Serving Customers in Global Markets
Launching ‘Oreo’ in China and India case study
Retake period
Answer both questions – both questions carry equal marks (50 marks each)
The report should be up to 1000 words maximum.
Credit will be given for directly answering the questions, well-written and clearly structured answers (with titles and subtitles). The answers should refer to the Case Study and the use and
application of models, theories and concepts studied on the module.
Questions
1. Would you say that Krafts food demonstrated a marketing orientation through the Oreo case?
Back up your response with examples and marketing concepts and theory. (50 marks)
2. Krafts food claim they are an innovative company. Consider the steps and decisions they need
to consider when developing and operationalising a new product. (50 marks)
Serving Customers in Global Markets
Spring 2020
Case Study: Launching ‘Oreo’, an iconic American biscuit, in China and India
Part 1: ‘Oreo’ in China and India
Source: Business Today, March 2013, at:
http://businesstoday.intoday.in/story/how-kraft-foods-won-over-customers-in-china-andindia/1/193162.html
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.
On March 6, 2012, the famous cookie brand, Oreo, celebrated its 100th birthday. From humble
beginnings 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
advertising slogans from the 1980s, “America’s Best Loved Cookie”. But the dominant position in
the US limited growth opportunities and 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 Rs 50 (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 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 Rs 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 consumption. Oreo launched in India in March 2011. It entered the market as Cadbury
Oreos because Cadbury is a stronger brand name than Kraft, and initially focused on generating
awareness and rapid trials. The product was sweetened to suit the Indian palate and Kraft
exploited Cadbury’s network of 1.2 million stores.
The Made in India tag meant using locally-sourced ingredients, modification of the recipe to suit
Indian tastes and possibly cheaper ingredients, a smaller size and competitive prices. Oreo launched its traditional chocolate cookie with vanilla cream at Rs 5 for a pack of three to drive
impulse purchases and trials, Rs 10 for a pack of seven and Rs 20 for a pack of 14 for heavy
usage. The cookie looks the same as its international counterpart with a motif of 12 florets and
12 dashes.
The company maintained the heritage of the bitter chocolate cookie with sweet vanilla cream to
stand out from me-too products and meet customer expectations of having the real thing. Kraft
initially chose to outsource its manufacturing for the Indian market instead of using Cadbury
factories.
Communication and advertising have been consistent across the world as the core customer
remains the same. The company focused on using the togetherness concept to sell Oreos in
India, with television forming the main medium of communication although other media are also
being tapped. Oreo India’s Facebook page is one of the fastest growing in the world. The
company also went on a bus tour to push the concept of togetherness among families across
nine cities and it used a smaller vehicle for a similar campaign across 450 small towns. Oreo is
driving point-of purchase sales with store displays and in-store promotions in a bid to overtake
market leader Britannia Good Day’s distribution.
With a strategy focused on rapid brand awareness and extensive distribution, the Oreo India
launch story has been a success so far. Its market share has grown from a little over one per
cent after its debut to a massive 30 per cent of the cream biscuit market. As awareness of the Oreo brand grows in India, Kraft is looking to shift from the Cadbury distribution network to a
wider wholesale channel. It is also eyeing kirana stores and small towns apart from modern
stores in big cities.
Today, Oreo is more than just an American brand. It is present in more than 100 countries, with
China occupying the No. 2 slot. Seven years ago, this was highly improbable.
Expert analysis 1:
The new Oreo brand proposition is richer and more elaborate while allowing for brand growth
and innovation, says Prof Nirmalya Kumar
“BRANDS FACE AN EXISTENTIALIST DILEMMA”
Initially, successful brands begin with a tight core brand proposition 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 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
patterns and greater diversity of income distribution questions the core proposition of many
developed world brands. Just as McDonald’s had to realise 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 realised 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.
Prof Nirmalya Kumar, Professor of Marketing and Director of the Aditya Birla India Centre at
London Business School
Expert analysis 2:
Affordable pricing is one of the strategic value propositions Kraft is offering valued customers in
India, says Hiroshi Omata
“AVAILABILITY, AFFORDABILITY AND ADAPTABILITY ARE KEY”
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 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 realise 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.
Hiroshi Omata, CEO, Dentsu Marcom
Part 2: ‘Oreo’ in China
Source: The Financial Times June 2013, at:
http://www.ft.com/cms/s/0/6bcc1c00-c886-11e2-8cb7-00144feab7de.html#axzz3INOTuvNA
The story. Kraft Foods’ flagship Oreo brand first went on sale in China in 1996. But sales were
lacklustre and by 2005 it was clear that one of the world’s largest biscuit brands was falling far
short of expectations in this fast- growing retail market. Shawn Warren, regional head of biscuits,
and his team knew they had to take radical action or risk the distinctive black-and-white-layered
round biscuits being pulled off the shelves in China.
The challenge. Growth was stalling at a time when the biscuit sector overall was experiencing
record growth in China. Apart from a small rise in 2003, Oreo sales had been sluggish from the
outset, and shipments into China were projected to drop by more than 10 per cent in 2005. To
make matters worse, the company was losing money on each Oreo sold. Even a near-40 per
cent rise in marketing spend yielded no boost in sales. Research revealed that Kraft’s positioning of the brand had missed the mark. First, its sales and marketing strategy had simply been
replicated from the US. Advertising and in-store displays were translated directly, and the pricing
structure and packaging were largely the same as in the US. Second, Kraft had paid too little
attention to what Chinese consumers prefer. For example, the biscuit was too sweet. It seemed
that Oreo’s product was dictated by the manufacturing process, not by the market. Mr Warren
recognised that without a significant strategic reorganisation, the company might have to pull
Oreo from China altogether. He and his team needed to challenge decisions that had been made
at Kraft’s Illinois head office and convince it to make Oreos more suited to Chinese consumers.
