When the Select line hit the shelves 11 eleven years ago, private label products accounted for 10-12 per cent of total supermarket sales by value. Credit:Louise Kennerley Woolworths currently claims its home brand sales in grocery and perishables represent about 6 per cent of its product range or about 10 per cent of sales and, in a nice bit of symmetry, Mr Corbett is back to farewell Select in his role as adviser to the board. Market research firm IBISWorld suggests private-label products make up about around 30 per cent of all food and grocery sales in Australia. This analysis includes fresh lines, which are not necessarily going up against branded products, but it's tipped to grow to nearly 35 per cent by 2020-21. The declining fortunes of Select and stable-mate Homebrand, which Woolworths dumped in March, is a complex tale. But it's also the story of the rise of a German giant, a discount monster both chains are still battling to hobble.

Former Woolworths chief Roger Corbett is still waiting for probity clearance to rejoin the ALH board as chairman. Credit:Louie Douvis Woolworths' private label business grew "tremendously" up until about four years ago, according to Atomic 212 chief and marketing expert Jason Dooris. But Wesfarmers' turnaround of Coles and growing customer acceptance of Aldi weighed on sales. "Private label was a margin-rich business but those margins have declined in recent years and so has overall revenue," Dooris says. Branded bread suppliers are struggling to compete against cheap private-label bread. Credit:Glenn Hunt Aldi's private label is about 27 per cent cheaper than Woolworths' Select range, according to analysis undertaken by broker Morgan Stanley, but 21 per cent more expensive than Homebrand.

Dooris says Woolworths had no choice but to drop prices to boost sales of its private label lines and limit leakage to Aldi in recent years. Aldi's private label is about 27 per cent cheaper than Woolworths' Select range. Expensive lesson Do they win by squeezing suppliers harder for lower prices again on private label or do they go overseas for supply? Supplier It's been an expensive lesson for Woolworths but Dooris says the best thing the supermarket chain can do for its private label business now is rebuild and repair the company's own brand.

"Woolworths needs to recreate what it stands for because when you buy private label you're actually buying the [supermarket] brand," Dooris says. He says the success of Aldi's private label is down to its very consistent messaging about value and quality through its positioning line "welcome to the home of the lowest prices". "If you look at Aldi, it very clearly stands for value and that's wrapped up with this promise of quality," Dooris says. "They've come into Australia and it's been very easy for them to build a following because they very clearly stand for something." Unwinnable war

Major suppliers claim Coles' and Woolworths' battle to match Aldi's private label offering is an unwinnable war. There are fears the changes to Woolworths' own brand range and Metcash's plans to replace its Signature range with a new brand will only exacerbate shopper confusion. Coles has also made significant changes to its private label lines and its push to consolidate almost all its private label food and grocery lines under the red ribbon Coles brand will be complete by the end of this year. Suppliers are frustrated by the "strategic shifts" around home brands at Coles and Woolworths, changes they claim have done little to shift perceptions that private label at the majors is more about price than quality. "Every few years there is another big push on private label from the big chains," one supplier says, who will only speak on the basis of anonymity. "This whole notion of taking Aldi on, they are just going somewhere where they can't win.

"Do they win by squeezing suppliers harder for lower prices again on private label or do they go overseas for supply?" Strong-armed Private label has not always been kind to supermarket suppliers, with grocery insiders suggesting brands were strong-armed into providing own brand lines at a significant discount to their branded product. Retail analyst Brian Walker said Woolworths and Coles had also turned to suppliers for help with this latest competition crunch. "All of a sudden Woolworths are trying to grow business, grow revenue while protecting their margins and their competitor Aldi is decimating them in the price-point comparison particularly in home brand," Walker says.

"Woolworths and Coles are putting pressure on their supply channel, to drive their home brand strategy, build margins but they're getting hurt and that's why they're mucking around, chopping and changing home brands." "Ultimately, does it really resonate with consumers or matter whether the home brand is called Homebrand, Select or Woolworths? The bottom line is they're not price competitive in a lot of home-brand products." Overseas experience In Britain, private label product accounts for close to half of all grocery lines but the established supermarket brands have still been wounded by the rapid growth of the European discount giants, according to the Australian Food & Grocery Council. "Private label is expected to remain a key part of the [Australian] supermarkets' strategy but in the UK even 45 per cent private label penetration proved to be no defence for Tesco and Asda against the discounters Aldi and Lidl," AFGC chief Gary Dawson says.

"At the end of the day consumers want to buy their favourite brands and they understandably get annoyed when those brands disappear and are replaced by private label. "It's almost encouraging the switch to the discounters." Private label product has always been synonymous with cheap and cheerful in Australia. But price is only one of the factors weighing on the decision-making process. The failure of the major chains to invest in marketing their brands has hurt sales of these lines, according to marketing and branding consultants. Confusion

Sales of Woolworths' Select and Homebrand lines have suffered in recent years. The chains' own research suggested that customers did not rate the products alongside Aldi's private label range. "The different levels of house brands have made it particularly confusing for consumers," Cummins&Partners global chief strategy officer Adam Ferrier says. "As soon as there is confusion in a consumer's mind, that shopper will find a way to avoid making a decision, so your proposition has to be explicitly clear." He said the problem with the so-called supermarket price war was that very few shoppers wanted to buy the cheapest item. "People want to buy the most expensive thing they can afford, so supermarket brands still need to be aspirational," Ferrier says.

"Historically supermarkets haven't built any aspiration into their home brands." X-factor By comparison, Aldi's limited range of popular products packaged in colours and designs that speak the "category language" of the top-selling product in that grocery category have won over customers. The x-factor with Aldi's private label product is how its side-stepped shopper shame about buying home brand products, according to Hoyne Branding creative director Andrew Hoyne. "Aldi packaging might look similar to mainstream brands but it doesn't look obviously like private label," Hoyne says.

"People know it's an Aldi product, so it's not a real brand but it doesn't look as embarrassing in the cupboard. As Aldi's brand gained momentum in Australia, so did appreciation of the custom packaging of its owned brands. It put the squeeze on Coles and Woolworths' private label sales. Price pressure At the same time, intense price pressure in grocery has gradually narrowed the gap between house brand lines and the high-profile branded product. The big brands have sunk more and more into safeguarding their spot on the weekly shopping list.

This has come at the expense of investment in product development and manufacturing, "which means mainstream fast-moving consumer goods brands have less to invest in innovation", Hoyne says. "This is not really something that concerns the mainstream grocery chains. In their view, it's just a reality of the changing market and a commercial opportunity for increased profit and shareholder returns."​