Executive Summary For Most Of Its 100-Year Existence Oreo Wa

Executive Summary For Most Of Its 100 Year Existence Oreo Was Amer

EXECUTIVE SUMMARY: For most of its 100-year existence, Oreo was America’s best loved cookie, but today it is a global brand. Faced with stagnation in the domestic market, Kraft Foods moved it into emerging markets where it made some mistakes, learnt from them and ultimately triumphed. This case study looks at the strategies used to win over customers in China and India. By STEPHEN CLEMENTS, TANVI JAIN, SHERENE JOSE, BENJAMIN KOELLMANN March BUSINESS TODAY 109 CASE STUDY Oreo SMA RT spurred Kraft to turn to international markets. With China and India rep- resenting possibly the jewels in the crown of international target mar- kets due to their sheer size, Oreo was launched in China in 1996.

The China launch was based on the implicit assumption that what made it successful in its home market would be a winning formula in any other market. However, after almost a decade in China, Oreo cookies were not a hit as anticipated, according to Lorna Davis, in charge of the global biscuit division at Kraft. And the team even considered pulling Oreo out of the Chinese market altogether. In 2005, Kraft decided to re- search the Chinese market to under- stand why the Oreo cookie that was so successful in most countries had failed to resonate with the Chinese. Research showed the Chinese were not historically big cookie eaters.

According to Davis, Chinese con- sumers liked the contrast of sweet and bitter but “they said it was a little bit too sweet and a little bit too bit- ter”. Without the emotional attach- ment of American consumers who grew up with the cookie, the taste and shape could be quite alien. In addition, 72 cents for a pack of 14 Oreos was too expensive for the value-conscious Chinese. Kraft’s Chinese division used this information to formulate a modified recipe, making the cookie more chocolatey and the cream less cloy- ing. Kraft developed 20 prototypes of reduced-sugar Oreos and tested them with Chinese consumers before arriving at a formula that tasted right.

They also introduced different packages, including smaller packets for just 29 cents to cater to Chinese buying habits. The changes had a positive im- pact on sales and prompted the com- pany to ask some basic questions challenging the core attributes of the traditional Oreo cookie. Why does an Oreo have to be black and white? And why should an Oreo be round? This line of questioning and an ambition to capture a greater share of the Chinese biscuit market led C KIE XECUTIVE SUMMARY: or most of its 100-year existence, Oreo spurred Kra markets.

Resenting p c o n of inO n March 6, 2012, the fa- mous cookie brand, Oreo, celebrated its 100th birth- day. From humble begin- nings in a Nabisco bakery in New York City, Oreo has grown to become the bestselling cookie brand of the 21st century generating $1.5 billion in global annual revenues. Currently owned by Kraft Foods Inc, Oreo is one of the company’s dozen billion- dollar brands. Until the mid-1990s, Oreo largely focused on the US market – as reflected in one of its popular adver- tising slogans from the 1980s, “America’s Best Loved Cookie”. But the dominant position in the US lim- ited growth opportunities and March I L L U S T R A T I O N B Y S R I S T I 108 BUSINESS TODAY March LBS Case Study- OREO.indd 2-3LBS Case Study- OREO.indd 2-3 3/8/2013 5:40:03 PM3/8/2013 5:40:03 PM Initially, successful brands begin with a tight core brand proposition which is often unique at the level of the prod- uct or product features.

Just as McDonald’s was about ham- burgers and Starbucks about coffee, Oreo was about its distinctive cookie. As time goes by, consumers change and the company needs growth. Sooner or later, the brand faces an existentialist dilemma. Staying faithful to the traditional proposition would lead to brand irrelevance, while expanding it too much would lead to brand incoherence. Continued success requires the brand to redefine its core, finding in it a proposition that is still faithful to tradition, and yet encompasses modernity in a manner to keep the brand relevant, differentiated and credible.

The rise of emerging markets with their different consumption pat- terns and greater diversity of income distribution questions the core proposition of many developed world brands. Just as McDonald’s had to realize it was about clean, affordable fast food and not hamburgers, Oreo had to go through a candid self-exploration. The new Oreo brand proposition is richer and more elaborate while allowing for brand growth and innovation. Similarly, Starbucks realized that when China was going to be its second home market, coffee was not essential to the core proposition. This required a change in the logo and the word ‘coffee’ was dropped from it.

