Lori RiceThe development of the Fat Free Oreo Cookie: A Marketing Plan

Current Issues in MarketingFebruary, 2007

Marketing Plan: THE FAT FREE OREO

Table of Contents

Executive Summary 1

Situation Analysis 1

SWOT 3

Target Markets 6

Mission Statement 8

Objectives 9

Marketing Strategy/Tactics 11

Price and Distributors 11

Communication Strategy 14

Media Schedule 16

Feedback/Evaluation 17

Financial Information 18

Appendix A – Top Cookie Makers, 2006 20

Appendix B – Top Cookie Brands, 2006 21

Appendix C – Press Releases 22

Appendix D – Magazine Ad 23

Appendix E – Magazine Ad 24

Appendix F – Outdoor Advertisement 25

Appendix G – Media Schedule 26

Appendix H – Customer Evaluation Survey 27

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Executive Summary

Nabisco is a company that has been in existents since 1898. During their 109

years in existence, they have grown through natural growth, mergers, and acquisitions.

This has allowed Nabisco to be the leading snack maker in the world. Being the leading

snack maker has allowed Nabisco to introduce a diverse selection of foods. However in

recent years Nabisco has been reluctant to adapt to current market trends. The company

was focusing on producing new versions of existing products to make them more

convenient. However Nabisco was ignoring that other companies were creating similar

products that were cheaper and also healthier products. Recently, Nabisco realized this

trend and began creating healthier foods such as 100-calorie snack packs, low carb foods,

and low fat foods. With these new products, Nabisco has been able to serve people that

have chosen to adapt to a healthy eating life style. The new Fat Free OREO that Nabisco

will be introducing next year will solidify Nabisco as a company that is willing to support

those that have adopted that healthy eating life style. Nabisco is expecting the new Fat

Free OREO to become one of the leading fat free snacks on the market. Nabisco hopes

to expand to other fat free products like OREO piecrust, OREO ice cream cones, and

snack size packages of Fat Free OREO for vending machines or individual purchases in

2009.

Situation Analysis

In 1898, The National Biscuit Company was formed in the US through the merger

of several regional baking companies. In 1952, the now familiar red Nabisco triangle

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first appeared on the upper left corner of National Biscuit Company products. National

Biscuit Company changed its name to Nabisco in 1971. In 1981, Nabisco, Inc. merged

with Standard Brands (founded in 1929) to become Nabisco Brands. To expand their

global presence and to strengthen their position in the fast-growing consumer snacks

sector, Philip Morris Co. Inc. acquired Nabisco Holdings in December 2000. Philip

Morris purchased Nabisco for $14.9 billion in cash plus assumed $4 million in debt

(Grant 243).

Nabisco is the world’s largest manufacturer and marketer of cookies and crackers,

based on retail sales. Eventually, Philip Morris integrated the Nabisco brands with its

Kraft Food operations (Cookies 4). In March 2001, Philip Morris created a new holding

company for the combined operations known as Kraft Foods Inc. (lacking the comma of

the previous Kraft Foods, Inc). The previous Kraft Foods was renamed Kraft Foods

North America (Grant 243).

The people of Kraft have recognized that the business has an important role in

society- a responsibility that included understanding and meeting the public’s

expectations, helping to address important social, environmental and economic issues and

making a difference in local communities and the world. They firmly believe that “Our

success will depend importantly on our willingness and ability to listen, get feedback on

what we’re doing from those both inside and outside Kraft and act responsibly on issues

of important concern.”

Beginning in the early 1990’s cookie sales began to slowly decline because

consumer’s buying habits were shifting towards lower calorie. When more brands began

making low fat products, then sales began to slowly increase again. By the early 2000s

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the low fat trend was out and the low carb trend was in. Therefore, cookie sales fell by

1.9 percent. The low carb craze has diminished in the eyes of Americans. There are

numerous diets that are setting the trend for the low fat craze. Among them are the South

Beach Diet, Jenny Craig, and Weight Watchers. However, these diets do not ban but

actually encourage the consumption of “good” fats. In order to gain back old consumers

and attract new consumers, companies have had to develop a wide variety of products

containing a low or no amount of fat. Numerous companies are creating low fat/no fat

versions of their products and other companies are specializing primarily in low fat/no fat

foods. When Nabisco introduced their fat free cookies to the market in 1995, US sales

zoomed peaking at about $490 million. The turnout of the product’s sales will give other

companies an insight on whether they should create a fat free cookie product.

