Public Relaunch of Private Labels

Asda recently relaunched its entire range of more than 3,500 private-label food products, while Sainsbury’s relaunched its $1.47 billion premium “Taste the Difference” line.

With annual sales between $11 and $13 billion, Asda’s renamed “Chosen by You” line marks the largest single private label relaunch in U.K. retailing history. Asda has invested $147 million in the effort, which aims to improve quality of the range overall. The retailer worked with Cambridge Market Research to conduct 200,000 blind taste tests with 40,000 consumers across the U.K. Each Chosen by You product was tested by at least 50 consumers in a single location.

Products in the Chosen by You line will continue to be up to 20 percent cheaper than the equivalent national brand, despite improvements in product quality. The Asda relaunch also involved a packaging overhaul in a bid to make the products more visible at the shelf and to differentiate them from other private-label tiers.

“Our customers got Smart Price. They clearly understood Extra Special,” says Asda marketing director Simon Eyles. Still, he noted that the standard private label line caused the most confusion with shoppers: Many described feeling “blank” about the brand, and some consumers found them difficult to spot on the shelf.

Sainsbury’s added 150 SKUs as part of its relaunch, increasing the Taste the Difference line to 1,141 items. It was unveiled with a high-profile media campaign fronted by Naked Chef Jamie Oliver. The extended range includes a 23-item Bistro line of “restaurant quality food” designed to appeal to shoppers who are eating out less.

“There is no doubt that in recessionary times people modify their behavior,” says Mike Coupe, Sainsbury’s Commercial Director. “So the eating in/eating out balance swings in our favor.”

Market leader strategy
Asda’s move is in line with its strategy to become the market leader in non-food and No. 2 in food. While Asda already dominates general merchandise and value, president/CEO Andy Clarke admits “food quality is something Asda hadn’t been as focused on in the past as it should have been.”

By contrast, Sainsbury’s has made significant investments in quality since CEO Justin King took the helm more than five years ago. The relaunch of Taste the Difference is another in a long line of improvements made to private labels across the range, with the key benefit being the opportunity to capture more upmarket shoppers who are less price-sensitive, as well as catering to the continuing trend of consumers trading out of restaurants.

Private label accounts for half of Asda’s sales. Of that figure, the Asda standard line (now Chosen by You) makes up 85 percent of sales and is itself twice the size of Waitrose’s entire business. More than nine in 10 Asda shoppers (92 percent) place at least one private label item in their baskets during their weekly shop.

Despite its sizable investment, Asda has vowed not to raise prices. This should instill confidence among consumers who may have previously shunned Asda’s fresh food because of a poor quality perception.

The main implication of Asda’s relaunch? Key competitors will have no choice but to respond on the quality front. Asda is increasingly becoming a thorn in their side, having also recently acquired the Netto chain, which will be converted to smaller Asda supermarkets.

At the time of the Netto acquisition, many observers were skeptical that Asda had what it takes to be a formidable player on the food front. Would shoppers be able to see Asda as a food specialist when there is plenty of existing competition with arguably much stronger food offerings? With the private-label relaunch, Asda is more convincing than ever that it has the capability to give the likes of Tesco Express or Sainsbury’s Local a run for their money.