By Eli Greenblat
AN INDUSTRY report into private-label foods has underlined the category's growth and earnings potential for Australia's leading supermarkets, Coles and Woolworths, with nearly a third of trolleys expected to be filled with private-label items by 2015.
While a popular range of off-label foods has already helped propel the category to account for 23 per cent of Australia's $70 billion grocery market, a similar trend in liquor is developing as the supermarket chains put out a growing portfolio of private-label wines, beers and spirits.
An IBISWorld report says private labels account for 20 per cent of annual grocery sales for Coles and Woolworths, while discount supermarkets, including price-conscious German group Aldi, have taken 3 per cent of the domestic market.
IBISWorld general manager Robert Bryant said growth in private-label groceries had outperformed traditional branded groceries consistently for a long time and, in some sectors, private labels had captured the lion's share of the market.
"In certain sectors, such as dairy, private-label growth has been dramatic, with private-label milk sales rising from 25 per cent of supermarket milk sales in 1999 to a massive 52 per cent last year," Mr Bryant said.
During the global financial crisis, Woolworths reported that private-label products had booked sales growth at nearly double the rate of branded foods as consumers opted for value. That faster growth rate had retreated somewhat in the latest quarter.
But IBISWorld believes the trajectory is still upwards, with the present 23 per cent market share set to reach above 30 per cent in the next five years. This would still be below rates overseas. In countries such as Britain and the US, private labels makes up 40 per cent of sales.
Private-label foods typically generate fatter margins for supermarkets versus branded foods.