Strengths

Among Kraft Foods’ many strengths is its standing as the largest branded food

and beverage company in North America and the second largest worldwide. Kraft Foods

are found in more than 99 percent of all households (Company Overview 1). Nabisco is

one of the seven Kraft brands that bring in more than $1 billion in revenues each year

($3.5 billion) (Grant 235). Nabisco is ranked as the top cookie maker, with

$1,432,539,000 in sales for the year of 2006 (see appendix A). Nabisco has consistently

been the leader in the industry, selling nine of the top twenty cookies worldwide,

including OREO, the world’s largest selling cookie brand (for cookie sales, see Appendix

B).

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One of Kraft’s most important strengths is the power of their brands. They work

to grow these brands by:

Focusing on fast growing sectors such as snacks, beverages, and

convenient meals.

Addressing consumer needs for health and wellness.

Expanding their presence in faster growing distribution channels.

Targeting fast growing demographics and economic segments.

Focusing on fast growing sectors is the strength we will base our new product on. Kraft

Foods will be introducing a new fat free OREO cookie. As we closely observed the shift

in society’s eating habits, we realized that we needed to come up with a new product to

accommodate those who do not purchase our products; those who are not currently

purchasing our products. This may include consumers who abide by some kind of strict

diet plan. Since the new recent health diet trend is low or no fat diets, we used the facts

and statistics in the development of our new product, the Fat Free OREO. Our new

product will contain 0 grams of fat per serving and 0 grams of sugar, because we are

substituting sugar for the sweetener, Splenda.

Weaknesses

While Nabisco is the top cookie maker, our sales have slowly declined the past

few decades. An important reason for the declines in Nabisco’s cookie and cracker

business is that during the 1980’s, Nabisco aggressively increased its price causing

consumers to buy less (Cookies 2). Nabisco still holds the largest part of the business,

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however, private labels have begun to heavily cut into Nabisco’s market share. Our

product will be made with more expensive ingredients as all healthy foods are, therefore,

we will not be lowering the cost of our product which will be a weakness. The price of

our new product will be a few cents higher than the price of the regular OREOs. While

the original OREOs are priced around $3.00 per package, the Fat Free OREO will be sold

for $3.15 per package.

Another reason for the decline in sales is that we do not make products that serve

the health conscious society. Nabisco has introduced several reduced fat products, but

consumers more recently have become interested in low or no fat intake. Nabisco’s

OREO cookies have a total of 7 grams of fat and 14 grams of sugar per serving (three

cookies), while one of our competitors are marketing new cookies that have 4.5 grams of

fat and 5 grams of sugar per serving. We hope that developing this new product will

raise our sales and reach the target audience we are aiming our marketing efforts towards.

Also, since our competitor’s cookies only contain 4.5 grams of fat, it will be essential to

have less fat but still have a great taste.

Opportunities

Category leadership provides us with major strategic advantages. It brings the

benefits of scale, consumer loyalty, and in-store emphasis by retailers. Kraft holds the

number one share position in 21 of the 25 top categories in the US and 21 of the top 25

country categories internationally. These advantages place Kraft in the position to obtain

a significant share of a category’s growth and profit, generating additional resources to

reinvest in marketing and innovation, and enabling them to continue ongoing leadership

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and profitability. In addition, the packaging for the Fat Free OREO will have a seal,

labeling the product “Weight Watchers, 4 points per serving,“ which will generate more

interest and reassurance throughout the target market.

Threats

A threat that we face is the competition of other cookie brands, such as Keebler,

which is the second largest cookie manufacturer in the US. Their annual sales are around

$554,318,700. Just as we want to generate a new group of consumers, we want to keep

our current consumers as well. Keebler has been a tough competitor of ours for a long

time. In addition, since we are developing and trying to market a new product, we have

developed a new competitor as well. AngelLite is the only other brand that has a fat free

sandwich cookie on the market. The company specialized specifically in low fat or fat

free foods, and currently has 140 products on the market. Although they are a relatively

new company, their sales are quickly increasing along with their recognition. Therefore,

we will be competing with a company that has already developed recognition and has had

its new product similar to ours on the market for five months.

