Generic Revolution

Reporter: Josh Fajzullin

Brace yourselves for a total generic takeover. Our supermarket shelves are entering a new phase where in-house brands rule.

They've evolved from bland imports into premium Australian products, but as more of them bump off established brands, are we in fact losing out?

Ian Timmins has bought Coles Smart Buy Cornflakes for years. When he went to check the price the Smart Buy Cornflakes had disappeared and instead there was Coles Premium Private brand. It was on special, but more expensive and smaller in size.

If Ian didn't know better, he'd think he was saving money. "If you're getting rid of the bottom line, don't pretend you're reducing prices", Ian said.

"Not everybody wants to buy Coles products", said Francesca Farrelly who used to buy Big Sister Fruit Cake at Coles. Now it's vanished, leaving her with one choice -- Coles Budget brand. "They're just going to dictate to us what we will buy and it will all be Coles and all the profits will go to Coles", Francesca said.

"The supermarkets like the generic products because they typically get a higher profit margin on those generics, they push off the branded products and that means more money for the supermarket chains themselves", said Competition and consumer specialist Associate Professor Frank Zumbo.

Bigger profits, but in the long run less choice, at a greater cost to us. "Inevitably what happens when the branded products fall off the shelf, the generic prices will go up", Professor Zumbo added.

Not that that's stopping us buying up big -- we spend $18 billion on generics every year, every household now buys them in some capacity. At Woolworths private brands contribute to 13% of sales; at Coles it's 28%. But at chains like the UK's Tesco -- the blueprint for the generic takeover - home brands make up more than 50% of sales.

It's helped Tesco become the fastest growing supermarket chain on the planet. "One thing is for sure in supermarket retailing, trends that we see overseas inevitably have impact here", said retail expert Steve Ogden Barnes.

Steve forecasts generics to grow by up to 15% in the next five years and that would put our levels closer to the world average of 40%.

Asked by how much they planned to expand their generic lines, Coles wouldn't give us a straight answer. "If our customers are happy with our products perhaps Coles brand will increase even further. Ultimately our customers will decide", Coles' Simon McDowell said.

Nor would Woolworths: "We'd like to have a woolworths select option in most product categories... they'll only get on the shelves if our tastes testers tell us they're good or better than the leading brand", Simon Berger from Woolworths said.

However, both are more than happy to reveal their latest additions.

If the popularity of generics continues to grow, here's how it will shape our future, according to a documentary in the US -- 30,000 cows crammed into one mega farm, producing a million litres of milk every day. They'll never go outside, never graze on grass, the milking never stops.}

Everything.. comes at a cost. Every day in the U.K., one farmer goes bust, the victim of a supermarket price war.

In the UK they have mega hydroponics -- they harvest six varieties of tomato -- any season, whatever the weather. It's market takeover Tesco style being copied there.

"Why shouldn't an Australian company like Woolworths offer a good value, good quality alternative that keeps the big companies on their toes and delivers customers value", said Simon Berger.]

Customers like Ian and Francesca.

Coles says in Ian's case it took away Smart Buy Cornflakes to give customers a simpler offering. Since we raised the issue they say they'll consider reducing the price of their Budget Coles brand cornflakes.

As for Francesca and her fruit cake quandary: "I'd love Ms Fareelly to join us to see if she can further improve the quality of our fruit cake -- maybe we can start there", Simon McDowell said.

At Tesco, its not just groceries on offer. You can buy your car from the generic giant, furnish your house and you can even do your banking with them. Perhaps all of that is headed our way. "We need to toughen our competition laws very quickly because the way things are going, Coles and Woolworths are getting so powerful that they will simply be unstoppable", Professor Zumbo said