Of course, Dr PepperÂ advertises on InsideCorner, and we love them for that. But theyÂ seem toÂ have something else going for them.Â According to a new study in the Journal of Political Economy [sub. req.], brands enjoy a higher market share in cities closest to their place of origin. Economist Tyler Cowan quotes from the study:
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.
Cowan goes on to note:
What’s amazing is how long these effects — however they are motivated — last.Â 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.Â 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?Â Is it that durable relationships with retailers persist for a very long time?Â Do area consumers develop the brand habit and pass it down across the generations?Â 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?