Home Retailing Hypermarket Tesco’s Renewing Private Label Push

Tesco’s Renewing Private Label Push

"I recommend Tesco own brand to my friends"
After online shopping, Tesco Malaysia is renewing its focus on private label to attract more footfall into its stores. Malaysian grocery shoppers are becoming very price sensitive as the cost of living has gone up tremendously. The retail price of sugar rose by 14% in October 2013, petrol up by 11% in September 2013 and electricity rose by 15%-16.9% in January 2014. The price hikes come as the government is moving away from subsidising essential items to increasingly pricing these products based on the prevailing market price to reduce the budget deficit.

 

Tesco Malaysia revenue annual growth rate in the local currency RM
Tesco Malaysia interim results and growth rates

Tesco Malaysia’s growth rate is slowing, reaching RM4.59 billion in 2012/13. Interim growth for the first half of 2013/14 declined to 4.5% from 14.1% two years ago. The rapid decline in revenue to 1.8% in the first half of 2013/14 at GBP terms was due to the weakening ringgit versus the pound, down by 10.6%.

To arrest the declining growth rate, Tesco is turning to own brand products or private label, which offers products at comparatively lower prices without compromising on quality. For example, the 400g pack of Tesco Chicken Flavoured Instant Noodle (80gx5) is 22.12% cheaper than the 385g pack of Maggi Chicken Flavoured Instant Noodle (77gx5) on a per unit price basis.

Tesco own brand instant noodles on the right (red and yellow)

Tesco has also made available its private label range on its online store. At the time of writing, the are 1,850 Tesco own brand products on the site ranging from office, arts and crafts (191 items) to laundry (51 items).

Tesco’s bet on private label is a calculated move to meet the needs of price-sensitive consumers. The primarily challenge for Tesco now is getting consumers to accept its own brand products.

Related posts:
Tesco – Trying to be ahead of the e-grocery game

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