Current and Prospective Target Market

The current target market for the original OREO is children. The original OREO

cookies have previously focused on and promoted the new colors for the crème filling,

which would generate new interest amongst children, who would in turn convince their

parents to buy the new cookie. We have created an entirely new target market for our Fat

Free OREO. Our marketing communications will be primarily directed toward women

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ages 18-45 that are health conscious, yet still enjoy consuming sweets. The target market

lives in the urban part of the city and resides in the middle to upper middle income range.

Our target audience enjoys recreational activities for exercise, such as swimming, biking,

jogging, or power walking. The psychographics of our target audience are the desire to

be healthy and fit, yet have a difficult time eliminating those sweet indulgences they

crave and desire. They probably have a pattern for low self control and/or self discipline

in regards to what foods they consume. The target market will purchase our new product

for themselves and possibly their spouses. As a result of the increasing problem of

obesity amongst children, we have made our children our secondary target market.

We will be focusing our efforts towards the primary target market. Their

behavioral patterns include white-knuckling through their diet, which eventually results

in a binge of high fat foods and then a feeling of guilt for losing self control. This

product requires low involvement decision making, because it is not a large purchase.

However, it may give our target consumers a food they can indulge in without the feeling

of guilt afterwards. More than likely, our target market will eat only one serving, which

is three cookies, at a time. This is just enough to give them their “fix” and satisfy their

cravings.

Key competitors are Keebler and AngelLite. AngelLite is not a high ranked brand

in the market, but they are currently the only other company with a fat free sandwich

cookie on the market. We want to ensure that our current consumers continue to remain

loyal to us, without switching over to our largest competitor, Keebler. In addition, we

also hope that our perspective target audience for the new product remains loyal to us

alone, especially when most consumers do not associate us with healthy snacks yet.

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Although we are currently the top cookie maker, we have earned a reputation for great

tasting, but fattening cookies. It is difficult to separate ourselves from the current image

we have, but significant promotion may help our target audience to notice us and choose

our product amongst the competition.

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Price:

The price point for Oreo cookies differs based upon the distributor of them. Oreo original

cookie, 16 oz. size, at mass merchandisers priced $2.54 at Target and $2.50 at Wal-Mart.

Supermarkets sold the cookies at a higher price. Public had Oreo cookie for $3.35, while

Hydrox had them for $3.39. The main competitors, Hydrox cookie and Pepperidge Farm

Chocolate Chunk varied in price, more than Oreo cookie, at the various locations.Oreo

Deluxe, for an 18 oz. bag of original cookies, priced $2.54 at Target, $2.50 at Wal-Mart,

$3.35 at Public and $2.75 at Kroger. Chocolate Chunk, for a 7.2 oz. bag of original

cookies, priced $2.39 at Target, $2.68 at Wal-Mart, $2.99 at Public, and $2.99 at Kroger.

Distribution:There are many forms of distribution to the customer. Oreo cookies can be sold to the end

user through convenient stores, vending machines, supermarkets and other general stores.

Sales in convenient stores have seen an increase in growth of cookie sales. Cookie sales

have increased 2%, to a 16.3% of sweet snack sales in convenient stores. The sweet snack

sales make up 1.93% of all inside sales. Supermarkets sold $3,712,100,000 in cookies,

while drug stores and mass merchandisers sold $128,000,000 and $627,600,000

respectively. The 56 chocolate chip cookie manufactures have a total shipment value of

$558,904,000 in 2002 (U.S. Census). The top cookie vendor is Nabisco, who produces

Oreo brand cookies, with $1,331,500,000 in volume. Nabisco’s largest competitor,

Hydrox cookie, had $420,500,000 in volume. Private label cookie producers totaled

$295,100,000 in volume, while Nabisco’s third largest competitor Pepperidge Farms, had

$269,700,000 in volume.

Mission Statement

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We want our consumers to regard us as their primary snack food. We want our

customers to know that we have their wants and needs in mind along with working to

create products that will cater to their health conscious lifestyles.

Objectives

Nabisco has been very successful with its OREO products. Now is the time to

become more competitive in other areas by becoming more attractive to potential

customers. Nabisco now plans to focus on better-for-you-products with less marketing to

children. Since the weight loss trend is targeting more awareness of fat intake, instead of

low fat products, we are choosing to shift some of our weight towards the fat free market.