In China, more than coffee, people line up at Starbucks for cold refreshments. However, brands are like rubber bands and can only be stretched so far in the short run. In the long run, they can often be more flexible than their brand managers. Kraft to remake the product in 2006 and introduce an Oreo that looked almost nothing like the original. The new Chinese Oreo consisted of four layers of crispy wafers filled with va- nilla and chocolate cream, coated in chocolate.

The local innovations continued and Oreo products in China today include Oreo green tea ice cream and Oreo Double-Fruit. Another challenge for Kraft in China was introducing the typical twist, lick and dunk ritual used by American consumers to enjoy their Oreos. Americans traditionally twist open their Oreo cookies, lick the cream inside and then dunk it in milk. Such behaviour was consid- ered a “strangely American habit”, according to Davis. But the team noticed China’s growing thirst for milk which Kraft tapped with a grassroots marketing campaign to tell Chinese consumers about the American tradition of pairing milk with cookies.

A product tailored for the Chinese market and a campaign to market the American style of pair- ing Oreos with milk paid off and Oreos became the bestselling cookies of that country. The lessons from the Chinese market have shaped the way Kraft has approached Oreo’s launch in India. Oreo entered India through the import route and was initially priced at `50 (about $1) for a pack of 14. But sales were insignificant BRANDS FACE AN EXISTENTIALIST DILEMMA 110 BUSINESS TODAY March “The new Oreo brand proposition is richer and more elaborate while allowing for brand growth and innovation” PROF NIRMALYA KUMAR, Professor of Marketing and Director of the Aditya Birla India Centre at London Business School CASE STUDY Oreo partly because of limited availability and awareness, but also because they were prohibitively expensive for the value-conscious Indian masses.

Learning from the Chinese success story, the company under global CEO Irene Rosenfeld took localisation strategies seriously from 2007 onwards. The $19.1-billion acquisition of Cadbury in 2009 provided Kraft the local foothold it needed in India. Unlike the Chinese, Indians love their biscuits. Nielsen says India is the world’s biggest market for biscuits with a market share of 22 per cent in volumes compared with 13 per cent in the US. While the lion’s share of this market is for low-cost glucose biscuits led by Parle-G, premium creams account for a substantial chunk valued at around `5,500 crore ($1.1 billion).

The way to the Indian consumer’s stomach is through competitive pricing, high volumes and strong distribution, especially in rural areas. Oreo developed a launch strategy around taking on existing market leaders in the cream segment – Britannia, Parle and ITC. Internally, they even have an acronym for this strategy – TLD (Take Leaders Down). The focus was to target the top 10 million households which account for 70 per cent of cream biscuit con- sumption. Oreo launched in India in March 2011.

It entered the market March BUSINESS TODAY 111 T his is a good example of marketing excellence in three As in India: Availability, Affordability and Adaptability. The key to success in the Indian market is to pursue a balanced marketing effort in terms of the three As. Availability is a function of distribution and value networks, which generates brand awareness when it goes along with well-devised advertising campaigns. Affordable pricing is one of the strategic value propositions Kraft (Cadbury) is offering to valued consumers in India. Better or more-for-less is the mandate for the value proposition in this category.

Arguably, where Oreo India made a difference in is the fact that it successfully overcame a real challenge each and every marketer faces to realize affordable pricing with profitability. Excellence in adaptability to local culture also helped Oreo capture a share of mouths and minds. One of the key success factors for Oreo in India is replicating the learning from China in terms of the intangible brand promise more than tangible benefits like taste. The notion of togetherness fits the Indian context of valuing the family and resonates with the nuclear family in the expanding middle class. Togetherness has successfully created emotional bonding not only between the brand and consumers, but also between parents and children when they experience the brand through product consumption.

When Oreo enters smaller towns, it will be able to enjoy a sweet taste of the future as the case proves the existence of global or universal consumers in India. AVAILABILITY, AFFORDABILITY AND ADAPTABILITY ARE KEY “Affordable pricing is one of the strategic value propositions Kraft is offering valued customers in India” HIROSHI OMATA, CEO, Dentsu Marcom, sees success in India as based on the three A's: Availability, Affordability, and Adaptability. The strategy involves extensive distribution, competitive pricing, and local cultural adaptation, such as emphasizing themes of togetherness and family bonds. By positioning itself as a brand that resonates emotionally with Indian consumers, Oreo has grown rapidly, achieving a market share of approximately 30% in India’s cream biscuit segment.

