MGT 481 CASE STUDY ASSIGNMENT

MGT 481 CASE STUDY ASSIGNMENT

Subject: Business    / Management
Question
CASE STUDY Oreo SMA RT C EXECUTIVE SUMMARY:
XECUTIVE For most of its 100-year existence, Oreo
or
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
108 BUSINESS TODAY March 31 2013 LBS Case Study- OREO.indd 2-3 KIE
ILLUSTRATION BY SRISTI O n 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 billiondollar 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 Kra to turn to international
Kraft
markets. With China and India repW
resenting possibly the jewels in the
p
crown of in
c o n 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 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 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 March 31 2
3 2013 BUSINESS TODAY 109 3/8/2013 5:40:03 PM CASE STUDY Oreo BRANDS FACE AN
EXISTENTIALIST DILEMMA I nitially, 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. “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 110 BUSINESS TODAY March 31 2013 LBS Case Study- OREO.indd 4-5 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 (about $1) for a pack of
14. But sales were insignificant India is the world’s
biggest market
for biscuits with
a market share of
22% compared with
13% in the US Premium creams
account for a huge
chunk of India’s total
biscuit market and are
valued at around 5,500Cr ` 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 consumption. Oreo launched in India in
March 2011. It entered the market AVA
AVAILABILITY, AFFORDABILITY
AND ADAPTABILITY ARE KEY
AN T h is a good example of marketing excellence in three
his
As
A in India: Availability, Affordability and
Adaptability. The key to success in the Indian market is to
Adap
pursue
pursu a balanced marketing effort in terms of the three As.
Availability is a function of distribution and value
Av
networks, which generates brand awareness when it goes
netw
along with well-devised advertising campaigns.
Affordable pricing is one of the strategic value
Af
propositions Kraft (Cadbury) is offering to valued
propo
consumers in India. Better or more-for-less is the
consu
mandate
mand for the value proposition in this category.
Arguably, where Oreo India made a difference in is the fact
A
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. “Affordable
e
s
pricing is
one of the
e
strategic value
e
s
propositions
Kraft is
s
offering valued
d
customers in
n
India”
”
HIROSHI OMATA,
A,
CEO, Dentsu Marcom
m March 31 2013 BUSINESS TODAY 111 3/8/2013 5:40:33 PM CASE STUDY Oreo
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 `5 for a
pack of three to drive impulse purchases and trials, `10 for a pack of
seven and `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 The Made in
India tag meant
using locally-sourced
ingredients and
modi?cation of the
recipe to suit
Indian tastes
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-ofpurchase 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 dis- BEST OF THE LOT tribution, 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. ~
(This case study is from the Aditya
Birla India Centre of London Business
School.)
What can we learn from Kraft
Food’s experiences in India and China?
Write to btcasestudies@intoday.com
or post your comments at www.
businesstoday.in/casestudy-oreo. Your
views will be published in our online
edition. The best response will win a
copy of Marketing as Strategy by
Nirmalya Kumar. Previous case
studies 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 has
one billion active users – and data use is overtaking voice revenue, social
media marketing is the future for branding and advertising This means customer approach will be precise in
STP (Segmentation, Targeting & Positioning). Also, as
discussed in the HBR issue of July-Aug’12 (Tweet Me
Friend Me Make Me Buy – Barbara Giamanco and Kent
Gregoire) this is the time when the right use of social
marketing management should be taught in business
schools as a subject. I think Indian companies should
start 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.) and
its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder’s
express 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.