Woolworths has ditched its long-running Homebrand label for the more up-market Essentials in a bid to improve perceptions of its private label range in the fight against Coles and Aldi.

WOOLWORTHS has ditched its long-running Homebrand label for the more up-market Essentials in a bid to improve perceptions of its private label range in the fight against Coles and Aldi.

The change will affect nearly 1000 products under the distinctive red-and-white Homebrand range — launched in 1983 — from pasta and sugar to insect spray, the AFR reports.

The Woolworths Homebrand label has annual sales of about $1.4 billion.

A Woolworths spokesman confirmed the change. “We have been reviewing the products in all of our own brand ranges to ensure we deliver even greater quality and value for our customers,” he told news.com.au.

“Part of this review will see our current value ranges, Homebrand and Essentials, consolidated into one improved value range called Essentials. 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.”

Earlier this month, Woolworths flagged it was reviewing its entire private label range, but stressed customers were “buying more Woolworths own label than ever before despite us having not increased the number of own label products on our shelves”.

It came after Coles announced it was eliminating a number of its longstanding home brand labels such as Smart Buy and Simply Less and replacing them with a single ‘Coles’ brand with a distinctive red ribbon.

Last month, an analysis by Morgan Stanley retail analysts Tom Kierath and Monique Rooney found Woolworths private label pricing had become more competitive but was still high compared to Coles and Aldi.

“Based on our private label basket Woolworths has reduced prices on average by 4.6 per cent compared to May 2015 when we last completed this analysis,” they wrote.

“However Coles also reduced prices by 4.6 per cent and Aldi by 1.2 per cent so little has changed in relative terms.”

They added that Woolworths pricing label range is “still stuck” with Select viewed as too expensive and Homebrand viewed as too low-quality.

“Aldi is still 18 per cent cheaper than Select and seven per cent cheaper than Coles brand while pricing differences to branded products sold by Coles and Woolworths remain at 30 to 40 per cent, which further enhances Aldi’s price perception,” they wrote.

Morgan Stanley says industry feedback suggests Woolworths’ sales performance has decelerated in the second quarter of 2016 with the migration to Coles accelerating. The analysts are predicting Q2 food and liquor sales to decrease two per cent, compared with one per cent decline in Q1.

“Ongoing high/mid-level management turnover appears to be the primary driver of Woolworths recent weak performance,” they wrote.

Earlier this month, market research firm Canstar said customer surveys indicated Coles was making headway with its private label brands against Aldi, but Woolworths was still struggling.

Private label brands make up around 30 per cent of all food and grocery sales, according to market research firm IBISWorld, which projects that figure to grow to 35 per cent by 2020-21.

frank.chung@news.com.au