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Kraft Foods Inc. is the second largest food company in the world. According to its annual report, the revenues of 2009 from its three operational segments Kraft Foods Europe, Kraft Foods North America, and Kraft Foods Emerging Markets exceeded $40.4 billion. With regard to the percentage of total revenues, Kraft endures considerable growth in the international markets. Kraft Foods gives the places of work to 97 000 employees worldwide and sells its products in more than 160 countries. In the domestic market, Kraft serves to more than 99 % of the American families (Kraft Foods Inc.).
Kraft's brands are available in six consumer sectors: Beverages, Snacks, Confectionary, Grocery, Cheese, and Convenient Meals. In February 2010, Kraft acquired $19.5 billion acquisition of Cadbury, the largest confectionery company in the world. While in 2006 Snack and Beverages were its two largest sectors, today Snacks and Confectionary generate 51 % of Kraft’s revenue. Eleven popular brands of Kraft Foods generate more than $1 billion revenue: Kraft cheese, Oscar Mayer, Cadbury, Nabisco, Oreo, Maxwell House, Cream Cheese, Philadelphia, Milka, Trident and Jacobs (Figure 1). Kraft emphasizes on its incomparable portfolio of brands which are in popular demand. 80% of its revenue is generated from products that maintain number one position in the world market. Kraft is a high dividend paying company. It offers 3.70% dividend yield. Their earnings per share ratio (EPS) are currently 2.09 (Kraft Foods Inc.).
Nabisco brand of cookies launched its intensive marketing campaign in 2008, advertising the promotion of Cool Mint Oreo Cookies. It soon became a popular entertainment media among the Americans. Eli Manning and Peyton Manning have supported its promotion. Sisters Serena and Venus William also maintained and contested the Manning. This advertisement appears on television on January 18, 2009. The second campaign began for Cool Mint Crème Oreo Cookies that was supported by the Manning brothers (Investment Dealers’ Digest). Another campaign related to a “Hooded Menace”. Kraft also organized a worldwide Cool Mint Oreo Stacking Competition, which was won by Jordan White from the United States in the final contest.
Kraft foods introduced Cool Mint Crème Oreo Cookies along with other Oreo products in Chinese market in 2006, and its sales rapidly grew in the Chinese cookies market. Cool Mint Crème Oreo cookies became one of the favorite cookies.
Kraft launched local marketing campaign in China to show Chinese the peculiarities of American culture to combine milk with cookies. Kraft devised an Oreo program at thirty Chinese universities. Approximately 6,000 applications were written by students. The company trained three hundred applicants to become the ambassadors of Oreo brand. The students drove around Beijing on their bicycles labeled with covers similar to Oreo cookies. They distributed Cool Mint cookies to more than 300,000 consumers. Other students held Oreo thematic basketball games to strengthen the idea of dipping cookies in milk. Commercials by means of television showed children twisting Cool Mint Crème Oreo Cookies, licking the cream and dipping the cookie into glasses of milk (Investment Dealers’ Digest).
Oreo brand is supported by Yao Ming, who is a famous basketball player of the National Basketball team. He is a Cool Mint Oreo brand ambassador. Yao Ming was shown dunking Cool Mint cookies in its 2010 Oreo advertising campaign. One of the famous Chinese movie actresses, Zhang Ziyi promoted the awareness of Cool Mint Crème Cookies by distributing packets to shoppers. Consumers welcomed this advertising campaign, and Oreo has been much in demand.
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Cool Mint Crème Oreo Cookie is a popular product of Kraft Foods. The Oreo brand supports this product, which is its main strength. Current design of Cool Mint Crème Oreo cookie is extremely attractive, consisting of a sweet, mint flavored cream that is sandwiched between two circular golden cookie pieces. From the day of Oreo cookies sold since induction in the market, Cool Mint Oreo Cookies hold a substantial share, making them the fast selling cookie of the twentieth century. Statistics shows around forty five percent of all American households purchased a package of Cool Mint Oreo cookies in 2009. It is extremely popular with teenagers and youngsters. Earning its title of America’s Favorite Cookie, this product has become a replacement of high calorie snacks such as pizza and burgers. It has changed the lifestyle of the Americans from high calorie snacks to healthier living (Kraft Foods. Political Involvement).
