THE “big two” supermarkets are being put under pressure from relative newcomers like Aldi and Costco, and food brands are becoming ammunition in the war.
The rise of brands is one of the megatrends identified by agrifood consultant David McKinna in his talk to the 2015 Meat Industry Conference on the Gold Coast last month.
Brands are becoming more important because the food retail landscape is changing with unprecedented speed.
Another speaker, Martin Kneebone of food supply chain analyst FreshLogic, forecast that Australia will see more change in the food retail market in the next five years than there has been in the last 25 years.
That is partly due to competition. Mr Kneebone reported that in the United Kingdom, which has long been a window into future supermarket trends in Australia, old established food retailers are under acute pressure from relative newcomers like Aldi and Lidl.
“Aldi and Lidl in the UK are growing at 20 and 30 per cent respectively, while the older retailers are at best breaking even,” Mr Kneebone said.
Over the past three years, some of those retailers have been paying developers to exit contracts for store development.
In Australia, Aldi is steadily munching into the market share of the Big Two.
The no-frills German retailer already has 380 stores in Australia; Mr Kneebone thinks there’s room for 750-800.
Aldi isn’t the only thing giving the Big Two heartburn. New channels for marketing food are emerging, especially through e-commerce.
The effect is to eat away at the dominance of Coles and Woolworths, and to give consumers more choice in how and where they shop.
With that choice comes greater opportunity for food producers to market different value propositions to select groups of consumers using brands.
“Your bargaining power is going to increase,” Dr McKinna told the conference, “and the role of brands is going to become more important”.
He points to brand marketing of milk, which has effectively decommoditised a commodity product.
Once, you just bought a carton of milk. Now, Dr McKinna reported, there are now more than 100 brands of milk.
“The presence of brands has driven demand, and created some consumer excitement.”
“Your fridge at home might have three different milks. Your wife or kids might have a different milk to what you have; you might have a different milk for your coffee.”
The cost of building a brand is now a fraction of what it used to be.
In the past, a company needed to mount an expensive television campaign to get brand traction. Now, it only needs a savvy social media campaign.
Matthew Cawood
National writer for Fairfax Agricultural Media.
National writer for Fairfax Agricultural Media.
