Assessing the Demand for a Functional Food Product: Is There Cannibalization in the Orange Juice Category?

The demand for functional foods has increased notably in recent years due to growing consumer interest in diet and health issues. Currently, the food industry is introducing many types of new food products with functional attributes. Consequently, cannibalization is a critical issue for firms that offer multiple products within a certain product category. The identification and assessment of cannibalization are integral factors when making strategic decisions about new product introductions. Using scanner data from Information Resources, Inc. (IRI), pertaining to a particular functional food, namely a phytosterol-enriched product for orange juice, we find that no cannibalization effects exist with respect to its introduction. We also provide estimates of own-price and cross-price elasticities of the orange juice category using a synthetic demand system.