Home brand auto parts to rev up beyond Coles, Woolies supermarket levels

Simon Evans
September 27, 2015
The Age
Home brand spare parts are increasingly making their way into Australian vehicles undergoing repairs and servicing in the $14 billion industry, with big player Burson Group, set to substantially bump up the levels of private label brands to beyond where the supermarket retailers have taken it in their stores.
Burson, which expanded its operations with the $275 million acquisition of Metcash’s automotive businesses Autobarn, Autopro, ABS and Midas Mufflers in June, intends to more than double its private label range to about 25 per cent of total products over the next four years as it seeks to improve margins and build on its economies of scale.
Burson chief executive Darryl Abotomey said the business had closely watched the supermarket retailers Coles and Woolworths and acknowledged it would be a gradual process in convincing the automotive after-market that high quality was being maintained.
“It’s a constant evolution like what the supermarkets have done to get the public to accept the quality,” he says.
Analysts estimate Woolworths and Coles have a private label range which now stretches to between 18 to 20 per cent of the total amount of packaged groceries they sell.
But under Burson’s plans, the aim is to steadily head towards about 25 per cent by 2019 for home brand products stocked by the businesses it owns, which supply automotive parts to 30,000 mechanics and workshops around Australia, along with chains such as Ultra Tune and Kmart Tyre and Auto. Burson is a clear leader in the $5 billion trade segment of the total $14 billion automotive parts after-market in Australia.
Focus on Autobarn
Mr Abotomey said the traditional Burson stores have a private label brand content of about 10 per cent, while in the Metcash stores it has acquired the level is about the same. But the retail brands such as Autobarn will be a focus for lifting the private label products. “That’s where we know we’ve got a big opportunity.”
Burson is also preparing to increase the level of director sourcing from international suppliers as part of the home-brand push. This will help temper the impact of the falling Australian dollar.
Mr Abotomey said Burson was very conscious of maintaining high quality. He said mechanics simply won’t cop an inferior product and the home brand items need to be at the top of the range in a “good, better, best” model adopted by the supermarket retailers in their industry.
“It’s got to be at the top of the range in the good, better, best approach,” he said.
Mr Abotomey also said Burson was being careful in its product selection, steering clear of categories such as spark plugs where the Japanese manufacturer NGK has a stranglehold on the market and is a dominant No.1.
“We won’t be doing private label in spark plugs.” .
Burson has a market capitalisation of almost $900 million after making solid headway since its sharemarket float of April, 2014 and through the Metcash automotive acquisition.
The issue price in the float was $1.85 and the share price closed on Friday at $3.69. A seven-for-15 rights issue priced at $2.85 helped pay for the Metcash acquisition. Burson’s main competitors include Repco, now owned by United States giant Genuine Parts Co, and Supercheap Auto, owned by ASX-listed Super Retail Group.