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We build a new data set to show that successful entrants in the consumer food sector build market share by adding new customers. They reach new customers by entering new geographical markets, placing their product in more stores in these markets, and by advertising direct to customers in markets where their product is available. We find no evidence that entrants manipulate markups to build market share. We estimate a structural model of endogenous customer base acquisition through marketing and advertising to match these facts. Our estimates suggest that the accumulation of customer base is subject to frictions which mean that entrant growth is a drawn-out process. This process generates market shares which are much more dispersed than underlying firm heterogeneity in cost or product appeal.
