First Movers
Bronnenberg, Dhar and Dube report on first mover advantage in consumer packaged goods brands:
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. [...] 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.
Tyler Cowen remarks:
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.
This reminds me of Andrew Gelman’s map of Starbucks vs Wal-Mart. Here’s Starbucks:
And here’s Wal-Mart:
You see some of the stereotype “latte liberal” stuff going on here, but it’s also clear that pure proximity to Seattle or to Bentonville is a big factor. And in the CPG market, these kind of impacts seem to last a long time. And somehow Tim Horton’s can be very popular in Canada but not make it big in the states. Why doesn’t In-and-Out Burger spread to the east coast?
64 Responses to “First Movers”
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April 22nd, 2009 at 1:05 pm
In-and-Out is delicious. This is an important question.
April 22nd, 2009 at 1:06 pm
You don know that Dhar and Dube are U Chicago economists?
April 22nd, 2009 at 1:11 pm
“Those are good burgers, Walter.”
“Shut the fuck up, Donny.”
April 22nd, 2009 at 1:13 pm
Obviously, the answer is White Castle.
April 22nd, 2009 at 1:15 pm
In-n-Out corp policy forbids any store out of one day’s truck range of their single meat processing plant for quality purposes. Farthest east I’ve seen one is Vegas. (weeps)
April 22nd, 2009 at 1:16 pm
Probably for the same reason that you won’t see White Castle west of the Mississippi.
That said, InO burgers are really, really good; they come with a bible citation on every shake (maybe not a feature); they have a special, “unpublished” vocabulary for ordering the fixin’s. WC burgers are really, really nasty, and I’ve never understood the attraction at all, save their cute size.
And I’m a vegetarian, so all this is moot for me. I’ve just a bystander now in the burger wars.
April 22nd, 2009 at 1:19 pm
And somehow Tim Horton’s can be very popular in Canada but not make it big in the states.
That’s because it’s really not that great. Sandwiches are pretty good. Coffee and donuts are average. So, no reason for it to displace American coffee shops. But, there is one on every block in Toronto.
April 22nd, 2009 at 1:20 pm
This data is (sorry, “these data are”) very interesting, but not surprising. Consumers grow attached to brands, and such attachment spreads from friend to friend and from parent to child. Brands compete with each other. The origin of different brands is dispersed geographically. QED, no?
April 22nd, 2009 at 1:20 pm
Haven’t read the article, but I wonder how much of this effect is pure name recognition and inertia and how much is the result of a communitarian instinct to support the local institution.
April 22nd, 2009 at 1:21 pm
Never had one, but the name is terrible. I’d prefer that burger go in and somethig else come out.
April 22nd, 2009 at 1:24 pm
In-n-Out’s burgers are both good and deeply overrated.
April 22nd, 2009 at 1:26 pm
Never had one, but the name is terrible. I’d prefer that burger go in and somethig else come out.
Back in the day, it was considered clever (well, sort of) to put an In-N-Out Burger bumpersticker on one’s car, modified by removing the “B” and “R” in “Burger” so it read “In-N-Out Urge.”
Disclaimer: I actually did that and thought I was pretty cool.
April 22nd, 2009 at 1:26 pm
I meant to type “disclosure,” not “disclaimer.”
April 22nd, 2009 at 1:28 pm
Anyone more than 150 miles from Portland doesn’t know a decent fast food burger:
http://burgerville.com/#page:/|secNum:1000
But the reason they are so good limits their range. The model could be duplicated in other regions, the ingrediants would just need to be different.
April 22nd, 2009 at 1:28 pm
No In and Outs down south, but there is Krystal burgers.
I much prefer Waffle House over IHOP too, but can’t find any up north or out west…
April 22nd, 2009 at 1:33 pm
And why no Publix outside of the southeast? Best grocery store there is, but they only exist in FL, GA, and maybe AL. #7 in the country in spite of serving such a small region.
April 22nd, 2009 at 1:37 pm
Why doesn’t In-and-Out Burger spread to the east coast?
Do we need them as long as we have Five Guys?
April 22nd, 2009 at 1:40 pm
No time for the old in-out, love, I’ve just come to read the meter.
Alex
April 22nd, 2009 at 1:41 pm
The walmart/starbucks maps probably have a lot to do with population density and urbanization.
