Executive Summary For Most Of Its 100-Year Existence 675662

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 famous 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 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 re-define 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- tern and greater diversity of income dis- tribution 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 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 bis- cuits 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, pre- mium creams account for a substan- tial 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, es- pecially 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 with a strategy of Availability, Affordability, and Adaptability—three key principles. Availability is a function of distribution and value networks, which generates brand awareness when combined with well-devised advertising campaigns. Affordable pricing offers value to consumers in a highly price-sensitive market. Adaptability involves tailoring marketing and products to local tastes and cultural nuances, such as highlighting family and togetherness, which resonate strongly within Indian social norms.

Oreo’s localization strategies incorporated modifying recipes to meet regional preferences, like reducing sugar and offering smaller, affordable packs. The company also focused heavily on marketing campaigns emphasizing the theme of togetherness, a concept highly valued in Indian families, through television, digital media, and in-store promotions. The brand’s messaging and packaging aimed to foster emotional bonds with consumers, linking the product to family unity and shared experiences.

This strategic approach yielded remarkable results; Oreo’s market share in India grew from approximately 1% shortly after its launch to around 30% of the cream biscuit market. The success hinged on creating widespread awareness, improving distribution channels, and delivering the product at an accessible price point. Further, shifting from exclusive reliance on traditional retail channels to including kirana stores and expanding into smaller towns signifies Kraft’s commitment to penetration in both urban and rural markets.

In China, Oreo’s product innovation, marketing strategies, and cultural adaptation created a strong foothold, emphasizing local tastes like green tea and fruit flavors, and local engagement through grassroots campaigns. The Chinese experience demonstrated the importance of understanding local culinary preferences and consumer behavior. Conversely, the Indian market’s emphasis on affordability, broad distribution, and emotional branding provided a template for localization in a culturally diverse and price-sensitive market. Both cases emphasize the necessity of flexibility, cultural sensitivity, and strategic adaptation for global brands entering emerging markets.

Paper For Above instruction

Oreo's journey from being a quintessentially American cookie to a global icon exemplifies the complex process of international brand adaptation and localization. As Kraft Foods sought to expand Oreo’s presence beyond the saturated US market, the company faced the critical challenge of understanding and responding to cultural, economic, and taste preferences in emerging markets such as China and India. The case provides valuable insights into the strategies employed, obstacles faced, and lessons learned in these two diverse countries, underscoring the importance of market research, product innovation, cultural adaptation, and marketing strategies tailored to local consumers.

Initially launched in China in 1996, Oreo’s entry was predicated on the assumption that its American success attributes would translate seamlessly across markets. However, by 2005, it was clear this was not the case. Chinese consumers exhibited different taste preferences, primarily favoring contrasting sweet and bitter flavors, and had different purchasing behaviors, such as prioritizing smaller, more affordable packaging. Recognizing these divergences, Kraft’s Chinese division undertook comprehensive market research to uncover the underlying reasons for Oreo’s underperformance. This research revealed that the original Oreo formulations were too sweet and unsuitable for Chinese palates, and the higher price point was a barrier for many consumers.

In response, Kraft adopted a localization strategy, developing modified recipes with reduced sugar and enhanced chocolate content that better aligned with Chinese tastes. This process involved multiple prototypes and consumer testing before finalizing formulations. Smaller pack sizes at lower price points further increased accessibility, reflecting Chinese consumers’ shopping habits for value and quantity. Additionally, Kraft innovated the product line by introducing varieties like green tea ice cream Oreos and fruit-flavored options, tapping into local flavor preferences and consumer trends. Additionally, to promote the American tradition of pairing Oreos with milk—a ritual less familiar in China—Kraft launched grassroots marketing campaigns that educated consumers about this experience, leading to increased product engagement and sales. These tailored strategies helped Oreo become one of China’s top cookie brands and underscored the importance of cultural sensitivity and innovation at the product level.

Similarly, the experience in India demonstrated that successful entry into emerging markets requires a comprehensive localization approach centered on three core principles: availability, affordability, and adaptability. When Oreo first entered India through imports, sales were minimal due to limited awareness and prohibitive pricing, which was not aligned with the income levels of the value-conscious Indian consumers. Learning from China’s experience, Kraft implemented a strategic shift after acquiring Cadbury, a giant in India’s biscuit industry. The company launched a targeted campaign focusing on core Indian values such as family and togetherness, which resonated with local social norms.

Product adaptation in India involved offering smaller, lower-cost packs, modifying recipes to suit tastes—such as reducing sugar—and emphasizing the "togetherness" theme through advertising campaigns. One notable success was the emphasis on emotional bonding fostered by shared family experiences around Oreo. The company’s distribution efforts expanded into smaller towns and rural areas, ensuring broad accessibility of the product—significantly boosting market penetration. The implementation of extensive in-store promotions and the use of local media channels created a strong market presence, eventually elevating Oreo’s market share to around 30% of the cream biscuit segment in India.

These case studies highlight that building a successful global brand in emerging markets necessitates a deep understanding of local cultural nuances, consumer behavior, and economic factors. The Chinese case underlined the importance of product innovation and cultural adaptation, emphasizing flavor preferences and consumer education. Conversely, the Indian case demonstrated that affordability, wide distribution, and emotional branding are crucial drivers of market penetration and growth. Both strategies show that flexibility, local insights, and strategic positioning tailored to specific consumer needs are essential for international branding success in diverse markets.

Furthermore, these experiences affirm the broader marketing principle that brands must evolve their core propositions while maintaining their identity. For Oreo, this meant shifting from a homogeneous global cookie to a regionally adapted product family that appeals to local tastes and social values. These approaches align with the marketing concept of segmentation, targeting, and positioning (STP), emphasizing tailored value propositions that meet specific consumer expectations. As brands expand into new regions, cultural sensitivity, continuous innovation, and strong distribution networks act as the pillars of sustainable growth and brand relevance.

In conclusion, Oreo’s expansion into China and India illustrates that successful global branding depends on a company's ability to adapt products and marketing strategies to local contexts without losing sight of the brand’s core identity. These cases reinforce the need for a flexible approach, substantial market research, and cultural understanding to create meaningful connections with diverse consumer bases. The lessons learned from these markets remain vital for other brands pursuing international growth, emphasizing that localization is not merely about translating messaging but about reimagining products and brand values to resonate authentically across cultural boundaries.

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