I tend to think of the food and grocery business as hyper-competitive with many new product introductions and failures. For example, data from the USDA ERS suggests roughly 20,000 new food and beverage products come on the market each year. That seems like a lot. But, compared to what?
I ran across a presentation that Austan Goolsbee and Pete Klenow recently gave at the ASSA conference in Philadelphia. They use online price and quantity data collected by Adobe Analytics. Their main objective was to construct price indices to compare against the official government consumer price index measures. Those results are interesting, but I was intrigued by some of their other findings regarding new product introductions and exits.
Below are two slides they created that challenged my prior beliefs about the food and beverage category.
If I'm understanding this correctly (and I may not be), I think the data below suggests that 69.8% of the total sales in the apparel category come from newly entering products. Moreover, 29.5% of total sales in the the apparel category come from products that are soon to exist the market. Other categories with high levels of "churn" and new product introductions are "other goods and services", ICT (which I believe is information and communications technology), and recreational goods. For food and beverages, "only" 19.5% of sales are by new entrants, and 8.5% of sales are by soon-to-be-gone products. By this measure, the food sector seems less dynamic than others.
Their next slide conveys the same information in a different way - by measuring the percent growth in sales-weighted variety. By this measure, variety in food and beverages has only grown by an average of 1.2% per year, and the only category with a smaller growth in variety is medicines and medical supplies. By contrast, there is an average 18.3% growth in vareity in the aparel cateogory.
One downside to these data is that they only reflect online sales. Perhaps there is more "churn" and new product introduction in brick-and-mortar grocery stores than online? Either way, this is interesting food for thought.