The Fat Free OREO will help broaden our marketability in the cookie industry.

Projected Goals

Gaining new customers who are watching and trying to lose weight by

lowering their fat intake.

Introduce the Fat Free OREO in January of 2008.

Establish OREO as one of the leading fat free snacks on the market.

Expand to other fat free products like OREO pie crust, OREO ice cream

cones, and snack size packages of Fat Free OREO for vending machines

or individual purchases in 2009.

Financial Objectives

Increase sales by selling 5 million bags of the Fat Free OREOs.

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Increase sales by marketing the Fat Free OREO product to women ages

18-45.

Sales goals- increasing OREO sales by 15 percent with the Fat Free

OREOs for the 2007 year.

Marketing Objectives

Targeting people who are on strict diets like Weight Watchers and South

Beach.

Promoting the Fat Free OREO packaging by using new colors to help it

stand out against the original OREO.

Promoting a healthier product to health conscious consumers.

Marketing Strategy/Tactics

To reach our target audience, which consists of health conscious women ages 18-

45, our campaign will focus on reach rather than frequency. With and unlimited budget,

we believe that running advertisements in magazines and TV will effectively reach our

target audience. We will supplement the campaign with consumer promotions.

Magazines

We will run advertisements in five major magazines throughout the country.

These magazines include Redbook, Shape, Cosmopolitan, People, and O-The Oprah

Magazine. These magazines were chosen because of the diverse group of women they

can reach.

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Redbook was chosen because their audience has the same demographics and

psychographics as our campaign. Shape was chosen because it is one of the leading

health magazines for women in the country. Cosmopolitan was chosen because it is the

leading women’s magazine in the country. People was chosen because of its ability to

reach a wide range of consumers. Oprah was chosen because of her ability to connect on

almost every level with diverse groups of women.

Television

Television spots for broadcast and cable networks will appear throughout the

country on various stations to reach our target. These networks include ABC, CBS, NBC,

FOX, TLC, Lifetime, Oxygen, and MTV.

ABC, CBS, NBC, and FOX were chosen because they are the most popular

networks. Advertisements promoting our new product will appear on these networks

during the morning and evening news, daytime television, and prime time. The daytime

television advertisements will be run during “Oprah”, “Days of our Lives”, and “Dr.

Phil.” “Oprah” is a television show directly targeted towards women. “Days of our

Lives” was found to be the most popular watched daytime soap opera. “Dr. Phil” was

chosen because the show’s popularity is rapidly increasing. In addition, Dr. Phil features

his program “The Ultimate Weight Solution”, which has become one of the fastest

growing lifestyle trends. Lifetime and Oxygen were both chosen because of its

networking specifically geared and designed for women. MTV was chosen because it has

the ability to reach the younger portion of our target audience.

Consumer Promotions

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We will run promotions at major food retailers throughout the country.

Promoting at major food retailers will allow us to get feedback from the consumer.

Coupons will be offered on our website and at sampling stations inside food retailers.

Coupons will be distributed in exchange for filling out a customer survey. In addition,

we will run seasonal promotions to coincide with our media schedule. For the months of

January and February, a contest will be held to win a one year membership to Bally Total

Fitness (Appendix E). This promotion will help kick off the start of New Years

Resolutions. During the months of April and May, ten elliptical cross trainers will be

given away in a sweepstakes drawing to kick off swim suit season. For December, there

will be a contest for whoever creates the most unique OREO Christmas cookie house

(See Appendix E). The winner will awarded $5,000 to pay off their credit card bills from

Christmas shopping.

Positioning

As stated earlier, Kraft Foods holds the number one share position in 21 of their

25 categories in the U.S. and 21 of our 25 top country categories internationally. In order

to remain at that point, Kraft is going to position itself as one of the first to create a fat

free line to complement its original line of products. Although AngelLite already has 140

products on the market, that is all they specialize in. They have a more specific target

market in general. Kraft wants to broaden their target market by reaching to an entirely

new audience they have not been able to accommodate in the past. We hope to maintain

our current reputation with our current consumers while creating a new favorable

reputation with our new target audience. Kraft’s position on the Fat Free OREO is that it

allow women to abide to their low fat diet without depriving themselves of sweet snacks.

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Essentially, our products allows low fat dieters to “cheat” on their diets without feeling

guilty afterwards.

