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In London, the Sunday Times reported that Tesco is developing a new line of private label products that are designed “to tackle the so-called Aldi effect which has seen thousands of hard-pressed families defect to the German discounter. The top-secret project, which is due to be unveiled in the autumn, aims to drive down prices of hundreds of items in the grocery giant's standard own-brand range.”

According to the story, “Tesco said this weekend that it was too early to discuss the own-brand project, but confirmed it was examining ways to ‘make things easier’ for customers affected by the credit crunch and that would involve looking closely at own brand.

“Tesco’s own-brand products fall into three ranges: Value, at the budget end, Finest, a premium brand, and standard products in between. The chain’s research has found that 80% of customers regularly buy from the Value range, 70% buy from the Finest range and most cherrypick from both.

“Tesco is concentrating on ways to bring down the cost of its standard range significantly without compromising on taste.”
KC's View:
So much for “top secret” projects…

Seems to me that while it remains to be seen whether Tesco’s new private label program will have the desired effect, the smartest thing about it is that the effort does two things – addresses the price issue while still providing Tesco with a potential differential advantage.

It makes the most sense to do both – just providing lower prices isn’t enough, in my view.