Woolworths is overhauling its Homebrand range in a bid to improve the range’s perception in an increasingly competitive market for private label grocery products.
According to Fairfax Media, Homebrand generates $1.4 billion annually across almost 1000 product lines for the supermarket but it will soon be rebadged as part of the lesser-known “Essentials” line.
See more: Woolworths is no longer the most valuable brand in Australia
Homebrand has long been perceived as the cheap option for shoppers but Woolworths chief executive Brad Banducci previously indicated the supermarket giant has a “perception problem” with its red-and-white coloured product line, according to Fairfax.
“The issue we’ve got with Aldi is providing the same value experience in our store as you would in an Aldi, which requires us to rethink and re-engineer some of our entry-level products,” he said last year.
Private label groceries are big business in Australia and now account for around 20% of supermarket brands, according to market research from IBISWorld.
Canstar Blue research in January showed 65% of Australians prefer to buy private labels, with Aldi the preferred choice for staples like white bread, wholemeal bread, butter and eggs.
The iconic Woolworths red and white Homebrand will slowly be phased out in favour of the new Essentials branding, which will feature red and yellow packaging. The supermarket plans to making the switch on a category-by-category basis.
Essentials is currently used on a range of non-food items, but the first food item to switch from Homebrand is honey.
A spokesperson for Woolworths confirmed to SmartCompany the Homebrand and Essentials ranges will be “consolidated into one improved value range called Essentials” following a review.
“We have been reviewing the products in all of our brand ranges to ensure we deliver even greater quality and value for our customers,” the spokesperson says.
“The Essentials range as the name suggests are products every home needs, both food and non food. When customers see each product move to the new Essentials packaging they can be assured the product will offer market leading value for money for our customers.”
Is Woolworths taking the “easy fix”?
Branding expert Michel Hogan told SmartCompany the switch from “Homebrand” to “Essentials” appears to be a re-naming and not a re-branding move, which is aimed at changing perceptions without repositioning the products.
“What they see as the front line of doing that [changing perception] is to give it a makeover, which is essentially all they’re doing,” she says.
“There’s an epidemic on this. It seems every other week I’m asked about this type of thing,” she says.
“It’s in the same process [as] calling themselves Susan instead of Tracey.”
Hogan says is it appears Woolworths is only changing the name and not the products themselves and as such, a long-term change in sales is unlikely.
“My general reaction is while that certainly it can drive a [sales] bump short term – usually a bump in traffic and interest – I tend to think people are smarter than that.
“I think the reason people are going to Aldi or preferring Aldi is [for] a whole bunch of reasons,” she says.
Hogan believes Woolworths should instead be considering what is driving the overall shift behind more people preferring Aldi’s product lines.
She says buying a product is about the experience in-store, the placement of the product and a number of other reasons aside from the name on a label.
“Customers are not quite as dumb as companies appear to think they are,” she says.
“If all the products that were called Homebrand are now called Essentials, they wont figure it out?”
Hogan believes the reason Aldi is seemingly doing better with its private label line has little to do with its name.
“One of the first things they say is its really great quality. There’s a payoff that people respond to and recognise thats actually what you’re combating,” she says.
“It’s important to look below the veneer of something to change the way a customer is responding to it.”
For SMEs, Hogan warns against taking the easy fix by only changing a product name.
“Changing the name is the easy fix. It’s the sexy, sparkling, shiny stuff. It’s easier to do that and think that’ll fix the problem,” she says.
Hogan suggests businesses look at featuring other product elements, such as how the product is made or how it has been sourced as a way to speak to the product’s quality.
“But that takes work,” she says.
“That’s something that you’ve really got to think about and you’ve got to have a story to tell.”
Originally published on SmartCompany on March 29, 2016.