ID:215257131 Adrian Cassar
Ok, I’m going to admit it, I’m a fan of Aldi. There, I’ve said it!
Why am I fan? Well, it’s pretty simple, I love their store brands for their price and quality. As a father of a young family, I was mainly driven to Aldi as a way of saving some dollars on our weekly shop. Aldi first opened in Australia in January 2001 and I have been shopping there for around seven years.
It wasn’t love at first sight though with Aldi, our relationship had a rocky start. Countless times I forgot to take shopping bags and had to buy Aldi’s shopping bags. Of course, the whole ‘turn your trolley around and load it yourself’ requirement took some getting used to as well. Throw in the joy of then having to re-pack all of my groceries into the Aldi bags that I just paid for and you can see that Aldi was making it hard for me to embrace it. However, like most relationships you take the highs with the lows and after those early teething problems, I’m happy to report that Aldi and I are now on good terms.
Like Brands. Only Cheaper
Aldi actively promote their store brands and highlight the significant price difference between comparable products. Aldi engaged BMF to put together a series for 15 second TVCs highlighting the price difference between named brands and their store brands. The TVCs ads are witty and fun to watch. The below TVC compares the price of a leading brand of aluminium foil, Multix, with the Goliath Aldi store brand:
What is a brand?
Simply put, a brand is a name, term, sign, symbol, colour or design, or combination of them intended to identify the products of one seller or group of sellers, and to differentiate them from those of competitors.
Branding benefits both the customer and the company that produces the good or service being branded.
For the customer, brands convey information, signal consistent quality, confer status, reduce customer risk and makes many purchase decisions easier.
For the company, brands enhance loyalty, allowing the charging of premium prices, inoculate the company from some competitive action, assist in segmentation, targeting, positioning and encourage channel partners’ support.
So why store brands?
Store brands have been around for many years. Presented as a cheaper option to named brands, store brands were previously known as being of sub-par quality. This perception is changing as supermarkets invest more in these store brand products and modernise their look and feel.
For the consumer it’s great to have access to cheaper goods. Named company brands will argue that this hurts their business, particularly Australian manufacturers.
To help address this, Aldi actively promotes their Australian Made labels with their store brands on its website and in its stores:
Additionally, Aldi promote their supplier relationships help generate more opportunities and reduce the stress of competition.
So who are the store brand consumers?
Nielsen reported (2014) that in 2006, 38 per cent of Aldi shoppers were from low-income groups and just 26 per cent were from high-income families. By 2014, the proportion of high-income shoppers had risen to 50 per cent.
What about other supermarkets?
Woolworths for example has its Homebrand range which is promoted as a range of everyday household products that is great value for money.
For example, Woolworths has its ‘Select’ range aimed at providing products that are reliable and of a high quality. Woolworths actively state that their Select range consumers are getting consistent big brand quality at a lower price. The Select range cost more than the Homebrand range and are more visually attractive to the consumer.
The store brand challenge
Interestingly, the trust of well-known brands over stores’-own has grown slightly since 2010, as has the proportion of grocery buyers who tend to stick with their favourite brands for most things they buy.
While nearly half (47 per cent) of Australia’s 14 million grocery buyers say they will go out of their way for a bargain, 70 per cent stick to their favourite brands for most products they buy and just 38 per cent buy more store-brand products than well-known brands. However Aldi customers buck this trend with 63 per cent saying they buy more store-brand products states Frank Chung in his article, Aldi shoppers ‘buck the trend’, love store brands.
For Coles and Woolworths, the news worsens states Chung, “Grocery buyers who usually shop at Aldi are a striking exception, being keen bargain-hunters and prolific consumers of stores’-own products. A product’s brand or label is less likely to be a conscious factor in their purchasing decisions.”
Aldi customers are also far less likely than people who shop at Coles and Woolworths to trust well-known brands better than store brands, or have favourite brands which they stick to.
With both Coles and Woolworths outlining plans to improve and expand their store-brand offerings, these findings “indicate that they have their work cut out for them”.
How do Aldi do it?
This is where things get interesting. Brands should enhance loyalty for the company.
What Aldi have been able to do is build a store brand range that is of a high quality and is affordable. Not only that, their store brand products are regularly winning awards. From wine to cheese, Aldi has regularly been winning awards and again this year, scooped up a number of awards. What this is helping generating is a loyalty to the Aldi store brands and as a by-product, Aldi as a store.
As Montgomery (2016) mentions, if Coles and Woolworths stock 30 SKUs of tomato sauce, Aldi will stock 1. Buying one line of sauce means that Aldi can buy it more cheaply from suppliers and then this puts the pressure on Coles and Woolworths to further discount their prices.
Where to next for store brands?
There is no reason to see why store brands will not continue to be developed by supermarkets. The store brands add another dimension to the purchaser’s experience and offer low priced options of a high standard.
The challenge lies with how Coles and Woolworths, and to a lesser extent, IGA manage Aldi’s continued growth in this area. Analysts predict that Aldi’s market share will grow from 6% (2016) to 10% in 2020.
For me, I’ll continue to be an Aldi customer for now. There’s a good chance that I can be found in the centre aisle, fishing through to find another Special Buy from Aldi.
Iacobucci, D 2014, Marketing Management (MM4), Student Edition, South Western, Cengage Learning, Mason USA.
Montgomery, R 2016, ‘It’s tough at the top as Aldi advances through the aisles’, Money (Australia Edition), 188, pp. 76-77, Business Source Complete, EBSCOhost, viewed 26 August 2016.
https://www.aldi.com.au/en/shopping-at-aldi/like-brands-only-cheaper, retrieved 25th August, 2016
https://www.woolworths.com.au/Shop/Discover/our-brands/homebrand ,retrieved 25th August, 2016
https://www.woolworths.com.au/Shop/Discover/our-brands/select, retrieved 25th August, 2016
https://www.marketingmag.com.au/news-c/aldi-dominates-product-year-awards/, retrieved 25th August, 2016
http://www.forbes.com/sites/jerrymclaughlin/2011/12/21/what-is-a-brand-anyway/#4ab345e22aa4, retrieved 25th August, 2016