Tuesday, February 19, 2008

The Consumer Revolution Continues - let's get rid of store brands

I fear that my old colleague Bob Quiggin does not share my beer tastes! Or so I infer from his comment on my opening post in my current campaign. However, his comment includes some very useful material to support my current campaign.

As part of this, Bob wrote:

More seriously, my family possesses what we now call the "Woolworths touch of death". If we find a product that we like, Woolies will take it off the shelves pronto.

Our local man supermarket is also a Woollies, and I have the same feel. Indeed, it is Woolies Eastlakes that launched this current diatribe.

A little while ago Woolies Select brand started to appear on the shelves. I was quite interested The packaging was stylish, the price appeared good.

On planning to buy some tinned fruit I looked at the label - product of China. I stopped and brought SPC.

Don't get me wrong. I do buy overseas produced food. But I prefer to buy Australian or New Zealand first.

Then, thinking about it, I realised that at a time of short self-space, every Select line stopped another line from getting shelf space. Now I know all the business arguments for store labels. It's just that those arguments are in the store's interests, not my own.

So, and subject to one exception that I will outline in a moment, if you want to exert personal discipline on the chains, do not buy their home brands. All you are doing is giving them greater market power.

The exception? For those who are broke, the bottom end of the store lines cannot be so simply rejected. If the difference between principle and practice is putting bacon on the breakfast table, then I say go with practice.

Mind you, bottom price end bacon is generally not as nice. Among other things, it is a lot more watery, making it harder to crisp. There is another story here. Still, for the moment and in the case we are talking about, go for practice.


Lexcen said...

There is no doubt the Home Brand products are slightly cheaper but then they are inferior quality products so you aren't saving money, just compromising on quality. Some people might not be fussed by inferior quality items such as tissues for example but who would deliberately buy inferior quality food products just to save a few cents? Now some people might object and say there are people who are so poor that it does make a difference to their budget. I'm not one to judge but I bet these same poor people can still afford to buy cigarettes at an average $12 per pack.

Jim Belshaw said...

Lexcen, I really disagree with you on this one. May I suggest that you are judging?

David said...

Wow, 12$ a pack. I must now rethink my criticism of the anti-smoking nazis here in the US!!!

Lexcen said...

Jim, I'm glad you disagree otherwise it would be boring to agree all the time.

Bob Quiggin said...

Lexcen's comments miss the mark twice, IMAO. Firstly, quite a few of us have been poverty stricken enough to have to pay for lower quality food without being smokers or drinkers, both now and in the past. The decisions can be the difference between eating properly or not.

More importantly, if you know what you are doing, you can buy pretty well on home brand items. The woolies generic spaghetti, for instance, is as good as San Remo (although a lot less expensive) as it is made by San Remo. A neat for of differential marketing.

So then it comes down to a decision - do you buy home brand at Woolies or something more expensive at the corner store, in order to keep the competition alive.

And don't even get me started on how woolies treats fruit and veg, or their producers.

BTW, I understand the reason cheapo bacon is so repulsive is that rather than smoke curing it, they flavour it with chicory essence.

Jim Belshaw said...

Lexcen, constant agreement would indeed be no fun!

David, the price of the cigs I buy ranges from $10.35 to over $13 depending on where I buy them. Tax makes up the majority of the price. In NPV terms and adjusting for higher health risks, smokers have on fact been subsidising the health system, not the other way around.

Bob, I will get you started on fruit and vegies! I did not know about chicory and bacon. More broadly, back in July I put up a post on food prices - http://belshaw.blogspot.com/2007/07/food-prices-in-australia.html - that is still getting a lot of hits. This spells out a little more about the impact of higher food prices.