Although the big grocery chains have, over the past 30 years, made huge and profitable inroads into most product categories with their own-brand alternatives, key product areas stubbornly refuse to be colonised.
In the unceasing war of the supermarket aisles, own-label has triumphed in fresh and tinned fruit and veg, in fruit juice, in wine, in cheese, in desserts and yoghurts, bakery and butchery, and basic cooking ingredients.
But proprietary brands still rule breakfast cereals, colas, instant coffee, pet food, confectionery, sanitary products and detergents. In these 'super-brand' categories, shoppers are still prepared to pay 20, 30 or even 40 per cent more for their favourite brands. It is these high-margin products that supermarkets are eyeing with increasing desire.
Opportunities for geographical expansion have dwindled in the last year. The grocers are pulling in their horns, shelving plans for new superstores. The discounters are poaching their customers. Margins are under pressure. Underlying sales are going backwards: last week Argyll, the Safeway supermarket chain, announced that like-for-like sales had slipped by 0.4 per cent. One ray of hope is to attack the blue-chips with own- label competitors.
J Sainsbury, the biggest supermarket group, is keen to penetrate more of these areas in the wake of the phenomenal success of Sainsbury's Novon, its sub-branded detergent (see panel). Sub-brands are own-label or private-label products given a unique brand name as well as the grocery chain identity.
These supermarket sub-brands could seriously hurt the proprietary manufacturers. David Atkinson, food manufacturing analyst with NatWest Securities, says: 'I think they are a serious threat. We've seen enough evidence that products like Novon and Gio (Sainsbury's fizzy lemon and lime drink) can do much better than straight private label.'
David Quarmby, Sainsbury's joint managing director, says the proportion of own-label sales has risen recently, as a result of the Essential for Essentials promotion, in which many lesser-known manufacturers' brands have been swept from the shelves and replaced by own-label.
He is delighted with the success of Novon and Gio. 'Clearly it would be a surprise if we weren't looking for further opportunities in sub-branding.'
Mr Quarmby won't be drawn on what these are, but the group is expected to launch a cola sub- brand shortly - precisely the kind of product category which until now has been sewn up by the blue- chip manufacturers Coca-Cola and PepsiCo.
Cott Corporation, a Canadian company whose private-label colas have taken North America by storm, has quietly bought control of the canning operations of Benjamin Shaw & Sons in the UK. Cott is thought to be in advanced talks with Sainsbury about launching a prominent cola sub-brand.
Sainsbury is also considering relaunching its various own-label pet food products under a single umbrella brand-name, like Novon. Pet food is another product group hugely dominated by proprietary brands, notably Pedigree Petfoods, a division of Mars.
Michael Rosen, non-food department director at Sainsbury, says of Novon and the concept of sub-brands: 'It has got the whole company to review and re-analyse the way it plans its ranges and markets its products.' On pet food he adds: 'Watch this space.'
Changes in taste and regulation can also reveal new own-label opportunities. Last month Sainsbury launched a range of contact- lens cleaning fluids, after the chemist shop monopoly ended.
Asda is aggressively rolling out sub-brands. In the past two years it has launched Integra detergent, Silk fabric conditioner, Tiger cat food, Shades toilet tissue and VIPs disposable nappies in another 'super-brand' category - dominated by Pampers and Huggies.
It is also pleased with its Tastes Flipping Good brand of fresh chicken. Then there is its George range of clothing, a joint venture with the former Next boss, George Davies. Asda is confident it can substantially lift its own-label share from 26 per cent of total sales.
It believes sub-branding adds authority to own-label products, especially in brand-dominated markets. It is also useful to tie together large and complex ranges under an umbrella name. Till technology aids the process: Catalina machines can be programmed to spew out money-off vouchers to customers as their newly purchased rival brands are passed over the scanner.
Power has ebbed and flowed in the grocery trade over the past century. Before the First World War it was the food wholesalers that called the shots, using sheer size to screw down small suppliers on the one hand and get top prices from small retailers on the other.
Between the wars, the manufacturers were on top. By developing strong, desirable brands, they persuaded customers to demand their products in what academics now term a 'pull-through' strategy. The retailers were squeezed.
In the post-war years, wholesalers withered away and retailers came to the fore, developing their own names as brands in themselves - sufficiently convincing to make own-label acceptable. Their sheer size gave them colossal negotiating clout.
Britain is now dominated by a handful of grocery chains that account for the bulk of household shopping. Moreover, they have grown own-label to a significant proportion of total sales - about 55 per cent in Sainsbury's case. Around 8,000 of the 17,000 lines available in a Sainsbury superstore are own-label.
