At the other end of the market, where once consumers sought out the big brands, it is boutique, gourmet, premium brands attracting attention.
Counter-intuitively, as the market has fractured it is the small to medium-sized food producers, once squeezed out by the old supermarket model, which have benefitted.
They are innovative and low cost enough to produce private labels. And they are nimble and close enough to the produce and consumers to satisfy the fickle premium end.
With private labels, Aldi and Costco have arrived with refreshing alternatives including premium private label ranges with products at least as good, if not superior to the big brands.
The foreign retailers fuelled a still escalating price war in which private label products are a strategic weapon.
The supermarkets have followed suit and are learning to behave like brand owners, developing private labels with strong and consistent value propositions which emulate the market leader. They often have added features as well as a substantially discounted price.
In developing their private label strategies, supermarkets have rationalised ranges and reduced big brand stock keeping units (SKUs) in favour of private label.
This has pushed the big brands into on-going price promotions to preserve their shelf space. More of the marketing budget is now devoted to ‘below the line’ price promotion (i.e. discounts or volume specials) at the expense of brand building or so-called ‘above the line’ marketing.
At the same time the market is also becoming choosier. Changed eating habits are influenced by ethnic and demographic shifts, TV cooking shows, sensitivity around food allergies and rising health and social consciousness.
These shifts have transformed what were once specialty foods like ‘gluten free’ or ‘halal’, into mainstream growth categories.
That fragmentation has given an edge to nimble, regional and gourmet specialist producers who can be highly profitable in niches.
Big brands cannot because their business models require scale to amortise overheads. Furthermore, their culture is process driven so they do not understand the nuances of niche markets.