The company has a weak structure in the market performance. Kraft Foods took over Cadbury which no doubt would increase its profit ratio, but currently it has brought a lot of debt pressure on the company. Besides debt pressure, the company faces cut throat competition with Hershey and Nestle in the cookies markets. Despite its operations in the overseas markets and presence, in the USA, Kraft Foods is still weak in geographic concentration. All these factors attribute to non-effective marketing and promotion of Cool Mint Crème Oreo cookies. Since the company has eleven more brands, it is still learning how to balance sales of a product, which is a serious setback to Cool Mint Crème Oreo Cookies. Kraft’s high pricing of Cool Mint Crème Oreo cookiesis retarding the growth of other company’s products in Asian markets, as Oreo is still a premium snack product in emerging markets. Kraft should offer small, economically priced Oreo packages, as it did in China (Kraft Foods. Political Involvement).
Kraft Foods has a long way to succeed. Cadbury is a key player in the emerging countries and earns billions of revenues from India, China, and other Asian countries. Kraft foods can exploit Cadbury’s brand image to offer Cool Mint Crème Oreo cookies along with other Oreo productsin these markets. Since, the company does not face the threat from new entrants; it will be easier to capture the market share of cookies market before the products of its main competitors become popular in developing countries. Kraft Foods should always consider that India and China have emerged a strong economy and people spending power are also showing considerable growth. The company can reposition itself in these emerging markets with more health focused products to bring awareness of Oreo cookies.
The prime issue currently hovering on Kraft Foods is the acquisition of Cadbury related issues. After the takeover f Cadbury, there was a lot of resistance from the British against this acquisition. The profit margins of Kraft Foods declined drastically during this process. The customers stopped purchasing the Cool Mint Crème Oreo cookies and other products offered by the company; thus, damaging the market position of the company. The acquisition of Cadbury did not bring any changes to the company as they failed to explore the resources of Cadbury and failed to act timely in positioning its structure in the markets. It does not come to the end here; the company faces the rigid competition with Nestle and Hershey, the two giants of Kraft in the market. In case, any of its competitors comes out with similar Cool Mint Crème cookies, it will be a serious threat to the company as well as to the product. All these circumstances are posing a threat to expansion of Cool Mint Crème Oreo cookies (Kraft Foods Inc.).
Marketing mix of Cool Mint Crème Oreo Cookies
The conventional Marketing mix is a 4 P’s model and is business focused. On the other hand, the 4 C’s model of marketing focuses on consumers. Since, its focus on consumers, the 4 C’s model is the best suitable for Niche Marketing (Bowman 56).
Product = Customer Solution
This principle of marketing states that the customer should be a prime focus.The product should satisfy needs and wants of the customer, thus offering a solution to the customer. Cool Mint Crème Oreo cookie is a customized product because it targets a smaller market segments and not the mass market. In almost every family, people of all age group consume Cool Mint Crème Oreo cookies in the evening as their evening meals with options of other Oreo products also available to them. Somehow, the company has succeeded in pushing the culture of Oreo into the blood of the Americans and now Cool Mint Oreo Cookies are available in 100 countries.
Oreo targeted soft segment of the market with a fudge-covered version to capture its market share. In 1992, in response to customers need for snack foods, Oreo tailored Mini Oreo sandwich cookies. Following health and calorie cautious trends, Oreo introduced Sugar-Free and Organic varieties of Cool Mint Crème Oreo cookies (Bowman 19).