And despite the brand manufacturers' attempts to disparage own-label as inferior, shoppers disagree. A survey of 2,000 housewives by Europanel showed the majority of shoppers thought own-label quality as good as proprietary brands. At Asda, 75 per cent of shoppers thought its own label was as good; 21 per cent thought it was worse; and 4 per cent thought it was better. The figures for Gateway were 67 per cent, 31 per cent and 2 per cent. Sainsbury scored 78 per cent, 15 per cent and 7 per cent.
Own-brand goes back to the 19th century. Sainsbury launched Cremos margarine in the 1890s after the marriage of John Benjamin Sainsbury to Mabel van den Bergh. The name was outlawed by the Margarine Act in 1907 and changed to Crelos, and the product was dropped in 1958.
Own-label gives two big benefits to the supermarkets: the margins (the difference between the cost price and the shelf price) are much fatter, and they make supermarkets less dependent on proprietary brands and therefore able to negotiate more favourable terms.
The ideal position has been reached by Marks & Spencer, virtually all of whose products are under the sub-brand St Michael. It is no coincidence that M & S is also the most profitable retailer by return on sales, followed closely by that other indefatigable own- brander, J Sainsbury (see graph).
Own-label is most advanced in the UK among European countries, with about 30 per cent of all groceries now under the retailers' own labels. Germany and the Netherlands are quite deeply penetrated, at about 20 per cent. The Mediterranean countries are most tied to manufacturers' brands.
Manufacturers tend to polarise in their response to own-label. Some, such as Northern Foods, have prospered by forging close links with the supermarkets and manufacturing for them. Dairy Crest, which hopes to come to the stock market this year, is another mainly in this category.
Then there are the proprietary branders that refuse to make own- brand. Kellogg's, the American- owned cereal manufacturer, stresses the point on its packets. Unilever, which this week is expected to report 1993 profits before tax of about pounds 2.3bn, also refuses to make private-label products.
These brand manufacturers rely on heavy advertising to sustain demand for their products. Product categories where advertising is heavy tend to be least penetrated by private label (see graphic). Cornflake advertising typically adds as much as 12p to the cost of a pounds 1.20 packet, but own-label rivals have made little impact on the proprietary brands. By contrast, wine- makers spend just 0.5p in the pound on advertising - and own- label penetration is 61 per cent.
Innovation plays a part too. Yoghurt manufacturers have kept the own-branders at bay with new ideas, such as fromage frais and twin-pots. Uninventive cheese makers on the other hand, have not, and have seen 60 per cent of their market taken by own-label.
Consultants at McKinsey & Co, who carried out a study of the phenomenon last year, predict that the proportion of own-label sales will continue to grow. They say the phenomenon has evolved from the primitive generic own-label grocery product, designed to widen margins, to carefully designed brands with identities of their own, often innovative and using advanced techonology.
Becoming an own-label manufacturer for one of the big grocery chains can make sense for all but the most successful brand manufacturers, says David Newkirk, vice-president of the consultants Booz Allen and Hamilton.
'Stores are taking over the quality and image promise which was traditionally the preserve of the brands. Sainsbury, Tesco and Marks & Spencer have created brands which promise as much as the classic packaged goods brands.'
Even the last defence of the proprietary brands - perceived technical superiority - has been eroded. The stores are launching own-label and sub-brands in cosmetics, nappies and sanitary towels, products whose manufacture requires more than average technical expertise and capital investment.
The product area least hit by own-label is confectionery, which seems to rely on naked emotion for its defence. Shoppers have been buying Mars bars since childhood, and no one, not even Sainsbury, has been able to do much about it.
Sainsbury's Michael Rosen is confident there is more mileage in own-label, especially sub-branding. 'Are we getting to the No 1 brands for the first time? Probably. Will we continue to do that? Almost certainly. I think it's going to get more difficult for the premium brands to regenerate themselves. And the rewards for them are going to be less. Because we're getting cleverer all the time.'
But there is at least one encouraging sign for proprietary brands. The latest figures from the US show that private-label lost a bit of market share in the final quarter of 1993. As prices for some top brands were cut, sales of private-label fell 0.3 per cent, according to Information Resources, which tracks supermarket sales. The war is far from over.
-------------------------------------------------------- TOP 10 UK BRANDS -------------------------------------------------------- Annual sales ('92 rank) 1 ( 2) Coca-Cola, pounds 242m 2 ( 1) Persil detergents, pounds 236m 3 ( 3) Ariel detergents, pounds 231m 4 ( 5) Nescafe instant coffee, pounds 228m 5 ( 4) Andrex toilet roll, pounds 183m 6 ( 7) Silver Spoon sugar, pounds 152m 7 ( 6) Whiskas cat food, pounds 142m 8 ( 9) Flora margarine, pounds 133m 9 ( 8) PG Tips tea, pounds 130m 10 (10) Walkers crisps, pounds 127m -------------------------------------------------------- Source: Nielsen --------------------------------------------------------