There's More to Oreo Than Black and White

Kraft customizes its iconic cookie to satisfy emerging market tastes
Indonesia: Oreos come in blueberry, orange, and peanut flavors

James Andrade, who holds a master’s degree in psychopharmacology and a Ph.D. in neuroscience, has just faced one of his biggest career challenges: coming up with a mango-and-orange flavored Oreo cookie. “People in this part of the world have strong feelings about what a mango tastes like,” explains Andrade, vice president of research and development in the Asia Pacific region for Kraft Foods. “You can have many variations on vanilla, but people are quite discriminating with mango.”

Whether it’s green tea Oreos in China, a chocolate and peanut variety in Indonesia, or banana and dulce de leche Oreos in Argentina, a lot rides on Kraft’s efforts to develop alternatives to the iconic cookie-and-cream combination. The 100-year-old sandwich cookie, a $2 billion brand, is going global in a big way. Emerging markets will account for about half of Oreo sales this year, and over the past five years emerging markets including Asia and Latin America have been the major drivers of the brand’s growth. Thanks to the overseas push, overall Oreo sales grew nearly 25 percent in 2011.

Kraft has tailored the cookie’s marketing to better resonate among local consumers. In one Chinese commercial, a child gives a lesson in dunking (cookies, not basketballs) to former Houston Rockets star Yao Ming. In a South Korean ad, a baby clutches an Oreo while nursing at its mother’s breast. Kraft says that spot was made by its ad agency only for an awards program. But since its leak online, it’s gone viral.

Success outside mature developed markets is important for Kraft as it prepares for a spinoff of its snacks business later this year. Given unexciting prospects in the U.S., the new company, which will be called Mondelez International, will focus heavily on emerging markets.

Oreos haven’t always been popular outside the U.S. Kraft struggled for years in China, for instance, and considered leaving five years ago. The cookie “was spectacularly underperforming,” says Sanjay Khosla, Kraft’s president of developing markets. One problem: Kraft offered Chinese consumers the same type of Oreos that it sold in the U.S. “There was a belief that what was good for the U.S. was good for the world,” Khosla says.

After surveys showed that Chinese consumers found Oreos too sweet, Kraft put Andrade to work coming up with a new formula to better suit local tastes. In India, Kraft encountered the opposite problem: The American-style cookie was too bitter, Indians told researchers. Adjusting for local preferences “isn’t a matter of just removing one ingredient,” says Andrade. “It’s about making sure you balance the flavors. You almost have to reconstruct the product.”

For Asia, Kraft also decided to jettison many of its dozens of brands and instead concentrate on a few important ones such as Oreo and Tang. That simplification strategy makes sense in China, where many multinationals are trying to introduce their brands to middle-class consumers, says James Roy, a senior analyst with China Market Research Group in Shanghai. “There’s too much noise in terms of how many brands there are,” he says. “Those brands don’t have a history in China, and people get confused if you introduce too many things at once.” Kraft is trying the same approach in India. The company acquired Cadbury in 2010 and the following year started putting that name on Oreos in India, taking advantage of Cadbury’s well-known brand and extensive distribution network there.

— With assistance by Caroline Winter

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE