Want to launch a panini program, but you’re afraid the rest of your sandwiches will take a sales hit? Menu cannibalization is a serious factor to consider when rolling out new menu items. But numbers are power, and a sales analysis is crucial to understanding just how serious the cannibalization is— and if it’s even a bad thing.
How should I deal with menu cannibalization? How can I accurately project how a new item is doing when there’s always cannibalization or a tradeoff from one item to another?
In the business world, there are many terms—such as cash cow, bull market, category killer, dog-and-pony show, halo effect, take a bath and white knight—that describe a host of business scenarios. Cannibalization, though, is my favorite. The name alone suggests that it should be avoided at all costs.
After all, being consumed by your own species is not high on anyone’s to-do list. Yet cannibalization is very much a fact of business and should be carefully considered in menu and merchandising decisions.
Unless you are entering a completely new sandwich when all you previously offered were sweets), the possibility for cannibalization is unavoidable and needs to be part of the decision-making process. And the closer the product is to existing products, the greater the chance of cannibalization. Ideally, a new product attracts a new customer demographic, or increases foot traffic of an existing customer base. Yet human behavior can be unpredictable.
Once a new product is menued, gathering data is essential. There is no way to really know if a new product’s success is the result of cannibalization unless you measure and analyze the results carefully. It is not enough to simply track sales of the new item. It is also critical to track and analyze all individual products in relation to the new one. Did sales of other products (either individually or as a total of different products) decrease in direct proportion to sales of the new product?
If so, you can confidently assume that cannibalization is behind the “success” of the new product.
Before you deem the new product trial a failure due to lost sales from other items, remember that cannibalization is not always a negative. Business is not about the sheer number of items sold, but the profit margin on each item.
If cannibalization results in a tradeoff of a new item for an old one and the new item carries a more favorable profit margin, consider it a victory. Also, if the new item increases sales of other items, it maybe a win even if there is cannibalization. So remember, cannibalization is often unavoidable, but sometimes it can even be a positive.
Christopher Koetke is vice president of Kendall College School of Culinary Arts in Chicago. He is a certified executive chef and certified culinary educator by the American Culinary Federation. Have a question for Chris? Email awestra@cspnet.com, subject “Ask the Chef.”
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