CASE STUDY Oreo SMA RT C EXECUTIVE SUMMARY:XECUTIVE For most of its 100-year existence, Oreoorwas America’s best loved cookie, but todayit is a global brand. Faced with stagnationin the domestic market, Kraft Foods movedit into emerging markets where it madesome mistakes, learnt from them andultimately triumphed. This case studylooks at the strategies used to win overcustomers in China and India.By STEPHEN CLEMENTS, TANVI JAIN, SHERENE JOSE,BENJAMIN KOELLMANN108 BUSINESS TODAY March 31 2013 LBS Case Study- OREO.indd 2-3 KIEILLUSTRATION BY SRISTI O n March 6, 2012, the famous cookie brand, Oreo,celebrated its 100th birthday. From humble beginnings in a Nabisco bakery in NewYork City, Oreo has grown to becomethe bestselling cookie brand of the21st century generating $1.5 billionin global annual revenues. Currentlyowned by Kraft Foods Inc, Oreo isone of the company’s dozen billiondollar brands.Until the mid-1990s, Oreolargely focused on the US market – asreflected in one of its popular advertising slogans from the 1980s,“America’s Best Loved Cookie”. Butthe dominant position in the US limited growth opportunities and spurred Kra to turn to internationalKraftmarkets. With China and India repWresenting possibly the jewels in thepcrown of inc o n international target markets due to their sheer size, Oreo waslaunched in China in 1996.The China launch was based onthe implicit assumption that whatmade it successful in its home marketwould be a winning formula in anyother market. However, after almosta decade in China, Oreo cookies werenot a hit as anticipated, according toLorna Davis, in charge of the globalbiscuit division at Kraft. And theteam even considered pulling Oreoout of the Chinese market altogether.In 2005, Kraft decided to research the Chinese market to under- stand why the Oreo cookie that wasso successful in most countries hadfailed to resonate with the Chinese.Research showed the Chinese werenot historically big cookie eaters.According to Davis, Chinese consumers liked the contrast of sweetand bitter but “they said it was a littlebit too sweet and a little bit too bitter”. Without the emotional attachment of American consumers whogrew up with the cookie, the tasteand shape could be quite alien. Inaddition, 72 cents for a pack of 14Oreos was too expensive for thevalue-conscious Chinese.Kraft’s Chinese division used thisinformation to formulate a modifiedrecipe, making the cookie more chocolatey and the cream less cloying. Kraft developed 20 prototypes ofreduced-sugar Oreos and testedthem with Chinese consumers beforearriving at a formula that tastedright. They also introduced differentpackages, including smaller packetsfor just 29 cents to cater to Chinesebuying habits.The changes had a positive impact on sales and prompted the company to ask some basic questionschallenging the core attributes of thetraditional Oreo cookie. Why does anOreo have to be black and white?And why should an Oreo be round?This line of questioning and anambition to capture a greater shareof the Chinese biscuit market led March 31 23 2013 BUSINESS TODAY 109 3/8/2013 5:40:03 PM CASE STUDY Oreo BRANDS FACE ANEXISTENTIALIST DILEMMA I nitially, successful brands begin with a tight core brandproposition which is often unique at the level of the product or product features. Just as McDonald’s was about hamburgers and Starbucks about coffee, Oreo was about itsdistinctive cookie. As time goes by, consumers change andthe company needs growth. Sooner or later, the brand facesan existentialist dilemma. Staying faithful to the traditionalproposition would lead to brand irrelevance, whileexpanding it too much would lead to brand incoherence.Continued success requires the brand to redefine itscore, finding in it a proposition that is still faithful to tradition, and yet encompasses modernity in a manner to keepthe brand relevant, differentiated and credible. The rise ofemerging markets with their different consumption patterns and greater diversity of income distribution questionsthe core proposition of many developed world brands. Justas McDonald’s had to realise it was about clean, affordablefast food and not hamburgers, Oreo had to go through acandid self-exploration. The new Oreo brand propositionis richer and more elaborate while allowing for brandgrowth and innovation.Similarly, Starbucks realised that when China was goingto be its second home market, coffee was not essential to thecore proposition. This required a change in the logo and theword ‘coffee’ was dropped from it. In China, more thancoffee, people line up at Starbucks for cold refreshments.However, brands are like rubber bands and can only bestretched so far in the short run. In the long run, theycan often be more flexible than their brand managers. “The newOreo brandproposition isricher and moreelaborate whileallowing forbrand growthand