First Homebrand and now the Woolworths Select brand has been given the chop by the supermarket giant.
The Select brand, which was introduced in 2005, will be replaced by the Woolworths label according to reports.
Both the Homebrand and Select brands have reportedly struggled to compete in terms of price and quality with competing products from Aldi and Coles.
IBISWorld senior industry analyst Brooke Tonkin said that Woolworths is following a similar strategy by Coles to simplify private-label brands in an effort to restore sales growth.
“This is largely due to increasing competition between the two major supermarkets and emergent players such as Aldi and Costco,” Tonkin said.
“Historically, the range of private-label products, which are often cheaper than branded merchandise, has allowed consumers to enjoy gourmet and discretionary items without paying significantly more. The rapid introduction of new private-label products has resulted in drastically increasing competition within the private-label space.”
According to Tonkin, supermarkets in the United Kingdom have also sought to reduce the number of products available in each category to make shoppers’ experience less confusing, and last year Tesco announced plans to significantly reduce the number of lines in each category.
“At present, between 20 per cent and 25 per cent of supermarket shelf space at the two major Australian supermarkets is dedicated to private labels. The share of total sales for private labels is expected to approach 35 per cent by 2020-21, as supermarkets offer more private-label products, but under fewer private label brands,” Tonkin said.
Both Woolworths and Coles have focused less on profit margins and more on market share in recent years, a strategy that has hurt Woolworths’ profitability, she said.
“Increasing private-label sales have enabled Coles to post profit growth over most of the past five-year period. Aldi has also enjoyed profit growth over the period. This has lifted the industry’s average profit margin over the past five years.”
