Tesco CEO defends new "fictional farm" product ranges

* Farmers' union says brands could mislead

* New (KOSDAQ: 160550.KQ - news) labels seek to undercut discounters

* Tesco CEO says labels well received by customers

* Investment in brands make it hard to lift profits

LONDON, April 13 (Reuters) - Britain's biggest supermarket chain Tesco (Xetra: 852647 - news) said a new range of own-label fresh fruit, poultry and meat aimed at fighting back against the German discounters had been well received by customers despite criticism from some farmers.

Tesco launched the seven new brands last month to replace some of its low-priced "Everyday Value" range, but the National Farmers' Union said using fictional farm names could mislead customers about the origin of the products.

The new Tesco brands, with labels such as "Rosedene Farms" for apples and "Boswell Farms" for beef, are a direct challenge to German discounters Aldi and Lidl, which also use invented farm names to promote their fresh produce.

Tesco Chief Executive Dave Lewis, who previously led major marketing campaigns for Unilever (NYSE: UL - news) brands like Dove deodorant, said UK consumers were aware that Tesco was so big that it could not source all its products from individual farms.

"Rosedene stands for a level of quality that is consistent. We are clear about where this product is sourced from, the customer definitely gets it," he said, adding that 95 percent of shoppers surveyed were either positive or neutral about the new labels. "The results are encouraging."

Lewis said the farm launch was the most significant thing he had done since taking over as CEO in September 2014 and was an attempt to address Tesco's underperformance in categories like fresh produce, meat, fish, poultry and eggs.

A basket of 51 of the new lines for which there is a direct comparison costs 86.35 pounds ($123.01), against 89.06 pounds at a discounter and 103.11 pounds at Tesco previously, Tesco said.

The investment in the launch is part of the reason why Tesco said profit growth would be hard to deliver this year, sending its shares down more than 5 percent by 1045 GMT.

"This is a direct result of an acceleration in the investment targeted against the discounters as Tesco overhauls its own label proposition," said Citi analysts.

"Ironically the more these initiatives succeed, the heavier the near term cost will be." ($1 = 0.7020 pounds) (Reporting by James Davey and Emma Thomasson; Editing by Keith Weir)