The strategy. The Oreo China team adopted a multi-pronged approach:
● It introduced a less sweet version called LightSweet Oreo. The team also convinced
headquarters to reformulate the original Oreo – for the first time in its 93-year history – to adapt
biscuits on sale in China to local tastes.
●The size of the packet was reduced, while the team also introduced another, smaller packet so
consumers could get a first taste of Oreo biscuits at a lower cost. The smaller packets required
changes in the manufacturing plant. Similarly, marketing promotions that relied on bonus packs
(extra biscuits for the same price in a bigger pack) were replaced with more economical in-store
samples.
●The team expanded distribution beyond grocery stores and hypermarkets to include
convenience stores, a fast-growing outlet for consumer packaged goods. Carrefour in Shanghai
offered to sell Oreos by weight, which gave customers more control over how much to buy.
●Recognising the popularity of wafers in China, the team introduced chocolate-covered wafer
sticks. Convincing senior management to introduce a new product was not easy, but Oreo sticks
were a big hit and soon gained 30 per cent of wafer sales overall. Wafer sticks later launched in
some other oveseas markets.
The results. Manufacturing, packaging, distribution and marketing were aligned with the Chinese
market and sales soared from $20m in 2005 to more than $400m in 2012. But the shift in
mindset from rigidly relying on orders from the US to harnessing the local team’s sense of
consumers’ tastes was also a significant outcome.
The lessons. Oreo’s experience illustrates the dilemma faced by a multinational brand entering a
new market. There are different consumer tastes and local sensibilities to cater to but
international brands often rely on the parent product’s strategies because they have worked well
over long periods in established, familiar markets. By launching new products in China that were
recognisably Oreos but were sensitive to local preferences, the brand ensured sustainable
growth by balancing traits that made the global Oreo brand successful while adapting to the local
market.
The writers are, respectively, a professor of marketing at the Lee Kong Chian School of
Business, and a former case writer at Singapore Management University Part 3: Kraft Foods creates ‘Mondelez International’
Source: New York Times May 2012, at: http://www.nytimes.com/2012/05/24/business/mondelezis-new-name-for-krafts-snack-foods-company.html?_r=0
Shareholders of Kraft Foods on Wednesday overwhelmingly approved Mondelez International as
the name of the $35 billion snack foods company that will be created when the company finally
splits sometime later this year.
The logo for Mondelez International, a combination of the words for “world” and “delicious” in
romance languages.
• Times Topic: Mondelez International Inc.
Daniel Acker/Bloomberg News
The name will be in small print on snacks once a part of Kraft.
Coined by two of Kraft’s employees, the name is meant to evoke the global ambitions of the new
snack business, which will take on the titan Frito-Lay, and pique the palate as well with its nod to
the words for “world” and “delicious” in a variety of romance languages.
Kraft announced plans in August 2011 to split itself into two companies. One will be a North
American grocery business made up of brands like Velveeta, Kraft Macaroni & Cheese and
Oscar Mayer that earn a lot of cash and profit despite low growth. The other will be the bigger, sexier snack foods company with more than 80 percent of its business in fast-growing markets
abroad.
Kraft decided the grocery business would retain the Kraft name, and rather than hiring an ad
agency or marketing firm to come up with a new name for the snack foods company, it held a
contest among its employees that attracted some 1,000 entries. “Curiously, two different
employees came up with essentially the same suggestion for the name, though with a slightly
different spelling,” said Michael Mitchell, a spokesman for Kraft.
Mr. Mitchell said the employees, both men, had arrived at the notion of a name connoting
“delicious world.” Johannes Schmidt, an information systems employee in the company’s Vienna
office, had looked for something with the cadences of a waltz, he said. Marc Firestone, the
general counsel based in the company’s headquarters in Northfield, Ill., had come to the name
on a drive from Brussels to Frankfurt on business.
There was no prize “other than our undying love and the honor of having named the new
company,” Mr. Mitchell said.
Consumers will see the name only in small print — Mondelez will allow its famous brand names,
which will include Oreo, Cadbury, Milka, Trident gum, Tang and Ritz, to do their work. “It’s not
intended to be a consumer brand,” Mr . Mitchell said. Marc E. Babej, a partner at Reason, a marketing and strategic innovation firm, said that was a
good thing. “Its saving grace is that it’s just a name for a corporate entity,” Mr. Babej said.
He said as the name for a global company, Mondelez would have little meaning to consumers
outside countries like Italy, Spain, France and Portugal. “I doubt that its connotations are going to
be so obvious to English, German, Japanese or Chinese speakers,” he said.
Allen P. Adamson, managing director at Landor Associates, a brand design firm, avoided
expressing an opinion about the name. Instead, he applauded Kraft for having managed to find a
name in relatively short order that apparently overcame all the potential trademark and legal
hurdles such things face these days.
“Their lawyers will have immediately eliminated 97 percent of the names they came up with
because they were already taken,” Mr. Adamson said. “Find a name is no longer a creative
exercise, which is why most names today sound like they were created by a computer program.
This one, in fact, almost sounds real.”
Additional sources:
Oreos in China (Example of Product Adaptation Strategy in Global Marketing)
Source: Youtube, December 2012, at: https://www.youtube.com/watch?v=U48nmKPJclA
Other sources:
https://www.oreo.com
Oreo Home Page, at: http://www.oreo.com/default.aspx
UK: https://www.oreo.co.uk
Kraft Foods Home Page, at: www.kraftfoodsgroup.com
Mondelez International Home Page, at: http://www.mondelezinternational.com
https://www.foodindustry.com/articles/why-kraft-split-into-two-companies/ (May, 2016)
https://www.mondelezinternational.com/About-Us/Who-we-are/Innovation5
