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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?
Posted by Tyler Cowen on April 22, 2009 at 07:32 AM in Economics | Permalink
Comments
Do area consumers develop the brand habit and pass it down across the generations?
I'd say that's it (maybe with a bit of the retailer relationships thrown in). I think that the habit often includes an awareness that the product is not popular elsewhere, and so there is a sense of ownership -- even if the company is no longer (or never was) local. In Chicago, I would think of 'Old Style' beer, for example.
Posted by: Slocum at Apr 22, 2009 7:51:23 AM
Pittsburgh is a city that has strong loyalty to all of its "brands" and symbols. Iron City Beer, Heinz Ketchup, the Steelers, Giant Eagle, PPG, etc. There are many others, but having gone to school there for four years I realized that maybe even among other cities, the loyalty to one's city's past is particularly strong there. Especially because it's regional footprint is so large (see this albeit less-than rigorous map from internet polling). Only Atlanta in the "Old East" covers a wider area of surveyed loyalty, and that status as regional capital is enhanced by the way that many people come from that sphere of influence for education and then often stick around Pittsburgh, or return to their hometowns in large numbers.
So that may have something to do with the particular case of Pittsburgh?
Posted by: Neal at Apr 22, 2009 7:52:31 AM
I think it's not just the ketchup but the Heinz here. I grew up an hour and some away from Pittsburgh, and even I knew that the Heinz family had had a deep relationship with the city. I suspect that relationship element, the family history, persists for a long time in local memory, and we humans are suckers for personal relationships.
Posted by: Andromeda at Apr 22, 2009 7:53:34 AM
Proximity to the city of origin might create a market advantage unrelated to history. It's the big-brand version of "buy local". If they're looking for a history effect they need to find early entry markets remote from the city of origin.
Posted by: ogmb at Apr 22, 2009 7:53:41 AM
When we have one product exclusively for an extended period of time it conditions our taste buds. The taste of Heinz becomes what ketchup is supposed to taste like. This preference is handed down from generation to generation. Last year I did a small taste test between Hunts and Heinz and the only person to prefer Heinz was from Pittsburgh.
Posted by: sourcreamus at Apr 22, 2009 8:02:05 AM
The "buy local" effect is almost certainly a real one for Heinz.
The other issue is that a corporation's charitable efforts (or sponsorship of sports teams) may be more likely to be emphasized in its home city, which would work as a means of creating increased brand awareness and good will, which would certainly explain Heinz and Pittsburgh, though that wouldn't explain Miller Beer and Chicago.
Without looking at the paper, I would predict that the effect is stronger for shrinking cities like Pittsburgh, Detroit, and Buffalo, than for growing Sun Belt cities with lots of newcomers like Houston, Phoenix, and San Diego. That could be one way to test how much of the effect is retailer-relations, and how much of the effect is intergenerational brand habits.
Posted by: Ted Frank at Apr 22, 2009 8:23:07 AM
Isn't this just a nondurable goods version of the home-country bias in finance? Of course, that doesn't answer the question, but it does suggest that perhaps we generally prefer the local to the foreign.
Posted by: Thomas at Apr 22, 2009 8:24:37 AM
Didn't Gary Becker pretty much explain this quite a while back?
Posted by: MikeDC at Apr 22, 2009 9:11:00 AM
It's just better ketchup. Their other products may be closer in quality to the competition, but for Ketchup nobody compares. When you go to a restaurant and they have a different kind, it feels you are eating at some cheap cafeteria.
Posted by: Matt at Apr 22, 2009 9:17:27 AM
My family is from Pittsburgh and they only eat Heinz. I don't like ketchup or else I would eat Heinz too. It's just what you do.
Posted by: Warren at Apr 22, 2009 9:24:12 AM
It might be interesting to compare this with numbers on brand loyalty across generations, and see whether the effect is stronger than expected based on those numbers.
These brands are hardly typical: brands that exist for such a long time are likely to have a strong parent-to-child loyalty effect.
Posted by: Zamfir at Apr 22, 2009 9:44:21 AM
I think that there is also a persistence in corporate culture. Conservative banks tend to stay conservative. This is a strong argument for letting the current crop of investment banks go broke and be liquidated allowing more conservative institutions to take their place.
Posted by: floccina at Apr 22, 2009 9:51:13 AM
Dr. Pepper in Texas is a perfect example.
