How Kraft Changed the Oreo and Its Global Marketing Strategy for Success in China
Gale Business Insights: Global Case Study Collection
After analyzing this case study, students should be able to do the following:
Explain at least three benefits of market research in product development for international and emerging markets Identify traditional and nontraditional strategies for increasing revenue through entering new global markets Appreciate the effect of cultural norms and tastes for firms expanding to new markets Discuss how firms can focus products to local tastes while increasing brand value globally Introduction
One of the more popular strategies for firms to increase profits in the 21st century has been to expand to new, growing markets. China, India, and other Asian and Pacific countries have received a great deal of attention by North American and European firms attempting to tap growing levels of expendable income from the emerging middle classes in these countries.
The strategy seems sound, but its execution is critical to its success or failure. Many examples exist of companies in the 1990s and the first decade of the 2000s failing to gain traction in these new markets. Firms often try to attract new customers by offering essentially the same products that have worked in other markets. They support this strategy by adding sales and marketing staff and other resources to convince potential buyers in the new market of the value of their products. Offering a standard product across markets can minimize costs and increase profit margins. However, cultural norms, tastes, and preferences vary greatly between a firm’s home market and the new market it may be attempting to enter. It is often difficult for firms to gauge the right mix of standardization and localization while still making growth profitable rather than being a drag on profits.
For example, Campbell Soup Co. saw an opportunity to make big profits in Russia and China with its preprepared soup products. According to The Wall Street Journal, Campbell estimated that Russians and Chinese eat soup five times per week on average. As life in China and Russia gets busier and more women enter the workplace, the company forecasted that people would have less time to prepare meals and that the demand for preprepared food would increase. However, Campbell found after years of marketing its products in these countries that its canned soup strategy did not capture the revenue it needed to be profitable. Campbell introduced and then pulled its condensed soups out of China in the 1990s, and the company announced in June 2011 that it would close its Russian operations four years after entering the market.
Kraft Foods Inc. is another company that sees opportunities for new and growing profits in Asia. The company’s first attempts to enter Asian markets were as unsuccessful as Campbell’s initial attempts. However, Kraft decided to shift to a new marketing strategy, grounded in a different understanding of how to best expand into new markets.
Kraft Foods and the Oreo in 2005: In Need of a Change
The first Oreo cookies were produced in New York City in 1912 and registered as a Nabisco trademark one year later. Nearly a century of popular marketing campaigns made Oreos one of the best selling cookies and best-known food brands in the United States. Throughout this period of popularity, very little changed about the physical cookie: Oreos remained a sandwich cookie with chocolate ends and a cream-filled center. The design of the cookie helped initiate an eating ritual that advertisers soon appropriated to make the cookie even more popular: the "twist, lick, and dunk" method for eating the cookie has been a centerpiece of Oreo advertising for many years.
By 2005, the Oreo cookie had been a mainstay in U.S. consumer culture for nearly a century. However, sales in the United States had seemed to peak, and international growth in...
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