Packaging

While the packaging for the original OREO is blue, the packaging for the Fat Free

OREO will be red and blue to promote a fresher image to our already successful brand of

OREO. We chose the color red because it triggers the thought of a healthy lifestyle. We

chose the keep the color blue in honor of the original OREO, but added the red color to

distinguish the new fat free product from the original. We also plan to include a zip lock

seal on the package to lock in the freshness for a longer period of time.

Communication Strategy

Consumers are extremely health conscious today and we want them to know it is

possible to abide by their diets without depriving themselves of the sweet delicacies they

crave. This is the message we will convey to our target market. In order to reach our

audience, we market our new product through print, electronic, and outdoor

advertisements.

Press Release

The first step in communicating with the public would be to send out a press

release explaining our new product and when distribution will begin. Press releases and

media kits would be sent to food retailers, editors of Food & Science, as well as the

editors for magazines we plan to advertise in. Finally, there would be a contact name and

number for more information (See Appendix C).

Public Relations

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For our Public Relations efforts, we will sponsor a fundraiser for the Susan G.

Komen Breast Cancer Foundation. Kraft Foods will donate 25 cents for every package

sold in the first two years after the Fat Free OREO’s introduction. Ads will be placed in

all of the selected magazines (See Appendix D). We chose this foundation since 99

percent of people diagnosed with breast cancer are women. Since women are our target

audience, we wanted to choose a foundation they felt strongly about and could relate

with.

Print Media

One form of media we would use would be through magazine advertisements.

The advertisements would be placed in magazines that are directed towards the same

demographics of our target audience. Magazines have longer shelf life and are, therefore,

a consistent reminder of our product and its benefits each time the magazine is read

through (See Appendix E).

Electronic Media

Another form of media we would use would be through television and our

website. Although it is the most expensive form, it is also most effective. Television

commercials are the fastest and easiest way to reach our target audience. Advertisements

will run during programs that are watched by those with the same demographics as our

target. Our website will feature information about all of our products, particularly the Fat

Free OREO.

Outdoor Advertisement

We will display advertisements on billboards along high traffic roads and

highways, which will increase our likelihood of reaching a large percentage of our

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audience. Reaching people while they are in their vehicles will increase the possibility of

immediate purchase (See Appendix F).

Media Schedule

We will advertise year round, but placing a larger emphasis on the months of

January, February, April, May, September, October, and December for several reasons

(See Appendix G). First, January and February are the months in which people begin and

try to maintain their New Years Resolution. Promoting a snack with no fat and sugars

will help those dieters to stick to their resolutions easier and for a longer period of time.

Second, we chose April and May because those are the months in which people begin to

watch their weight for swim suit season (summer). This is one circumstance in which

people white-knuckle through their diets. As a result, they are more likely to give up

because they just cannot curb the sweet tooth. We chose September and October because

that is around Halloween time, and we will promote our new product, and offer single

serving packages to be given to trick or treaters. Finally, we chose December because the

holidays are a very difficult time for consumers who are trying to watch their weight.

Our product will assist dieters in creating holiday desserts that are fat free, which will

lower the likelihood of gaining weight during the holidays.

Our website will also be used as a form of advertisement, as we will list all of our

products but strictly emphasize the new Fat Free OREO. There will be information

reaping the benefits of our product with other comparable fat free products on the market.

The website will also feature a list of dessert recipes that can be created using the Fat

Free OREO.

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Performance Evaluation

In order to evaluate and monitor the public’s opinion on the Fat Free OREO, we

will be distributing Consumer Surveys. These will help provide us with the necessary

feedback in determining the strengths and weaknesses of our product, along with any

modifications that are necessary. Sampling stations will be set up throughout food

retailers, allowing consumers to taste our new product. The demonstrator will distribute

the surveys to the samplers, explaining that they will receive a coupon for a dollar off if

they complete and turn in the survey. We hope this incentive will encourage consumers

to take a few minutes and fill out the survey (See Appendix H). In addition, surveys can

be located on the Kraft website, inside packages of our new product. All completed

surveys will be rewarded with and incentive of $1 coupon for the next package of Fat

Free OREOs purchased.