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Understanding the global expansion strategies of brands like Oreo reveals critical insights into localization, adaptation, and cultural resonance that are essential for success in diverse markets. Oreo, originally known as “America’s favorite cookie,” transitioned to a global brand by redefining its core value proposition to cater to the unique tastes, preferences, and cultural sensibilities of emerging markets, particularly China and India. This strategic evolution underscores the importance of market research, product modification, marketing adaptation, and responsive distribution channels in establishing a firm foothold in diverse regions.

In the early stages of Oreo’s international journey, Kraft Foods assumed that success in the American market—characterized by specific taste preferences and cultural habits—would automatically translate to other countries. However, Oreo’s initial launch in China in 1996 demonstrated the pitfalls of such an approach. Chinese consumers have historically exhibited different taste profiles, favoring contrasting flavors of sweet and bitter, and experiencing less emotional attachment to Western snacks like Oreos. Moreover, price sensitivity significantly impacted sales, with the original Oreo offering being prohibitively expensive for Chinese consumers. As a result, Kraft undertook extensive research, leading to a reformulation of the product—making it more chocolatey and reducing sugar content—and packaging smaller portions at lower prices, which resulted in increased acceptance and sales.

The adaptation process in China illustrated a vital lesson: successful international branding requires understanding local palate preferences, economic factors, and cultural behaviors. Kraft’s modification of Oreo not only involved taste adjustments but also challenged traditional design attributes such as the black-and-white color scheme and round shape, leading to innovative product variants like green tea-flavored Oreo and other limited editions. Additionally, marketing strategies needed tailoring—introducing grassroots campaigns that educated consumers about American eating rituals like pairing Oreos with milk, which aligned with rising milk consumption trends. This localization facilitated Oreo’s transformation from a foreign snack to a culturally embedded product, culminating in it becoming the best-selling cookie brand in China.

Applying this success to India, Kraft faced similar challenges—initial high pricing, limited awareness, and distribution gaps. Learning from China’s experience, Kraft adopted a localization strategy that focused on affordability, extensive distribution, and cultural relevance. The acquisition of Cadbury in 2009 provided Kraft with a deep understanding of Indian consumer preferences, especially the importance of family-centered themes and the love for biscuits. In India, the key to Oreo’s success was positioning the brand around the concept of ‘togetherness,’ resonating with Indian societal values of family bonds and social cohesion. The brand’s marketing emphasized emotional connections, especially targeting nuclear families and children, through campaigns highlighting shared experiences and joy associated with Oreo consumption.

Further, the strategy emphasized making the product accessible through aggressive distribution networks, especially in rural and small-town regions, and offering it at competitive prices—initially around 5 Indian rupees for a small pack—to boost trial and adoption. This approach demonstrated the importance of the three A's—Availability, Affordability, and Adaptability—in emerging markets. Oreo’s local formulation, packaging strategies, and promotional campaigns helped it capture approximately 30% of the cream biscuit market within a few years, surpassing competitors. The rapid growth affirmed that understanding local cultural context and consumer behavior was crucial to establishing a strong brand presence in a complex and diverse market like India.

From a broader perspective, Oreo’s journey exemplifies how global brands must evolve from a core product-centric identity to a flexible, culturally attuned brand proposition. Success lies in balancing brand heritage with innovation and cultural sensitivity, enabling brands to remain relevant amidst changing consumer dynamics. For instance, Starbucks’ repositioning in China—dropping the word ‘coffee’ from its logo to appeal to tea-drinking cultures—mirrors Oreo’s strategy of product and message reformulation. Such approaches highlight the significance of strategic flexibility, market-specific innovations, and emotional engagement—factors that proved pivotal in Oreo's adaptation and eventual success in China and India.

In conclusion, the Oreo case underscores the importance of comprehensive market research, local customization, and emotional branding for international expansion. By respecting local tastes, leveraging cultural values, and implementing flexible marketing strategies, global brands can achieve sustainable growth and build deep consumer loyalty in emerging markets. Oreo’s story reinforces that understanding and adapting to local consumer realities is not just a strategic necessity but a critical determinant of success in the world’s diverse and dynamic markets.

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