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Nabisco, a company established in 1898, has a rich history marked by natural growth, mergers, and acquisitions. Over its 109-year existence, Nabisco has evolved into the world's leading snack maker. One of its most iconic products, the Oreo chocolate sandwich cookie, made its debut in 1911, and today, it reigns as the world's most popular cookie, accounting for approximately 10 percent of all store cookie sales, translating to a staggering $3 billion market share. However, in recent years, Nabisco has encountered challenges in adapting to evolving market trends.
The origins of Nabisco can be traced back to 1898 when the New York Biscuit Company and the American Biscuit and Manufacturing Company merged to form the National Biscuit Company, later known as Nabisco. Adolphus Green and William Moore orchestrated this merger, propelling the company to the forefront of cookie and cracker manufacturing and marketing in the United States. With a commitment to global expansion and a desire to solidify its presence in the rapidly growing consumer snacks sector, Philip Morris Co.
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Inc. acquired Nabisco Holdings in December 2000. This acquisition amounted to $14.9 billion in cash, along with assuming $4 million in debt. Subsequently, Philip Morris integrated the Nabisco brands into its Kraft Food operations, expanding its product portfolio to include renowned brands such as Chips Ahoy, Fig Newtons, Mallomars, Oreos, Premium Crackers, and Ritz Crackers.
In 1995, Nabisco Arabia Company Ltd. (NAARCO) emerged as a joint venture between Nabisco International and The Olayan Group of Saudi Arabia. Notably, NAARCO made a significant investment in a state-of-the-art plant dedicated to the production of OREO cookies, the world's most beloved cookie.
OREO cookies were introduced to the Saudi market in March 2001, accompanied by a substantial television advertising campaign. The $3 million plant upgrade included the installation of a new production line, expanded office spaces, additional warehousing, and enhanced employee facilities. The equipment used for this world-class facility was sourced from Spain, Italy, India, France, and Austria, under the supervision of Nabisco Technical Director Frank Willemsen and Technical Services Manager Anselmo Codina.
Nabisco's commitment extended beyond its business operations, emphasizing its role in society. The company recognized its responsibility to meet the public's expectations, address critical social, environmental, and economic issues, and make a positive impact on local communities and the global landscape.
The primary target market for the original vanilla filling Oreo is children. Historically, Oreo cookies have focused on and promoted new variations of the creme filling and alterations to the cookie shape, aiming to generate fresh interest among children. This strategy is designed to convince children to enjoy the new cookie and, in turn, influence their parents to purchase it.
The market analysis and strategy evaluation discussed here pertain to Riyadh, the capital and largest city of Saudi Arabia. Riyadh is situated in the historical regions of Nejd and Al-Yamama, with a population of 4.7 million people, consisting of 60% Saudis and 40% foreigners. The city spans an area of 3,024 square kilometers.
Riyadh's demographics are characterized by conservative family structures influenced by Islamic principles. Young, unmarried individuals typically reside with their families, as independent living is not commonly practiced. Consequently, young adults continue to live with their families until they are ready to establish their households. Family sizes in Saudi Arabia tend to be larger, often exceeding six members, contributing to a youthful population. Saudi citizens are generally associated with affluence, boasting high income levels.
The evolving landscape of Riyadh has led to increased awareness among residents about various new brands, enticing them to explore and discover new products. Women in Riyadh, known for their enthusiasm for shopping, exhibit a favorable attitude towards different brands. They are also considered heavy users when it comes to brand loyalty.
Oreo biscuits, as a form of food, primarily fulfill the basic need for sustenance, namely, hunger. However, they cater to more than just the hunger drive:
Several ongoing trends in the consumer market exert an influence on the Oreo chocolate sandwich biscuits business:
The growth of the Saudi Arabian biscuit market is driven by two primary factors: increased advertising expenditures by multinational companies such as Nabisco, Master Foods, and Danone, and the rising popularity of innovative products like chocolate-coated biscuits and bread substitutes.
Research indicates that biscuits, particularly sweet ones, are available at affordable prices, with single-serve packs ranging from SR0.25 to SR2 (approximately US $0.06 to US $0.53). Biscuits enjoy widespread distribution across various retail outlets. The biscuit sector has flourished due to the strong presence of local industry giants like United Food Industries.
Oreo sales have witnessed fluctuations over the past 13 years.
Upon Oreo's initial introduction to the market, sales experienced a significant upswing, sustaining high levels of growth for approximately three years. However, a subsequent decline in sales occurred between 1997 and 2002, prompting Nabisco's marketing managers to take action. Recognizing the need for change, they revamped the marketing mix and introduced various new product offerings. These efforts culminated in a remarkable resurgence in 2008 when Oreo achieved $4 billion in sales, securing a substantial 41% market share.
Despite Oreo's storied history and undeniable popularity, Nabisco has faced challenges in adapting to evolving market trends. One noticeable trend in the market is the shift towards smaller family sizes, with Saudi families recognizing the benefits of smaller households for enhancing their children's quality of life. Nabisco must consider the changing dynamics of family structures when strategizing its product offerings and marketing campaigns.
Moreover, the increasing participation of women in the workforce, supported by government policies, has boosted the purchasing power of Saudi residents. This change in demographics provides an opportunity for Nabisco to target working individuals who may seek convenient and enjoyable snacks.
Another noteworthy trend is the growth of the food market in Saudi Arabia, driven by shifting lifestyles and population expansion. As consumer behavior in the Saudi market reflects active brand switching and moderate brand loyalty, Nabisco should focus on building lasting connections with its customers.
Furthermore, the study conducted in 2007, indicating a high consumption rate of chocolate-based food products, underscores the potential for Oreo to leverage its chocolate sandwich cookies in response to evolving consumer preferences.
Recognizing the need to adapt and stay competitive in a changing market, Oreo should consider the following strategies:
Expand the product line to cater to the evolving preferences of consumers. Introduce variations of Oreo cookies that align with health-conscious choices, such as reduced sugar options or gluten-free alternatives. Additionally, explore new flavors and formats to capture a broader audience.
Invest in innovative marketing campaigns that resonate with the target audience. Leverage the nostalgia associated with Oreo while embracing contemporary themes and trends. Engage in social media marketing to reach a wider demographic, including the tech-savvy younger generation.
Consider collaborations with local businesses and influencers to strengthen Oreo's presence in the market. Partnering with cafes, restaurants, or food delivery services can create unique opportunities for Oreo-themed desserts and promotions.
Engage consumers through interactive campaigns, contests, and events. Create a sense of community among Oreo enthusiasts and encourage user-generated content, such as recipes and creative ways to enjoy Oreo cookies.
Nabisco's Oreo, a beloved brand with a rich history, faces the challenge of adapting to changing market dynamics in Riyadh, Saudi Arabia. By recognizing emerging trends and implementing strategic changes, Oreo can continue to thrive and cater to the evolving needs and preferences of its consumers. With product diversification, innovative marketing, collaborations, and consumer engagement, Oreo can position itself as a timeless treat in the ever-changing landscape of the snack industry.
Nabisco's Oreo: A Market Analysis and Strategy Evaluation. (2016, Jul 15). Retrieved from https://studymoose.com/oreo-market-research-essay
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