Why is Heinz Ketchup still so popular in Pittsburgh?
From the latest issue of the JPE, Bronnenberg, Dhar and Dube write:
We document evidence of a persistent “early entry” advantage for brands
in 34 consumer packaged goods industries across the 50 largest U.S.
cities. Current market shares are higher in markets closest to a
brand’s historic city of origin than in those farthest. For six
industries, we know the order of entry among the top brands in each of
the markets. We find an early entry effect on a brand’s current market
share and perceived quality across U.S. cities. The magnitude of this
effect typically drives the rank order of market shares and perceived
quality levels across cities.
You'll find ungated versions here. The upshot is this:
Across 49 current leading national CPG brands, dating back to the late 1800s and early 1900s, we find that the current share in markets close to the city of origin, is, on average, 12 share (i.e., percentage) points higher than the national average of 22 percent.
What's amazing is how long these effects — however they are motivated — last. Miller Beer was introduced to Chicago in 1856 (a very early launch though technically not its first city) and it still has an advantage there, relative to other cities. Heinz Ketchup originated in Pittsburgh in 1876 and it still has an market share advantage there, again relative to other cities.
What is the mechanism? Is it that durable relationships with retailers persist for a very long time? Do area consumers develop the brand habit and pass it down across the generations? Or is the brand from a particular area better suited for people of that area in the first place, perhaps for reasons which are demographic or ethnic in nature and somewhat persistent through time?