to achieve the profile of Finest or Taste the Difference. It has instead relied on so-called ‘hero pricing’ to draw in footfall using a hi-lo pricing strategy. As a result Safeway customers are highly promiscuous arriving to purchase the advertised deals and making multiple purchases of those products but leaving without filling their baskets with products not on offer.

According to Judith Batchelor, General Manager of NPD at Safeway, Safeway generally builds share throughout the year only to lose its shoppers at Christmas when they return to Tesco, Sainsbury’s and to a lesser extent Asda to do their main shop.

Safeway has begun to shift its focus, recently announcing that its deep cuts policy was to be reviewed and that the chain would move towards an EDLP strategy as it renovates its stores and opens new locations. It has almost simultaneously announced that it would re-launch The Best, its own premium private label offering. An additional 120 lines are to be added to the current 300 and £2m will be invested in marketing the re-vamped range.

If Safeway is to compete on the basis of EDLP rather than hi-lo it will need a well-developed range of private label which attracts consumer’s attention and just as importantly distinguishes it from Tesco and Sainsbury’s.

Brands vs. private label

On the basis of an evolving private label strategy, Tesco Finest and Sainsbury’s Taste the Difference have already developed a level of recognition comparable to many of the UK’s top brands.

Sainsbury’s Taste the Difference was worth an estimated £350m in retail sales in 2002 and Tesco’s Finest was even larger, generating almost £500m. That makes Sainsbury’s Taste the Difference, the smallest of the two, almost twice the size of Avon, three times the size of Boots No. 7 and almost one and a half times the size of Mars including Mars Ice Cream and Mars dairy drinks.

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