Why are supermarket house brands cheaper than other brands? It’s not due to quality

Why are supermarket house brands cheaper than other brands? It’s not due to quality

“In some instances, there’s a middleman … between the manufacturing facility and the retailers,” he noted. “We try to work directly with the manufacturing facility or supplier … and we pass the cost savings from this to the consumers.”

On why manufacturers would want to sell their products under supermarkets’ house brands, he said some of them have excess capacity and are “open to working with multiple brands”, including house brands, to optimise their capacity.

When it comes to marketing and branding of house brands, FairPrice also “(does) not over-invest”. For its own flavoured and UHT full-cream fresh milk, for instance, it opted for “standard packaging from the supplier”.

When the products were launched, FairPrice established “some (brand) communication to get the initial awareness up”. After that, it relied on word-of-mouth recommendations from consumers who had tried the milk, said Wong.

“That allows us to not have to continue spending marketing dollars on driving the sales and awareness.”

CO-BRANDED FISH BALLS: A NEW STRATEGY

FairPrice’s house brand sales have grown by 20 per cent over the past three years.

And a Talking Point survey found that 51 per cent of the 500 respondents are making more house brand purchases compared to a year ago. The main reason for choosing these products: Price.

Singapore’s core inflation, which excludes accommodation and private transport costs, has reached its highest level since November 2008.

It rose 4.4 per cent year on year in June, up from 3.6 per cent in May, with stronger price increases in categories such as services, food, retail, electricity and gas.

But house brands may not necessarily be the cheapest products on the shelves. This is because supermarkets have responded to changing customer needs and expanded their house brand range beyond the essentials.

Some products cater for segments of shoppers with more specific or sophisticated tastes. Take, for example, FairPrice’s organic extra virgin coconut oil.

“We look at our data and … where there’s an opportunity for us to expand our range to meet (customers’) needs,” said Wong.

Online grocer RedMart, meanwhile, has adopted another strategy for some of its house brands. It has partnered with some manufacturers and rolled out co-branded products with packaging that features both RedMart’s and the manufacturer’s names.

One such collaboration is with Fishball Story, an eatery that was awarded a Michelin Bib Gourmand for its fish ball noodles.

At S$6 per pack of 15 RedMart x Fishball Story Yellowtail Fish Balls (300 grammes), it is a bit pricey, felt Talking Point host Diana Ser.

The objective of this collaboration, said Jolin Huang, head of RedMart and grocery at Lazada Singapore, was not to improve people’s perceptions of house brands but to offer a wider range to customers.

“Also giving them an alternative (that’s) better-tasting (and) that they’re not able to find in supermarkets outside or even at (other) online supermarkets,” she added.

Ultimately, consumers looking to stretch their dollar can still do so by choosing house brands of everyday items such as toilet paper, biscuits, rice and dishwashing liquid.

For example, Ser’s grocery bill for a trolley laden with house brands was 30 per cent (S$19) less than the S$64.40 she would have spent on the same items if they were non-house brands.

As supermarkets’ house brands evolve and expand, if the result is a wider range to choose from, “it’s still a win for us”, she said.

Watch this episode of Talking Point here. The programme airs on Channel 5 every Thursday at 9.30pm.

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