Place = Customer convenience
Convenience is an equivalent to placement or distribution of conventional marketing mix. Since, Kraft Foods possesses a niche customer base; the convenience of its customers in locating Oreo products plays a crucial role. Presently, Cool Mint Crème Oreo Cookies have found their way to all leading stores of the USA and European market. In Chinese market, the famous food store chain Deli de Luca is selling Cool Mint Crème Oreo cookies in all of their stores. For the convenience of customers, Kraft has extended distribution in three types of retail food outlets in India: convenience stores, large food stores, mom-and-pop stores, and from these outlets, Cool Mint Crème Oreo cookie is gaining momentum and becoming popular.
Price = Customer Investment
Kraft Foods Inc. should offer small Cool Mint Crème Oreo packages with lower price
entering into emerging markets as it did in China, but the company pricing strategy points out to higher prices of its products due to the acquisition of Cadbury and large debts. This will pose a serious disadvantage in sustaining competitive advantage, if the company does not adhere to reasonable pricing. American economy and consumption should not be viewed while pricing for Cool Mint Oreo cookies for developing markets.
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Promotion = Customer communication
Major factors attributing in the continuous growth of Cool Mint Crème Oreo Cookies are the best-in-class consumer promotions and brand’s award-winning advertising. One of its unique advertisement promotions is a panoramic elevator in a shopping mall that pictures the OREO and milk connection: a picture of a Cool Mint Oreo cookie on the elevator dips into a glass of milk as the elevator goes down. Since, the OREO and milk moment is a focus of the brand’s identity; the advertisement now appears as “Milk’s Favorite Cookie” instead of “America’s Favorite Cookie.” Over the past 10 years, two signature marketing campaigns, OREO Global Moments contest and the DSRL league have been a center of attraction for American people. Social networking such as Facebook, YouTube, and Twitter are suitable tools for a product like Cool Mint Cookie, whose strategy is to connect family and friends (Bowman 21).
Macro environmental factors
The PESTEL method analyzes the macro environmental factors of the company.
The political situation is suitable for Kraft Foods. The company has a wide experience of participation in various political and public initiatives. This includes support of candidates who understand and appreciate a state policy that influences their business, products, and employees. The company owns a political action committee called Kraftpac, which provides funding to Federal state political parties, candidates, and committees. The company takes reasonable measures to provide corporate contributions to the political parties if permitted by law.
Despite the deterioratingeconomic conditions of the world economy, Kraft Foods is making high earnings from its products and brands. The company provides high quality profit to the shareholders, despite the difficult economic conditions. It continues investment in brands portfolios by providing the best product offerings to customers. With its long run investment strategies, the company is remarkably well placed to prove sustainable top tier performance, with or without Cadbury (Drummond 200).
The company was once again named to the Jones Sustainability North America Index in acknowledgment of the economic, environmental, and social development performance.
Since 2010, the company is constantly working on its CSR related activities. Kraft Foods issues in its CSR report of 2010 called for creating a more delicious world. According to this CSR report, company’s policies concentrate to drive lasting and meaningful change around well-being and health, food safety and sustainability including other topics of societal interest. Kraft Foods took the initiative to provide a better living standard to 1 million farmers with effective collaboration with them. The company decreased greenhouse gas emissions by 19 percent and water consumption by 35 percent since 2007, as compared against total production. The coompany also removed nearly 3 million kg of salt from its products in 2010. It has helped to provide more than 1 billion portions of food since 1999, in the United States (Kraft Foods Inc.).
The Kraft foods successfully implement innovative processes and ideas that provide values to their customers. They constantly struggle to embed innovations in the company from developing services and innovative products to carrying activities innovatively. The company keeps consumer needs in their consciousness before development of their strategy. The company is using SAP Net weaver technology platform for effective information and business transformation strategy within its all business units.
The company has set an example by determining to reduce the effect of its operations on the ecology in the US and all over the world. In CSR report 2011, it states environmental goals for reducing the effects of the carbon dioxide emissions in food plants to the water conservation and minimize the excess packaging. Kraft is developing packaging that weighs less, uses less material, and reduces effect on landfills without compromising food quality, safety or freshness.At last they not only emphasize minimal wastage in the production activities, they are continuously searching better ways to treat, reuse, and put waste to work (Kraft Foods Inc.).