Posted by: Brian at Apr 22, 2009 10:12:47 AM
I wonder if Chicago's allegiance to Miller has less to do with Miller and more to do with it not being Anheuser-Busch. Could this be a reaction to the underreported St. Louis / Chicago rivalry as Chicagoans would not want to be seen drinking their enemy's beer?
Posted by: Mike at Apr 22, 2009 10:21:49 AM
Would a neoclassical economist allow that experience shapes -- changes -- tastes? Can you put that into math? Can you create a journal publication out of that, something for your CV?
Posted by: Greg Ransom at Apr 22, 2009 10:37:31 AM
Chiming in with all the prior commentators: you can't really say you've found an effect in which the early entry of a product brand is causal of retained local market share unless (1) you differentiate all the brand-name producers which have subsequently vacated the local market from those who still operate within it and (2) find no particular difference in market share.
Also, one needs to remember that the grocery supply system is highly constrained by logistics and the narrowness of its profit margin (leading to attempts to improve profit by multi-product brand exclusivity deals, amongst other things), and is absolutely not strictly competitive in a commodity market sense. As it says on the edge of the map, "here be nonlinear equations of period three or greater."
Posted by: sleepy_commentator at Apr 22, 2009 10:41:40 AM
Matt: "It's just better ketchup."
This other Matt has answered the wrong question. It's not about being more popular than other brands, but being more popular than other places.
Back to the question at hand, I wonder how this tracks continuing blue-collar employment in the home city, i.e. buying from the employer that is putting food on the table in more than one sense. Does the home city share revert to national mean if manufacturing is moved away?
Posted by: Matthew Ernest at Apr 22, 2009 10:46:47 AM
Business relationships drive this, and specifically the behavioral tendencies to reward allies and punish defectors. Try operating as a charitable institution in Atlanta that serves Pepsi instead of Coke in the cafeteria. Or try getting UPS' business if you ship with fedex or fedex's business if you ship with UPS. Or any firm's investment banking business if your analysts trash their stock.
The result is that firms prefer to form alliances with long-term, trusted business partners, instead of putting out every contract for purely rational bidding. economically a city/region is a network of allied firms with greater trust for each other than outsiders.
Posted by: DK at Apr 22, 2009 10:48:14 AM
maybe it pairs better than other ketchups with the other stuff people eat in pittsburgh?
Posted by: babar at Apr 22, 2009 10:50:30 AM
Here's another one -- why does Walgreens essnetially have a monopoly on the St. Louis drug store market?
Posted by: JohnMcG at Apr 22, 2009 11:29:45 AM
I guarantee it's generational. There's no other explanation for why anyone would drink Miller beer than "my dad drank it".
All joking aside, our taste for products like ketchup is definitely shaped by what we eat as kids.
Posted by: Noah Yetter at Apr 22, 2009 11:31:17 AM
The mechanism? How about quality of family ties and knowledge of how the business is run?
If I'm deciding between relatively similar products, but my Uncle Charley worked for the company that made one of those products, and Uncle Charley had always been nice to me and Uncle Charley always liked working for that company, I'd buy that product.
I wonder if there are any hometown brands without a high hometown market share. If so, I wonder what it was like working for those companies.
Posted by: Seth at Apr 22, 2009 11:34:20 AM
The Steelers. Heinz field.
Posted by: John at Apr 22, 2009 11:52:41 AM
Pittsburghers seem to have a lot more pride in the products of the city. Natives *will make fun of you* if they come to your house and see some other brand of ketchup (or, gasp, catsup). Imp' 'n' Arn' (Imperial and Iron City) are staples here, and the popularity of Yuengling is growing (despite being from St. Mary's, approximately 100 miles from Pgh). Delallo Italian Foods is based in Greensburg--30 miles east, still within the greater Pittsburgh area--and folks buy that. A trip to Wholey's Fish Market is an experience for inlanders who aren't accustomed to such.
Pittsburgh is a beautiful city with a kind of a gruff yet playful edge about it. Come visit! We'll show yinz around.
Posted by: Colin at Apr 22, 2009 11:52:53 AM
Colin
Yuengling is from Pottsville, in the east of PA. Strawbs is from St. Mary (up north).
Posted by: mike at Apr 22, 2009 1:00:24 PM