innovation”PROF NIRMALYA KUMAR,Professor of Marketing andDirector of the Aditya Birla IndiaCentre at London Business School 110 BUSINESS TODAY March 31 2013 LBS Case Study- OREO.indd 4-5 Kraft to remake the product in 2006and introduce an Oreo that lookedalmost nothing like the original. Thenew Chinese Oreo consisted of fourlayers of crispy wafers filled with vanilla and chocolate cream, coated inchocolate. The local innovationscontinued and Oreo products inChina today include Oreo green teaice cream and Oreo Double-Fruit.Another challenge for Kraft inChina was introducing the typicaltwist, lick and dunk ritual used byAmerican consumers to enjoy theirOreos. Americans traditionally twistopen their Oreo cookies, lick thecream inside and then dunk it inmilk. Such behaviour was considered a “strangely American habit”,according to Davis. But the teamnoticed China’s growing thirst formilk which Kraft tapped with agrassroots marketing campaign totell Chinese consumers about theAmerican tradition of pairing milkwith cookies. A product tailored forthe Chinese market and a campaignto market the American style of pairing Oreos with milk paid off andOreos became the bestselling cookiesof that country.The lessons from the Chinesemarket have shaped the way Krafthas approached Oreo’s launch inIndia. Oreo entered India throughthe import route and was initiallypriced at `50 (about $1) for a pack of14. But sales were insignificant India is the world’sbiggest marketfor biscuits witha market share of22% compared with13% in the US Premium creamsaccount for a hugechunk of India’s totalbiscuit market and arevalued at around 5,500Cr ` partly because of limited availabilityand awareness, but also becausethey were prohibitively expensive forthe value-conscious Indian masses.Learning from the Chinese successstory, the company under global CEOIrene Rosenfeld took localisationstrategies seriously from 2007 onwards. The $19.1-billion acquisitionof Cadbury in 2009 provided Kraftthe local foothold it needed in India.Unlike the Chinese, Indians lovetheir biscuits. Nielsen says India isthe world’s biggest market for biscuits with a market share of 22 percent in volumes compared with 13per cent in the US. While the lion’sshare of this market is for low-costglucose biscuits led by Parle-G, premium creams account for a substantial chunk valued at around `5,500crore ($1.1 billion). The way to theIndian consumer’s stomach isthrough competitive pricing, highvolumes and strong distribution, especially in rural areas.Oreo developed a launch strategyaround taking on existing marketleaders in the cream segment –Britannia, Parle and ITC. Internally,they even have an acronym for thisstrategy – TLD (Take Leaders Down).The focus was to target the top 10million households which accountfor 70 per cent of cream biscuit consumption. Oreo launched in India inMarch 2011. It entered the market AVAAVAILABILITY, AFFORDABILITYAND ADAPTABILITY ARE KEYAN T h is a good example of marketing excellence in threehisAsA in India: Availability, Affordability andAdaptability. The key to success in the Indian market is toAdappursuepursu a balanced marketing effort in terms of the three As.Availability is a function of distribution and valueAvnetworks, which generates brand awareness when it goesnetwalong with well-devised advertising campaigns.Affordable pricing is one of the strategic valueAfpropositions Kraft (Cadbury) is offering to valuedpropoconsumers in India. Better or more-for-less is theconsumandatemand for the value proposition in this category.Arguably, where Oreo India made a difference in is the factAthat it successfully overcame a real challenge each andevery marketer faces to realise affordable pricingwith profitability.Excellence in adaptability to local culture also helpedOreo capture a share of mouths and minds. One of the keysuccess factors for Oreo in India is replicating the learningfrom China in terms of the intangible brand promise morethan tangible benefits like taste. The notion of togethernessfits the Indian context of valuing the family and resonateswith the nuclear family in the expanding middle class.Togetherness has successfully created emotional bondingnot only between the brand and consumers, but alsobetween parents and children when they experience thebrand through product consumption.When Oreo enters smaller towns, it will be able to enjoya sweet taste of the future as the case proves the existenceof global or universal consumers in India. “Affordableespricing isone of theestrategic valueespropositionsKraft issoffering valueddcustomers innIndia””HIROSHI OMATA,A,CEO, Dentsu Marcomm March 31 2013 BUSINESS TODAY 111 3/8/2013 5:40:33 PM CASE STUDY Oreoas Cadbury Oreos becauseCadbury is a stronger brand namethan Kraft, and initially focusedon generating awareness andrapid trials. The product wassweetened to suit