The confectionery behemoth Cadbury is now expanding its wings in the biscuit category with the launch of Oreo biscuits. The company launched Oreo a couple of months back and is vying for a fair share of the quickly expanding cream biscuit category (also referred as sandwich biscuits).
The biscuit category, as per Euromonitor report (2010), is worth Rs 10,782 crore, and is growing at the rate of over six per cent. Meanwhile, the sandwich biscuit category is worth Rs 1,466 crore and is expected to grow faster than the overall biscuit category at the rate of over 10 per cent. The biscuit category is largely dominated by local players with Britannia leading the pack with 35 per cent share, closely followed by Parle with 33 per cent share and ITC’s Sunfeast with 11.5 per cent share. Cadbury, before the launch of Oreo, had a small share of 1.4 per cent in the biscuit market with its chocolate filled biscuits - Bytes.
Oreo is product of Kraft Foods, which acquired Cadbury in January 2010. Kraft Foods has been riding high in Asia Pacific with Oreo. Oreo has tripled its business in the region in just three years, with markets such as China leading the way. At present the Indian market is among the top 10 priority markets for Kraft Foods Group.
Bonding over biscuits
Cadbury’s latest launch Oreo is focusing on the households, which are heavy consumers of cream biscuits. In other words, the brand’s primary target audience are the 10 million households that contribute 70 per cent of cream and biscuit sales. While the rest 30 per cent is consumed by households which are not a heavy consumer of cream biscuits. These households are not in the focus lens of Oreo.
Cadbury has positioned Oreo as a family brand. And that’s why the communication of the brand stresses on a special way of enjoying Oreo cookies ‘Twist, Lick and Dunk ritual’ as they call it. Chandramouli Venkatesan – Director, Snacking and Strategy, Cadbury India, says, “Through our marketing, we want to engage Indian parents and kids with the child like delight. That’s why the campaigns revolve around families bonding over Oreo”.
The Oreo ritual also seems in sync with the Indian habit of dunking biscuits in tea and milk and that’s what Oreo is looking to capitalise on, while vying to capturing the mindshare of families in this highly competitive market.
The company has used a mix of TVCs, outdoor campaigns, on-ground activation and digital outreach for its launch, however the major thrust has been on TV. The TVC of Oreo was launched during Cricket world cup 2011 to grab maximum eyeballs. The TVC played on all major channels in Hindi, Bengali, Marathi, Tamil, Kannada, Telugu and Malayalam. Market reports suggest that Cadbury has allocated one of its largest marketing spends on Oreo, however, the company refused to disclose the numbers.
Multiple price point game
Oreo is targeting different consumers through different Stock Keeping Units (SKUs) available at Rs 5 for three biscuits; Rs 10 for seven biscuits; and Rs 20 for 14 biscuits covering impulse, family sharing and heavy usage.
CR Vinay, Founder & MD of Customer Centria (a Customer Experience and Engagement Company) feels, “These SKUs will help Oreo cater to the different needs of different set of consumers. It is the right way to approach the market and will help the brand to reach out a wider audience.”
Chitrangda Kapur, FMCG analyst at Angel Broking feels, “Small SKUs will help Oreo tap on-the-go consumption. With the small pack priced at Rs 5, the brand is aiming to lure consumers that generally buy quick snacks to be consumed on the move.” To achieve this affordable pricing, Oreo is being manufactured locally.
These low priced SKUs (of Rs 5 and Rs 10) are also helping the trial purchase of the biscuit. Clearly, Oreo is looking at a volume driven growth in the country and the low priced small packs may help the brand achieve that objective.
However, there is a risk for Oreo to lose its premium image. M Unnikrishnan, MD, Brand Finance, says, “Low priced packs will destroy Oreo’s premium image. This is what I call subliminal discounting of value and I think Oreo will end up being negatively affected by this strategy.”
The distribution push
Oreo is also relying on strong distribution push to make its presence felt. The brand is focusing both on modern and retail trade. Cadbury’s Venkatesan says, “India is the best example of a market that has not only traditional trade but also modern trade. Oreo will therefore be widely available to consumers - at hundreds of thousands of retail outlets across urban and semi urban markets in attractive packaging at affordable price points.”
Even a senior executive from a competitive brand appreciates the distribution strategy of Oreo as he says, “Cadbury has done a fabulous job in terms of distributing Oreo. They are relying on the ‘distribution Push advertising pull’ strategy. This has given them initial kick and trial sales. Now how they go ahead from here will be a bigger challenge.”
Going forward, the biggest challenge for Oreo will be to convert the trials to repeat purchases and penetrate the market deeper in the Tier-II & III cities in the country, especially when the brand is looking at a volume game and not getting into the premium space. Angelbroking’s Kapur agrees, “The challenge for Oreo will be to gain market share once the trial purchase is over.” Thus retail trade will play a huge role in Oreo’s success or otherwise.
Where is the differentiation?
The competitive space in the cream biscuit category is really intense. It is notable that Britannia’s and ITC’s Sunfeast already have similar products, which have a strong footing in the market. Britannia’s Treat-O and Pure Magic and Sunfeast’s Dark Fantasy dominate this space. In such a scenario, it was very difficult yet important for Oreo to differentiate itself from these products. However, experts are of the view that unfortunately the brand has failed on this point. Brand Finance’s Unnikrishnan says, “From a product perspective, Oreo has no differentiation than what the existing players are already offering. Being a brand of such a stature, I expected Oreo to offer benefits based specifically on the Indian consumer’s insight. Maybe something more healthy or wholesome offering as there is this notion that consuming too much biscuits by kids is not healthy. But it is quite disappointing to see that a brand as big as Oreo is simply trying to play on its global proposition and not doing anything differently for a market which is so unique.”
On the contrary, Oreo claims that its success in global markets is based on deep local consumer understanding and insights – making it locally relevant. “In India, we are launching Oreo in its classic flavour - dark chocolate biscuit with smooth vanilla crème – based on consumer insights that show Indian consumers responding enthusiastically to the product,” says Venkatesan.
However, going forward, how Oreo innovates in terms product and marketing coupled with efficient reach deeper in the country will decide the brands’ success or otherwise in the Indian market.