Executive Summary For Most Of Its 100-Year Existence 008708

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 SMART spurred Kraft to turn to international markets. With China and India representing possibly the jewels in the crown of international target markets 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 research the Chinese market to understand 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 consumers liked the contrast of sweet and bitter but “they said it was a little bit too sweet and a little bit too bitter”. Without the emotional attachment 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 cloying. 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 impact on sales and prompted the company 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 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 vanilla 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 considered 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 pairing 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 rupees (about $1) for a pack of 14. But sales were insignificant partly because of limited availability and awareness, but also because they were prohibitively expensive for the value-conscious Indian consumers.

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% in volumes compared with 13% 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 rupees ($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 percent of cream biscuit consumption. Oreo launched in India in March 2011.

This 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 generate brand awareness when combined 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, Oreo India made a difference by overcoming a real challenge each 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. Premium creams account for a huge chunk of India’s total biscuit market and are valued at around 5,500 crore rupees. India is the world’s biggest market for biscuits with a market share of 22% compared with 13% in the US. This case provides valuable insights into Kraft’s strategic approach to global branding and localized adaptation in emerging markets.

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The case of Oreo’s global expansion exemplifies the complexities and strategic adaptations necessary for a traditional Western brand seeking success in diverse international markets. Initially perceived as a quintessential American cookie, Oreo’s journey in China and India highlights key lessons in market research, product customization, cultural adaptation, and strategic pricing. Kraft Foods’ approach in China involved understanding the local palate and behavior, leading to recipe modifications and innovative marketing campaigns that fostered emotional connection through cultural relevance. Conversely, in India, emphasizing availability, affordability, and adaptability proved essential to capturing market share and building consumer loyalty in a highly competitive environment.

In China, Oreo’s initial failure underscored the significance of product-market fit, where taste preferences and price points diverged dramatically from American consumer expectations. Kraft’s decision to redesign Oreo with a richer chocolate flavor, less sugar, and various innovative products like green tea Oreo and fruit-flavored variants demonstrated a tailored approach to local tastes. Additionally, the marketing campaigns highlighted cultural differences in consumption rituals, with a grassroots push to introduce the American tradition of pairing Oreos with milk. These efforts culminated in Oreo becoming the top-selling cookie in China, illustrating the importance of localized product development and consumer education in emerging markets.

On the other hand, the Indian market required a different strategic focus. Given India’s vast and price-sensitive consumer base, Kraft adopted a strategy centered on competitive pricing, extensive distribution, and cultural resonance. By leveraging local biscuits brands and understanding the significance of “togetherness” as a core cultural value, Oreo’s marketing campaign emphasized emotional bonds between family members and across generations. The use of tiered pricing, smaller packages, and localized advertising helped Oreo gain rapid market acceptance, capturing a significant share of the essential cream biscuit segment. This approach illustrates how blending global brand equity with local culture can accelerate growth and brand loyalty in diverse markets.

The broader lessons from Oreo’s experience highlight the importance of flexible brand positioning, product innovation, and culturally sensitive marketing. Companies must balance maintaining core brand attributes with adapting to local preferences and consumption habits. The concept of “stretching” a brand, as seen with Oreo’s varied formulations and marketing strategies, underscores the potential for global brands to remain relevant through innovation, while still respecting cultural differences. A focus on consumer insights, coupled with strategic localization, enhances a brand’s resonance and market penetration in diverse environments.

Furthermore, Oreo’s success demonstrates the importance of understanding consumer behaviors and rituals. While the American twist, lick, and dunk ritual was central to Oreo’s identity, its adoption in China was facilitated by targeted campaigns that educated consumers and integrated local taste preferences. In India, the emphasis on togetherness and emotional bonding exemplifies how cultural values influence consumption patterns and brand relevance.

Ultimately, the strategic lessons from Kraft’s Oreo expansion in China and India underscore that global success hinges on the ability to adapt while leveraging the brand’s core strengths. Companies need comprehensive market research, innovative product design, culturally aligned marketing, and flexible pricing models. These elements collectively enable a traditional brand to thrive amidst diverse consumer expectations, driving growth and reinforcing brand equity across borders.

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