Cannibalization
Short definition
Cannibalisation is a new product or channel eating existing sales and cash. Incremental cash is after the net shift, not gross new sales.
Detailed explanation
If the new SKU’s EBITDA is written without deducting the lost contribution of the old SKU, NPV is inflated. If a competitor would have taken that volume anyway, the shift is “cash already lost” and belongs less in the incremental file — that assumption must be evidenced.
Channel conflict (own e-commerce versus dealers) is the same mechanism. A price cut that keeps volume and eats margin is also cannibalisation.
Why it matters for the CFO
A growth story that eats the old product can grow the firm without growing cash.
How to read it
The cannibalisation rate depends on product, channel and price; there is no universal percentage. Do not pass a file on “the competitor would have taken it” until that claim is stressed.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.