Financial Information

It will cost Kraft Foods Inc. 10 million dollars to develop the formula for the Fat

Free OREO. There is an increase cost of production of around seven cents per package

compared to the traditional OREO. The majority of this difference is due to more

expensive ingredients. We are estimating to charge an additional 15 cents per package,

which will continue our current profit margin. All marketing costs will be taken from

Kraft Foods total marketing budget, so that the marketing costs do not directly factor into

the cost of production.

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Break Even Analysis

With a cost of $3.15 per package, Kraft Foods Inc. will continue on the same

profit margin as the traditional OREO, which is double the cost of production. The cost

of producing a package of Fat Free OREOs is approximately $1.57 per package. By

dividing $1.57 into $10 million, Kraft Foods Inc. figures it will take approximately 6.4

million packages to break even.

Sales Forecast

Kraft Foods Inc. is projecting first year sales to be around 5 million packages with

most of those being sold in the second half of the year. The reason that Kraft Foods Inc.

is expecting greater sales in the second half of the year is that once the product hits the

shelves, it will take time for all the consumers to hear about the new product. They are

expecting sales to increase in the second year by 2 million packages for a total of 7

million packages. The reason for the increase in sales is that by 2009, all stores should be

carrying the Fat Free OREO and through our aggressive marketing campaign most people

would have heard about the Fat Free Oreo and they will desire to buy the product. By the

end of the first quarter of 2009, Kraft Foods Inc. forecasts that the Fat Free OREO would

have sold enough packages to earn a profit.

Appendix A

Top Cookie Makers, 2006 Shown in Dollar Volume

Nabisco $1,432,539,000Keebler $554,318,700

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Private Label $291,050,300Pepperidge Farm $290,018,500Parmalat $192,279,100Voortman $59,199,700Frito Lay $38,392,030Masterfoods USA $38,279,380The Hershey Co. $27,690,900Lu Cookies $25,844,070

Source: https://www.aibonline.org/resources/statistics/2006cookies.htm, May 2006

Appendix B

Top Cookie Brands, 2006 Brands are ranked by sales in millions of dollars for the year ended in May of

2006.

Nabisco OREO $474,749,800

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Nabisco Chips Ahoy! $310,779,300Private Label $291,050,300Keebler Chips Deluxe $101,656,500Nabisco Newtons $97,654,980Archway $93,288,130Keebler Fudge Shoppe $87,550,220Pepperidge Farm Chunk $83,417,940Pepperidge Farm Misc. $81,792,940Nabisco Teddy Grahams $84,659,110Nabisco Nilla $76,988,540Nabisco 100 Calorie Packs $73,618,780Murray Sugar Free $65,005,630Nabisco Nutter Butter $64,502,720Keebler Sandies $63,510,920Mothers $63,234,490Nabisco Misc. $59,756,250Nabisco Snackwells $59,586,160Voortman $58,451,140Pepperidge Farm AO $51,309,930

Source: https://www.aibonline.org/resources/statistics/2006cookies.htm, May 2006

Appendix H

Consumer Evaluation Survey

1. How did you first learn of our new OREO?

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2. Have you purchased any other Kraft/Nabisco products in the past? If so, what?

3. How would you rate the Fat Free OREO?

Very Satisfied 1 2 3 4 5 Very Unsatisfied

4. What would you change about the new Fat Free OREO?

5. How many packages of OREOs do you buy in a month?

6. Would you purchase the Fat Free OREO again?

Work Cited

“Company Overview”. Kraft Foods Inc. http://164.109.16.145/investors/strategies.html(12 Apr. 2004)

“Cookies and Crackers”. Business and Company Resource Center. http://80-galenet.galegroup.com.library3.webster.edu/ InfoTrac:Gale database

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(13 Apr. 2004)

“Cookies and Crackers Statistics”. AIB Internationalhttp://www.aibonline.org/resources/statistics/cookie.html (21 May 2006).

Grant, Tina. International Directory for Company Histories. Vol. 41, 2001. St. James Press. Farmington Hills, MI.

“Strategies for Growth”. Kraft Foods Inc. http://164.109.16.145/investors/strategies.html(12 Apr. 2004).

“Responsibility”. Kraft Foods Inc. http://www.kraft.com/responsibility/index.html (12 Apr. 2004).

“Timeline”. Kraft Foods Inc. http://www.kraft.com/100/timeline/index.html(12 Apr. 2004)

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