Innovate, Innovate, Innovate!

With a full quarter of 2012 behind us, I'm pleased to see many brand innovations on a number of fronts. But for private brands, investment in true innovation versus replication of brand innovations has been the exception, not the rule. Moreover, promotional support here has been soft for some time.

Over the last three years, amid consumer uncertainty, high unemployment and volatility in food and energy prices — all tailwind factors — private brand unit share growth has been flat. Nevertheless, I remain optimistic. The best-in-class store brands are doing three things well: demonstrating a deep understanding of shopper demand; building credible value propositions in core categories and then expanding into additional categories or tiers; and growing demand by investing in advanced brand management (from concept testing and package design to advertising messaging and vehicles), pricing and promotion analytics.

Leaders drive higher shares and exhibit stronger pricing and promotional skills.

Our Nielsen Retail Analytics Team built a framework to group retailers into three segments based on rankings of private brand performance across a number of consumer metrics involving a set of 30 core and non-core categories. From this work, we found that industry "leaders" developed private brands within both the core and non-core categories; many have tiered programs.

The "committed" private brand retailers have penetrated core categories, but trail the leaders. The "nascent" or developing retailers, meanwhile, lack private brand program depth.

The expertise of the leaders is demonstrated by the success they are having in driving superior private brand share versus the committed or nascent retailers. We also see higher dollar sales growth in the latest year among the private brand leaders as they exhibit stronger pricing and promotional skills. Leaders are maintaining a tighter price gap to the national brands. They also are promoting their store brands more frequently using more "quality" promotional tools (feature ads and displays) and relying less on temporary price reductions.

If you're not in the leaders group today, don't despair — there is still plenty of opportunity out there. But you have to ask yourself some potentially tough questions. For example, households with more mouths to feed and bodies to maintain are key drivers of private brand sales (the most important private brand buyers are three+ member households). But are you paying close attention to assortment with an eye on these households? It will help you hedge bets.

With a growing aging population and many women delaying parenthood, are you looking at opportunities to attract smaller households? And are you leveraging new media communication vehicles to reach younger generations? How are you building advocates among these shoppers so they spread the good word about your private brands?

And finally, I've written and spoken about this topic frequently lately, but it's possibly the fastest way to leapfrog the competition: How are you connecting with your multicultural consumer? No one has created an unassailable approach here. You could be the first one to do so.

Straight Talk delivers monthly store brand insights from Nielsen, New York. Todd Hale is Nielsen's senior vice president, consumer & shopper insights.