Kraft Foods maintains corporate compliance with all the global and local legal implications. The company observes laws, rules, and provisions of the national and international countries with a view to sustain the profitability and its business operations. All the activities of food operations outside of America are subject to national laws similar to applicable to Kraft North America Commercial’s United States businesses.
With regard to international regulatory provisions such as the European Union standards, relating to packaging, labeling, pricing, food content, marketing, and advertising the company follows all norms and laws set by EU committee.
Demographic factors also influence the performance of the Kraft Foods. Demography is useful for planning a marketing strategy as it allows to distinguish human populations in terms of density, size, age, location, sex, occupation, race, and other statistics.
UK and the USA populations have been stable at approximately 62.6 million and 315 million respectively for a number of years, but the birth rate is constantly declining, while people tend to live longer. Kraft Foods produces goods and services such as Cool Mint Crème Oreo cookies suitable for the younger generation. Their traditional markets are declining and have become static. Kraft Food is intending to diversify, offering products targeted at an older age groups (Kraft Foods Inc.).
Micro environmental factors
The microenvironment factors are those elements over which the company has control, or which it can utilize in order to obtain information that will help it in its marketing operations. Mostly, all companies use Porter’s five forces to analyze micro factors affecting the company.
Porter’s five forces analysis
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Bargaining power of suppliers
The food industry is rather high and competitive in character. The pricing policy is competitive to hold the market. The suppliers of Kraft Foods do not possess a substantial power to hold the company as a hostage for extracting high profits. Since, Kraft Foods is a large company, despite suppliers having their a little say prefers to associate themselves with the company for consistent business. Thus, bargaining power of suppliers is less (Aaker 95).
The bargaining power of buyers
The bargaining power of buyers is high. Their preferences are changeable with the time
and are likely to switch to the product that offers superior quality at less price. It is a serious challenge to Cool Mint Crème Oreo Cookies. Wal-Mart is giving a tough fight in this case by offering less priced products to attract the attention of buyers.
The threat of the entry of new competitors
There are already so many established companies in the market that it is extremely difficult for the new entrants to set foot in and capture their share. The existing companies have invested highly in the branding, positioning, and quality that it will be rather impossible for new players to induce switching among customers. Cool Mint Oreo cookies have no threat from new entrants.
Rivalry among established competitions
Intense competition grips the food industry. The vehicle by which competitors preserve their market share is through diversification and brand loyalty. In general, the goods offered by competitors are highly elastic in nature with consumers weighing the tradeoff between quality and price, products and companies. The rivalry among competitors is extremely intense that these companies maintain market share by providing brand quality at an affordable price.
Threat of substitutes production or services
The consumers have become aware, evaluate the prices and quality of products with others and decide which product to buy. The threat of substitute products is negligible in this case as private label products do not pose a serious threat to firm profits and their market share of Cool Mint Crème Oreo cookies (Aaker 95).
With massive spending and backed up by powerful promotions and public relations, Cool Mint Crème Oreo cookies along with other Oreo products have formed lasting and strong connections with consumers.
Sometimes a product can be more than a brand. It can become a part and parcel of life. It can be connected with memoirs, can cross generations. Cool Mint Oreo Cookie cream is one of such products. It is simply incredible that an Oreo brand, conceived in the early days of the 20th century, continues to be one of Kraft’s most powerful engines of growth in twenty first century. It is the right time for Kraft Foods to exploit the strong branding image of Cadbury, and devise novel concepts of popularizing Cool Mint Crème Oreo cookies in Asian and as well as national market. Company should not forget maintaining the balance between all Oreo products, as it directly or indirectly affect the ultimate sale of Cool Mint Crème Oreo cookies.
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