Woolworths leaves the door open for Aldi by dropping its Select brand

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Woolworths has decided to drop its Select as well its Home brand labels, completing a swing away from competing in-store brands by the retailer and its main competitor Coles.

In its place will be a Woolworths brand for more than 2000 products. The Select label was on more than 1000 items.

It completes the move away from the supermarket’s Cheap Cheap advertising of the past.

Woolworths in March confirmed it was dropping its red and white label Home brand after Coles made a similar change, replacing its in-store labels with a Coles brand.

However, the move plays into the hands of discount chain Aldi, according to customer marketing expert Teresa Davis, an associate professor at the University of Sydney Business School.

“The latest move by Woolworths (and Coles) is no more than a defensive strategy,” she says. “Unfortunately for them Aldi is the new player with agile moves and a clear targeting strategy.”

Woolworths is at the start of a turnaround strategy to lift sales growth from its current flat state. Its main competitor Coles is growing sales at 5.9%.

The retailer posted a loss of $972.7 million in the first half of the financial year, its first for more than 20 years, driven by a massive $1.9 billion write down in the value of the troubled Masters hardware business.

Brad Banducci, the new CEO at Woolworths, told an analyst briefing he plans to lift sales growth to 4% through price inflation and by opening a smaller number of new stores.

Davis at the University of Sydney Business School says Aldi has been positioning itself for exactly this moment, when the price wars between Woolworths and Coles get to a point where consumers see no difference between them and begin to look seriously for alternatives.

“Aldi has positioned its brands as being of consistent quality at a great price,” she says.

“Its latest advertisements show how well its brands perform when tested by people who prefer luxury brands.

“From a low advertising spend new entrant to a serious player it now has a marketing strategy and spend that shows much more agility and consumer responsiveness than the big duopoly.”

Woolworths says its new Woolworths label will offer customers fresh produce and food products more consistent in their promise and delivery.

“This will become a food-focused brand (covering a couple of thousand products) — Select currently covers both food and non-food products,” a spokesman said.

“On price we will offer our customers greater value, which will see the Woolworths label being more competitive in the marketplace than Select.”

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