Why Does Brand Cannibalisation Become a Problem for Growing Businesses?

Retail managers often celebrate business growth as companies introduce new products and place them beside their existing offerings. However, this strategy can quickly lead to Brand Cannibalisation when customers switch from the original product to the new one.

Marketing professor Philip Kotler has discussed this common business problem, in which a company loses sales of an established product without gaining additional revenue overall. Instead of increasing total income, the business simply shifts existing customers and cash from one product to another. Managers need to understand the key causes of Brand Cannibalisation before launching new products.

How Brands Trigger Brand Cannibalisation

Technology companies often face this kind of financial challenge. When Apple introduced the iPad Mini in 2012, it offered customers a smaller tablet at a lower price than the standard iPad.

Many Apple buyers who might have purchased the larger, more expensive model chose the cheaper iPad Mini instead. Although Apple sold millions of additional devices, some of those sales came from customers who would otherwise have paid more. This Brand Cannibalisation reduced premium revenue, but Apple accepted the trade-off to compete with other companies in the smaller-tablet market.

Beverage companies often introduce products that are very similar to ones they already sell. As we discussed in our previous article about Brand Extensions, a soda company might launch a second zero-calorie drink under a different label even though both beverages serve the same purpose.

This unnecessary duplication can lead to Brand Cannibalisation. Nielsen research suggests that around 60% of sales from new beverages may come from customers switching from an existing product rather than from new buyers. The company invests in producing and marketing the second drink but gains little additional revenue, which can reduce overall profits.

Supermarkets have limited shelf space, so businesses must carefully manage how many products they display. Suppose a soap company already sells ten varieties and then introduces three new fragrances. To make room, the store removes three of the original products.

This creates Brand Cannibalisation. Loyal customers who came looking for the familiar blue soap may find it missing and choose the new green version instead. Although sales of the new soap increase, the company has mostly shifted customers from one product to another. Total daily revenue remains almost unchanged.

Advertising can require a significant daily investment. Suppose a shoe company has a $1 million marketing budget and initially uses it to promote one running shoe. If the company launches a second model and divides the budget equally, both products may receive weaker promotion.

This can lead to Brand Cannibalisation and reduce the effectiveness of the campaign. Potential customers may overlook the less visible advertisements, causing the original shoe to lose momentum while the new one fails to attract enough new buyers. In the end, the company spends its advertising budget without generating sufficient additional sales.

The Harvard Business Review has published research on the financial impact of internal product competition. Its findings suggest that unmanaged competition between a company’s own products can reduce profit margins.

Investors often respond negatively to this decline, which can put pressure on the company’s stock price. To avoid these losses, managers should carefully evaluate new product launches and protect the revenue generated by existing products.

Business leaders should remember that Brand Cannibalisation can become serious when new products take sales away from loyal customers. Sometimes companies accept this trade-off deliberately, especially when they need to replace an outdated product before competitors introduce a better alternative.

Also read: Why Does Campaign Integration Matter More Than Using More Channels?

However, accidental Brand Cannibalisation can prevent total revenue from growing. Managers should test new products carefully and ensure they appeal to a different audience or offer a genuinely distinct function. When new customers buy the new product while existing customers continue choosing the original one, the business can protect its established revenue and increase overall sales.

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–Written by Rajnish Kumar, a copywriter and strategist with a background in fast-paced journalism, who explores the gap between what brands promise and how consumers actually behave.