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Sales of Pick n Pay’s new top-end house brand prepared meals were up 50 percent from a year ago, it said yesterday, after it had spruced up its offering in a bid to win back up-market customers.

June 25, 2008

By Tom Robbins

Cape Town – Sales of Pick n Pay’s new top-end house brand prepared meals were up 50 percent from a year ago, it said yesterday, after it had spruced up its offering in a bid to win back up-market customers.

Until last September – when the downturn hit hard – competitor Woolworths had been stealing the market as it rolled out premium convenience meals under its own label.

Peter Arnold, the general manager of Pick n Pay fresh foods, said it was achieving double-digit growth in the house brand category week on week. He admitted that the previous private label, Foodhall, had been poorer in quality and packaging.

Arnold denied that the No Name products were poorer in quality than competing national brands. He defended the use of inexpensive packaging, saying customers didn’t want to pay more for it.

He said house-branded products accounted for 13 percent of sales; when it included meat and vegetables it accounted for 30 percent.

A significant supplier was Tiger Brands. This was a new area for the manufacturer, but Pick n Pay was still working out which meal types had the strongest customer demand, Arnold said.

Mark Ansley, a portfolio manager at Cadiz, said private label prepared meals offered high margins and could pull customers into stores.

He cautioned, however, that the growth had been off a low base, and that in the past private labelling had not been an effective strategy.

The retailer said recent changes, including a brand refresh costing R110 million, were part of a strategic shift that included getting products into supermarkets more quickly by centralising distribution and incorporating new systems software.

The Foodhall brand would be discontinued, along with the Pick n Pay Choice label, which included vegetables and dry groceries. These products would all be rebranded as Pick n Pay and would “be the equivalent to the leading national brand at a better price”.

There were no fundamental changes planned for Pick n Pay’s entry-level private label No Name, although the brand would be modernised. Earlier this month market research company AC Nielsen said supermarket groups had not invested enough in packaging and advertising to change perceptions about the poor quality of the bottom-end private label. The category was growing despite the suspension of advertising for the No Name brand while it was being tweaked.

Private label brands offer retailers higher margins, as other manufacturers can command a premium on competing national brands.