Whataburger is good, and Five Guys is better. I was in the San Jose area recently and meant to try In n Out but it slipped my mind.
April 22nd, 2009 at 1:45 pm
The fact that In-and-Out is not expanding due to the East Coast is due to the intentions of the owners. From what I’ve read, they don’t want to expand much further than they already have.
April 22nd, 2009 at 1:46 pm
I support stim funds to be used to spread Whataburger to CA. Could MattY ask Jennifer to ask John to ask BHO to do that? Also, don’t tell MattY about Tommy’s.
In more MattY bashing, some years ago I stopped at CasaDeFruita for some pistachios and then stopped at the InAndOut in Fresno – a city MattY is an expert on – and I was sick for a week. I don’t know which one did it.
April 22nd, 2009 at 1:48 pm
Why doesn’t In-and-Out Burger spread to the east coast?
Perhaps because the single most disgusting meal I have ever eaten was at In-and-Out.
April 22nd, 2009 at 1:51 pm
In-N-Out burgers are so good that it’s probably impossible to overrate them. Is there a better $6 meal in the universe than a double-double, fries and a coke?
April 22nd, 2009 at 1:53 pm
Farthest east I’ve seen one [an In n Out] is Vegas.
Tucson is probably as far east as they get. Arizona is a weird amalgamation of West Coast and Southern cultures. In my hometown near Phoenix, there is a Waffle House across the street from an IHOP and a Whataburger on the same street half a mile away from an In n Out.
April 22nd, 2009 at 2:00 pm
the real question is — why has WaWa spread so slowly?
April 22nd, 2009 at 2:01 pm
How is Budweiser doing now that it’s no longer an American beer?
I use to spend a lot of time in BUD country -defined as any bar where almost everyone is drinking BUD- and I imagine the sale of Budweiser had to have a profound effect on the once unshakable esprit de corps of the Budweiser drinker.
April 22nd, 2009 at 2:03 pm
In-N-Out Burgers don’t spread East because the owners refuse to franchise and want all of their chain outlets to be able to receive the same ingredients from their central supplier with deliberate speed. They don’t want to expand any further.
April 22nd, 2009 at 2:04 pm
only one Chik Fil A in all of NY state. ridiculous.
luckliy, there are a half-dozen within easy driving distance of my house, here in NC.
April 22nd, 2009 at 2:09 pm
Good discussion.
Wawa – yeah Wawa is so much better than 7/11, but it only exists in the Mid Atlantic.
Another classic – Duane Reed. Why is Duane Reed only in NYC? Or is in upstate too? But its not in north Jersey or anywhere else I’ve ever seen.
Oh, BTW. Now that I”m in Seattle, I’ll add to the burger thing. Here there are two classic local burger chains – Dick’s, which has $1 burgers and also Kid Valley. Kid Valley is better, but Dick’s is the real local legend. Its still 50s style basically – you eat outside either in your car or standing. Always packed.
April 22nd, 2009 at 2:19 pm
Life long beef eater here, so believe it when I tell you that there are no burgers anywhere that aren’t just nasty and stomach-churning.
April 22nd, 2009 at 2:31 pm
I have long since migrated my taste in burgers to the burger-with-exotic-cheee-and-interesting-sauce stage of my life, so you can all imagine my surprise to discover that this entire thread is dominated by people who are 11 years old and still love bland tasting fast food burgers.
April 22nd, 2009 at 2:37 pm
max424, good question. Since they bought Old Dominion are are moving to Delaware, I might have to look for a new Virginia brew. I’ve been trying some of the Starr Hill selections.
April 22nd, 2009 at 2:39 pm
So how are things at Buckingham Palace nowadays?
April 22nd, 2009 at 2:50 pm
This research is actually pretty useless. Brands introduced in the 1880-1960s had radically different distribution, legal, financial and marketing considerations than brands introduced today.
April 22nd, 2009 at 2:55 pm
How are things in Congress, Senator Craig?
April 22nd, 2009 at 3:02 pm
Interesting analysis. As to the question of bringing In-and-Out to the East Coast – my understanding is they don’t franchise and if nobody in the family wants to come out East they will never set up shop. Jersey City has a Fat Burger though.
April 22nd, 2009 at 3:14 pm
Lived in Seattle, Orange County, and now Portland.
