Marketin g Plan: THE FAT FREE OREO

Lori Rice
The development of the Fat Free Oreo Cookie: A Marketing Plan Current Issues in Marketing February, 2007

Table of Contents
Executive Summary Situation Analysis SWOT Target Markets Mission Statement Objectives Marketing Strategy/Tactics Communication Strategy Media Schedule Feedback/Evaluation Financial Information Appendix A – Top Cookie Makers, 2006 Appendix B – Top Cookie Brands, 2006 Appendix C – Press Releases Appendix D – Magazine Ad Appendix E – Magazine Ad Appendix F – Outdoor Advertisement Appendix G – Media Schedule Appendix H – Customer Evaluation Survey 1 1 3 6 8 9 11 14 16 17 18 20 21 22 23 24 25 26 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 first appeared on the upper left corner of National Biscuit Company products. National

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

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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). One of Kraft’s most important strengths is the power of their brands. They work to grow these brands by:

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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, 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,

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

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

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

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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.

Mission Statement
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.

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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. 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 1845, our campaign will focus on reach rather than frequency. With and unlimited budget,

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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. 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

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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 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

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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. 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

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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 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

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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 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.

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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.

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.

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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. 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

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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 Keebler Private Label Pepperidge Farm Parmalat Voortman Frito Lay Masterfoods USA The Hershey Co. Lu Cookies $1,432,539,000 $554,318,700 $291,050,300 $290,018,500 $192,279,100 $59,199,700 $38,392,030 $38,279,380 $27,690,900 $25,844,070

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

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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 Nabisco Chips Ahoy! Private Label Keebler Chips Deluxe Nabisco Newtons Archway Keebler Fudge Shoppe Pepperidge Farm Chunk Pepperidge Farm Misc. Nabisco Teddy Grahams Nabisco Nilla Nabisco 100 Calorie Packs Murray Sugar Free Nabisco Nutter Butter Keebler Sandies Mothers Nabisco Misc. Nabisco Snackwells Voortman Pepperidge Farm AO $474,749,800 $310,779,300 $291,050,300 $101,656,500 $97,654,980 $93,288,130 $87,550,220 $83,417,940 $81,792,940 $84,659,110 $76,988,540 $73,618,780 $65,005,630 $64,502,720 $63,510,920 $63,234,490 $59,756,250 $59,586,160 $58,451,140 $51,309,930

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

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Appendix H Consumer Evaluation Survey

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

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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 (13 Apr. 2004) “Cookies and Crackers Statistics”. AIB International http://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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