Understanding the Consumer: An Oreo Case Study
Oreo's Globalization Problem
With more than 25 million Oreos eaten every day in America, It is no secret that Oreos are America's favorite cookie. But as Kraft Foods learned, this is not the case all over the country. After saturating the American market, Kraft wanted to introduce the cookie to the more densely populated nation of China. After failing in the Chinese market by only achieving 3% of cookie market share, they decided to take a new approach. This is a quick summary of an article I read from Canadian Business. However, I have also learned about this case study in my management class, and so I want to expand on the details of the case and explain the implications it has on the business world.
So why did the Oreo fail in China? Well it's simple: Kraft used the exact same formula and marketing to sell the product on another continent. Therefore, it did not appeal to local tastes and its messages were not constructed to appeal to locals. One way to illustrate this example is with McDonald's in other countries. When I studied abroad in Spain, the McDonalds offered an entirely different selection: patatas braves instead of French fries, macarons and cheesecakes for dessert, and even beer! This really appealed to the local tastes where eating tapas and social drinking are the norm.
So Oreo needed to change their formula. They looked at what was dominating the market at the time, and what was failing. What they found was that wafer cookies were more popular, and that Chinese consumers preferred a less sweet cookie. So Kraft took this information, and created a new cookie: a slightly less sweet wafer cookie. And it took off! Oreo was then able to reach 15% market share with their new formula: a true success for globalization.
Key Takeaways
Kraft's main issue was that they did not take into account the differences between Asia-Pacific nations and the Western world. They created a generic marketing plan and tried to enter a new country with it, but quickly realized that this was not how to be successful. Instead, a company needs to devote time and effort into tailoring new formulas and marketing tactics to fit the market. Consumers in different parts of the country have differences in values and desires. In this case, Chinese consumers wanted more innovation and a semi-sweet wafer cookie: both of which are very different than consumer preferences in the US. In order for a company to succeed in globalization, more research needs to be done beforehand and changes in marketing need to take place. This is a great lesson for companies around the world who are contemplating entering new markets: do your research beforehand and put in the work to change your products and marketing plans to match that.