1) In-and-Out (by a mile…)
2) Burgerville
3) Helvetia Tavern (sorry, only 1 in the chain…)
4) Fat Burger
5) Kid Valley
Five guys just opened in Portland. It doesn’t make the list.
April 22nd, 2009 at 3:18 pm
Fatburger’s totally overrated. Worse than In-N-Out in every way and about 50% more expensive. The only good thing about Fatburger is you can get a burger with a fried egg on it.
April 22nd, 2009 at 3:27 pm
In-N-Out doesn’t want to dilute the brand, man. It’s that simple.
April 22nd, 2009 at 3:32 pm
More seriously, though, others have pointed out the real reason In-N-Out won’t expand. They have no desire to move outside the range of their preferred suppliers.
Even though I frequent a Duane Reade in my NYC neighborhood, the name always makes me think I’m talking about somebody’s cousin.
I had a friend from Chicago who now lives in SF who LOVES Dunkin Donuts, so much so that he inquired about opening a franchise. They told him no dice. Seems they felt like their identity was too tightly tied to the upper midwest and northeast. Interesting.
April 22nd, 2009 at 3:56 pm
Hamburgers are overrated as a class. It really isn’t that difficult to make a good hamburger.
April 22nd, 2009 at 4:11 pm
Crap, you’re kidding me? I waited 5 YEARS for them to make it to Tucson after relocating from LA, and finally threw in the towel.
In-N-Out tends to stand out because it’s not a franchise, and is still (basically) a family affair. When they go public, I predict that closing for common holidays, relatively good wages, and quality will hit the bin within days of the IPO.
Skating beyond the edge of profiling, I’ll note that to my experience, the demographics of In-N-Out staff in So. Cal. seems to match the demographics of the neighborhood, rather than going strictly ESL Latinos, like just about everyone else.
April 22nd, 2009 at 4:13 pm
As much as I’d love a handful of In and Out Burgers in NJ in theory, I doubt they’d be able to maintain those same standards spreading across the whole continent. They’re obviously comfortable with their suppliers, and overreaching would likely cause them to make compromises. Besides, having one within the same time zone as where I live might rob it of some of it’s mystique.
April 22nd, 2009 at 4:19 pm
Tim Horton was a hockey star who played almost his entire career in Toronto. Every Canadian knows who he was. Almost no one in the US ever has heard of him. No surprise that the franchise he founded is big in Canada and not in the US.
April 22nd, 2009 at 4:32 pm
Anyone else find it funny that people who are probably uniformly irritated with mall culture and that the exact same Old Navy exists every 12 miles from sea to shining sea are also the ones complaining that their favorite burger joint/supermarket/restaurant/whatever isn’t national? I’ve lived in a few places across the country, and one of the last things differentiating one place from another is the local food.
For instance, if there were Waffle Houses near me, I’d probably be sick of them, but that I have to travel a few hundred miles (at minimum) to find one makes the finding of one a fun place to stop and eat, very infrequently. And actually, I miss Midwestern supermarket prices moreso than the supermarkets themselves. Anyway, celebrate the differences, don’t bemoan that wherever you’re at isn’t like back home*.
*Disclaimer: I whined for years about In-N-Out and Fatburger (not to mention a decent pizza) while I lived outside of Socal.
April 22nd, 2009 at 5:04 pm
“Duane Reade” is named after two parallel streets in lower Manhattan, just north of Chambers Street. It wouldn’t make sense to establish a branch in Boston!
April 22nd, 2009 at 5:07 pm
I used to do business with Wal-Mart down in Bentonville, so I’ve thought about this for awhile. A very large fraction of the retailer geniuses of the 20th Century were Jewish, so they understood metropolitan shoppers well, but they didn’t understand heartland gentiles all that well, so the retailing market didn’t small town America’s needs and wants as well.
Then along comes the greatest retailer genius of them all, Sam Walton, and he’s heartland gentile to the core. (He picked Bentonville because its location allowed him to enjoy the short duckhunting seasons in four different states.) Along with other advantages, Walton understood what heartland people want so much better than the competition that he builds the biggest company in America.
April 22nd, 2009 at 5:14 pm
[...] a post about the relationship between proximity and market dominance Matthew Yglesias asks: Why doesn’t In-and-Out Burger spread to the east [...]
April 22nd, 2009 at 5:41 pm
JB -
I’ve lived in a few places across the country, and one of the last things differentiating one place from another is the local food.
I see where you’re coming from but there are huge regional differences in the type and quality of “ethnic” food which is available. Here in Colorado tamales and burritos are more American than apple pie, but I spent years hunting around the Seattle area for Mexican food and the best I could find qualified as marginally edible. At least Seattle is better in this respect than the east coast and the south where it seems the only Mexican food available rates as flat out disgusting and inedible. On the other hand, the Seattle area has mind-bogglingly large number of excellent Thai and Vietnamese restaurants.
As for the burger question, Five Guys is hands down the best chain store burger available on the planet. Smash Burger is also damn good, better even than In and Out, but it ain’t no Five Guys.
April 22nd, 2009 at 5:42 pm
#44: Mr. Horton’s playing career ended 40 years ago. Surely that can’t still be having an effect all this time later?
#47: Mr. Neiman and Mr. Marcus figured out how to sell stuff in the “heartland”.
April 22nd, 2009 at 5:48 pm
PS…
In the spirit of hometown pride: fuck NYC and San Francisco. New Orleans is the culinary capitol of the Western Hemisphere.
April 22nd, 2009 at 5:53 pm
Agreed with Eric K about Burgerville (which actually has no stores more than about 90 miles from Portland; I remember seeing–and still see–the “last Burgerville for 24,603 miles” billboard just north of Albany, my second-favorite sign on that route last year*), but I’ve never had In-N-Out myself.
But the regional thing is very true. My former residence had lots of Tim Horton’s and was in the United States. Labatt sales were about 2300% of the national average as well. Not surprising considering it was Buffalo (and Horton did play a bit for the Sabres, I believe). There are just some ingredients that don’t travel well and quality control is sometimes hard over long distances. Makes the trips to those areas (or moving there) all the sweeter, though.
*The winning sign was on a fence of a farm south of Aurora, advertising “Llamas, Llamas, Llamas!” Around March it got a companion sign “Obama for President” with the word “support” above it. Sadly, few llamas voted; those hooves make it hard to fill in optical-scan ballots.
April 22nd, 2009 at 6:46 pm
Eric H -
I see where you’re coming from but there are huge regional differences in the type and quality of “ethnic” food which is available.
Agreed. Mexican food is something that doesn’t travel well. I’ve had San Diego natives complain that the Mexican food in LA isn’t good enough, much less out of state. Talking to enough people who have lived enough places, what invariably gets settled on is that the food wherever you grew up is much better than any other place. There is a substantive argument that Mexican food, for instance, is typically much, much better the closer to the border you get, but outliers with larger Hispanic populations (like CO) do exist as well.
The worst Mexican food I ever had was in Christchurch, New Zealand. I ordered “nachos” and received a plate with stale, microwaved tortilla chips, covered in oily cheddar cheese and canned jalapeños. It had been a month or more since my last fix, so it did the job, but…wow, really wow.
The other thing that’s amusing is trying to start conversations about local food and that’s what people miss when they move. I mentioned this at lunch with some pals, everyone sort of brushed off the idea, until 5 minutes later when one guy was telling us tales of growing up in DC and driving 45 minutes to the only Arby’s within three states, and their immense lines at the drive-thru. Everyone else had a similar story, too.
I’m telling you–malls and TV shows make people dress the same and repeat the same sitcom catchphrases wherever you go, the food and accents are about the only things that change.
April 22nd, 2009 at 8:40 pm
@32 S.P. Gass:
The best thing that’s happened in this country in the last 30 years is the reemergence of the microbrewer. I don’t know Starr Hill, but I’ll be looking for it.
April 22nd, 2009 at 9:51 pm
The reason you don’t see regional burger chains expanding everywhere is because every market in the country is alreayd saturated with fast food. Seriously, tell me one populated place in this country that is underserved by fast food joints?
