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Britain's Tesco and Sainsbury pioneers in developing own brand products.

BRITAIN has always been a trailblazer for the development of own-label, or private-label food brands. And two of its dominant supermarket chains Tesco and Sainsbury have been particularly innovative. Tesco's private label food range holds the largest share of the UK's private label market, with Sainsbury coming in at second place. Both chains tout strong multi-layered own-label food ranges that continue to grow despite a tougher economic climate. This consistent private label growth may not be beneficial for branded food manufacturers, but others in the food industry view it as positive. Angela Coleshill, director of competitiveness at the UK Food and Drink Federation said: "Both branded and private label products have an important role to play in providing supermarket shoppers with a greater array of products at different price ranges to suit different budgets. This diversity makes for an exciting and highly competitive food and drink industry."

In recent years, both Tesco and Sainsbury have sought to broaden their customer base. Sainsbury, which traditionally appealed to mid and high income earners, reached out down market through promotion and new lines. "Sainsbury's based its marketing campaigns around three themes: 'Shop and Save', 'Switch and Save', and 'Cook and Save'. Shop and Save highlights the fact that Sainsbury's offers competitive pricing and a range of promotions. Switch and Save highlights the quality and value offered by Sainsbury's private label products at lower prices than the equivalent leading brands. Cook and Save meanwhile aims to help households make the most of their food budgets, with promotions such as Feed your Family for a Fiver and Love your Leftovers," reported global research firm Euromonitor International. Both promotions were focused around own label goods. Sainsbury's Feed your Family for a Fiver recipes featured a number of staples, such as bread and chicken products, from the company's 'basics' (NOTE--LOWER VASE 'BASICS') own label range.

Tesco has also run similar own brand meal deals. This Valentine's Day the supermarket chain offered a GB Pounds GBP9 special where customers could select from main and side prepared meals for two paired with a bottle of wine.

Both retailers' own brand food strategies are in tune with their customers growing desire to be more eco-conscious and have tailored their products to suit.

Sainsbury has placed high importance on sourcing local products and promotes this within its own brand strategy. In 2009, the company changed a number of its private label brands to 100% British ingredients. The company promotes their 100% British pork sausages including 100% British back fat -stating they are the only UK supermarket to do this. Tesco personalises its localisation by profiling all of their own brand (and commercially independent brand) suppliers by region on the company website. Suppliers who want to join the Tesco team, whether to sell food marketed as own brand or under their own name, can apply directly through the site using an online form.

Sainsbury's runs its own brand Partnership in Livestock and Partnership in Produce schemes, and has done so for a number of years. Sainsbury believes that this three-way partnership (supplier, farmer/grower, and Sainsbury) has the following benefits: "members benefit from being able to plan better long term, to share information, to support joint research and development, and to reduce costs."

Buying local also reduces each company's carbon footprint. Tesco actively promotes its private label's reduced carbon output through labels. "We have now footprinted over 500 [own brand] products and will continue to footprint and label our products over the coming year," said Tesco corporate affairs manager James Wiggam. Each label gives a figure of the amount of CO2 generated over a product's life cycle (from growth to storage).

That said, the leading chain is yet to make a 100% switch: this May, the retailer received bad press for importing asparagus from Peru, when the green vegetable was abundant locally. Sainsbury has undertaken a number of initiatives to limit its environmental impact of its goods. The company's environmental initiatives have been "mostly on own brand goods but of course we work with major suppliers to reduce packaging whenever possible," said Tom Parker, a Sainsbury spokesman. This year the chain re-launched its basics range tinned chopped tomatoes in cartons rather than cans. The company stated that the switch will reduce packaging by half a million kilograms a year and cut back production carbon emissions by 156 tonnes per year. Other packaging reduction efforts include removing the outer sleeve on the retailer's 'basics' own-brand chilled ready meals (lowering the amount of packaging used by 34%), and in the basics family biscuits selection the company uses 70% less packaging than in its alternative 'core' own brand family selection.

The chain has seen solid growth in its basics range, reporting sales were up 60% year-on-year in the final quarter of 2009.

Sainsbury's efforts have remained focused locally while Tesco continues to expand globally. The international player has rapidly expanded over the last year through aligning with established companies in foreign markets. Last year in India the company committed to selling food items through a cash and carry system to small retailers, restaurants, kirana stores (India's corner shops) along with entering an exclusive franchise agreement with Tata-owned Trent. Tesco now has 1,230 stores in Asia and has developed own-brand products across the continent.

Europe, another key market for Tesco, has felt the strains of the recession and so the company has rolled out local equivalents to its Discount own-label brand in these European stores. In America, Tesco has moved away from its name and operates an eco-friendly neighbourhood supermarket chain called Fresh & Easy.

Although the company is yet to reap large monetary benefits from its endeavour it has successfully expanded and has over 150 stores throughout California, Nevada, and Arizona, all sporting own brand products.

Tesco and Sainsbury's private label innovation and expansion during the recession has served them well and has the potential to keep doing so after the economy recovers. Sainsbury places high importance on packaging for its own brand goods. The company has created an eco-friendly image with a milk bag being rolled out through all stores in February. The milk bag is made of a low-density polyethylene plastic that fits inside a reusable jug. The whole system uses 75% less packaging than its standard counterpart. In April this year, the company announced, "milk bags now account for one in every 10 pint semi-skimmed milk sold [around 110,000 per week], twice as many as the supermarket predicted." Tesco also took a more principled approach to its milk selection and launched the Localchoice milk range in 2009 (NOTE--SPELLING IS CORRECT). "These [the company's expanded Fairtrade line, which includes the milk] are also a part of Tesco's strategy to appeal to the growing number of consumers who consider themselves to be ethical shoppers," stated Euromonitor International in a March 2010 report.
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Author:Miller, Karryn
Publication:International News
Date:May 1, 2010
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