the Indian palate and Kraft exploited Cadbury’snetwork of 1.2 million stores.The Made in India tag meantusing locally-sourced ingredients,modification of the recipe to suitIndian tastes and possiblycheaper ingredients, a smallersize and competitive prices. Oreolaunched its traditional chocolatecookie with vanilla cream at `5 for apack of three to drive impulse purchases and trials, `10 for a pack ofseven and `20 for a pack of 14 forheavy usage. The cookie looks thesame as its international counterpart with a motif of 12 florets and 12dashes.The company maintained theheritage of the bitter chocolatecookie with sweet vanilla cream tostand out from me-too products andmeet customer expectations of having the real thing. Kraft initiallychose to outsource its manufacturing for the Indian market instead ofusing Cadbury factories.Communication and advertising The Made inIndia tag meantusing locally-sourcedingredients andmodi?cation of therecipe to suitIndian tasteshave been consistent across the worldas the core customer remains thesame. The company focused on usingthe togetherness concept to sell Oreosin India, with television forming themain medium of communication although other media are also beingtapped. Oreo India’s Facebook page isone of the fastest growing in theworld. The company also went on abus tour to push the concept of togetherness among families acrossnine cities and it used a smaller vehicle for a similar campaign across 450small towns. Oreo is driving point-ofpurchase sales with store displaysand in-store promotions in a bid toovertake market leader BritanniaGood Day’s distribution.With a strategy focused on rapidbrand awareness and extensive dis- BEST OF THE LOT tribution, the Oreo India launchstory has been a success so far.Its market share has grownfrom a little over one per centafter its debut to a massive 30per cent of the cream biscuitmarket. As awareness of theOreo brand grows in India,Kraft is looking to shift from theCadbury distribution network toa wider wholesale channel. It isalso eyeing kirana stores andsmall towns apart from modernstores in big cities.Today, Oreo is more than just anAmerican brand. It is present in morethan 100 countries, with China occupying the No. 2 slot. Seven yearsago, this was highly improbable. ~(This case study is from the AdityaBirla India Centre of London BusinessSchool.)What can we learn from KraftFood’s experiences in India and China?Write to email@example.com post your comments at www.businesstoday.in/casestudy-oreo. Yourviews will be published in our onlineedition. The best response will win acopy of Marketing as Strategy byNirmalya Kumar. Previous casestudies are at www.businesstoday.in/casestudy. BT receives scores of responses to its case studies.Below is the best one on Burberry in the Feb 3, 2013 issue Ambarish Jambhorkar, AmbarishJambhorkar@torrentpharma.com The way smartphone sales are going north – as per CBS news the world hasone billion active users – and data use is overtaking voice revenue, socialmedia marketing is the future for branding and advertising This means customer approach will be precise inSTP (Segmentation, Targeting &, Positioning). Also, asdiscussed in the HBR issue of July-Aug’12 (Tweet MeFriend Me Make Me Buy – Barbara Giamanco and KentGregoire) this is the time when the right use of socialmarketing management should be taught in businessschools as a subject. I think Indian companies shouldstart early and gain early.Ambarish Jambhorkar wins a copy of Marketing as Strategy by Nirmalya Kumar 112 BUSINESS TODAY March 31 2013 LBS Case Study- OREO.indd 6 3/8/2013 5:40:56 PM Copyright of Business Today is the property of Syndications Today (Division of Living Media India Ltd.) andits content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder’sexpress written permission. However, users may print, download, or email articles for individual use.After carefully reading the case study,Smart Cookie, answer the following questions in a 5-7 page paper with support from a minimum of two external sources. Be sure your paper adheres to the CSU-Global Guide to Writing and APA Style. The CSU-Global library is a good place to find these sources. Apply SWOT, Porter’s Five Forces, or the BCG Matrix to analyze Kraft’s strategic plan to expand into international markets. How would you determine which markets to target short versus long term? Connect your Oreo conclusions to how you would develop a strategy for a new product, like the sensors your company is developing in the Capsim simulation. Consider how your team would apply the strategic planning model and measure your success in implementing your product strategy in Capsim.Reference:Clements, S., Jain, T., Jose, S., & Koellmann, B. (2013). Smart cookie. Business Today, 22(7), 108-112.
Originally posted 2018-07-09 20:53:17. Republished by Blog Post Promoter