Home brands are brewing

The success of recession-proof home brand lines is about to shake up the liquor industry

If a strong domestic dollar and an oversupply of grapes weren’t already enough to contend with, Australia’s wine brands may find a new challenger emerging from within.

As the proportion of home brand, no-name and private label goods in the shopping trolleys of the average shopper climbs, large retailers such as Coles and Woolworths are extending their presence in the liquor market.

According to IBISWorld, demand for private labels grew across all demographics during the financial downturn and own-brand wine sales was the biggest growth area of all for Woolworths over the past 12 months.

Given the success of their wine and beer labels, IBISWorld general manager Robert Bryant suggests both major retailers are likely to expand their offerings in this area following similar moves by supermarket chains in Europe such as Asda, Tesco and Sainsbury’s.

The managing director of Taylors Wines, Mitchell Taylor, says an expanded presence of the major retailers in the space will significantly affect the sub-$10 market, where the brands are likely to trade, but says it will force existing brands to focus their marketing on the quality of their product.

“We will focus on the fact that we are estate grown and bottled, on the quality of our product,” Taylor says. “We operate more in the premium end of the market to make sure that our wine stands up and is recognised for its quality and its heritage.”

Having based the success of his business on an increasing demand for affordable quality wines via a retail outlet and online store, Brendan Hilferty, director of The Wine Point, says the low-margin, high-volume brands will be affected the most if the retailers expand their private-label wine offerings.

“Coles and Woolies are used to dealing in a high-turnover, low-margin space and they have huge penetration through different retail outlets where they’re already selling a significant amount of their own brands in the single bottle sales areas,” Hilferty says.

“They are aiming to take share from the big brands because if they are selling their own brand, ultimately they’ll earn bigger margins. The profitable end of the spectrum is the $15 to $20 range, where they’re unlikely to have much effect.”

Jeanne-Vida Douglas

BRW

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