Here in Waco within a 20 block/5 minute drive I have the following burger choices: Wataburger (2), Sonic (2), Backyard Burger, McDonalds (2), Wendy’s, Burger King, Arby’s, Chic Fillet, Jack-in-the-Box, Dairy Queen, and some I’m probably forgetting. This being Texas, there’s also just as many fried chicken places and BBQ joints as burgers. And probably as many Mexican restaurants as the rest of them combined. In addition, I have all the sit-down chains that serve burgers: Chili’s, TGI Friday’s, Cheddar’s, Outback, Applebee’s, etc. And finally all the local drive-in/diner burger joints that are not chains. Like for example, the famous Health Camp just down the road from me:
http://www.texasburgerguy.com/2007/07/review-27-health-camp-waco-texas.html
Every so often one of these famous regional chains expands beyond beyond its normal market in a big marketing frenzy. Krispy Creme came out here a few years ago in a flash of press coverage and frenzy, with the long lines and news reports for the first few weeks. After a year or two, most people had gone back to their local Shipley’s for their donuts (local Texas donut chain, there are maybe 10 in Waco) and Krispy Creme was sitting empty, closed for lack of business. When I was out visiting my folks in Oregon recently there was a new Sonic opening up to great fanfare. So what? It’s just a Sonic. You can’t swing a dead cat without hitting one in Texas.
I’m sure In-and-Out has great burgers. But seriously. I already have 100 places to get burgers. I can think of a lot better uses for the space than one more fast food joint.
April 22nd, 2009 at 9:53 pm
Nothing brings out the elitist a-hole attitude like a best burger conversation. Since I have never been to Whataburger, Five Guys, etc, I cannot comment on them. Chainwise, In-N-Out is my fave. But I would hate to be someone who is trying it for the first time nowadays. I mean, based on the hype, you would think that would literally have an orgasm eating one. It’s just a burger. An awesome burger, but a burger.
Not a chain – but the single best burger I’ve ever had was the Squeeze with Cheese at the Squeeze Inn in Sacramento. Unfortunate name, but my god, what a burger. Cheese halo!
April 22nd, 2009 at 10:01 pm
“*Disclaimer: I whined for years about In-N-Out and Fatburger (not to mention a decent pizza) while I lived outside of Socal.”
A decent pizza in SoCal? Where? I came here from Chicago 8 years ago and have searched and searched for something decent. Some of the different toppings here are OK for a change, but I’ve not found any good sauce or crust in and around LA.
April 22nd, 2009 at 10:33 pm
20 years Air Force. Lived just about everywhere.
Nothing compares with In-N-Out. The secret is consistency.
Every single burger is perfect every single time.
My South Carolinian wife doubted the hype… tried In-N-Out, and is now a dedicated convert.
Tried Burgerville… good, but not In-N-Out good. I guarantee you they don’t bake their own buns and grind their own hamburger like In-N-Out.
April 22nd, 2009 at 11:47 pm
Kent from Waco is a man who has never tasted In-N-Out. I too have 47 different fast-food burger options within 5 miles of where I sit, and yet, I can’t remember the last time I had a burger at any of them other than In-N-Out.
April 23rd, 2009 at 1:21 am
This is very interesting.
I wonder how much of this is psychology & brand loyalty, vs. supply chain efficiency, employee loyalty, and natural patterns of infrastructure investment.
When we see a similar pattern in the Roman empire, it doesn’t seem mystifying. Perhaps improved communications and transportation is not as effective in decreasing path length in our modern world as we might expect intuitively.
April 23rd, 2009 at 11:34 am
As lots of Tyler’s commenters point out, the Heinz/Pittsburgh case isn’t that mysterious. Not only did Heinz originate in Pittsburgh, it’s still headquartered there, a member of the Heinz family was a PA Senator who died tragically, lots of local institutions are named after the Heinz family, and now the football stadium is too. It’d be more interesting to look at a place like Cleveland, which is close to Pittsburgh but doesn’t have all the Heinz stuff in it (and really has no love for Heinz Field).
April 23rd, 2009 at 12:35 pm
I think a lot of the effect is just hometown boosterism. Did they control for that somehow in the study? Here in Atlanta, we root for the Braves, drink Coke, and wouldn’t be caught dead with a Pepsi. Plus, I have friends who work at Coke – why wouldn’t I support ‘em with my consumer dollars? I’m sure folks in Pittsburgh do the same thing with Heinz.
April 23rd, 2009 at 3:13 pm
so Tyro’s one of the assholes that made Father’s Office unbearable
factoid about Inn-N-Out
http://www.fastcompany.com/blog/dan-macsai/popwise/sizzling-secrets-n-out-burger-qa
April 23rd, 2009 at 8:49 pm
I hate both.
But then I grew up in New Orleans and didn’t need stupid Starbucks telling us what good coffee was (not that Starbucks sells good coffee just better coffee then Folgers) and Wal-Mart stores are crap.