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Late entrant Oreo finds Indian consumer willing

business Updated: Jun 04, 2012 22:33 IST
Rachit Vats

In a hotly competitive cookies market where chocolate and orange flavours rule the roost, recent entrant Oreo has stuck to its vanilla offering and managed to carve a niche for itself.

With a little over 1% market share since its debut in the country a year ago, Cadbury Oreo (marketed as Kraft Oreo elsewhere in the world), is looking at ramping up distribution with small towns on its radar.

Cadbury will also explore popular flavours suited to the local taste including mango and orange, albeit on a suitable scale.

“Given its stature worldwide Oreo has made a strong entry in the market,” said Chandramouli Venkatesan, director (snacking, India and strategy) South Asia Indo China. “Our strategy was to establish the brand and build up distribution. So far we have built a share and held on to it even after the initial launch and marketing push.”

“Oreo is off to a great start with 1.16% share of the total biscuit market and 6% of creams and cookies segment but still has a long way to go,” he said.

The company claims that competitor Britannia launched a vanilla-based offering owing to pressure from Oreo.

According to research firm Nielsen, India’s cookies market is about Rs 18,000 crore in value terms and expanding at a compounded annual growth rate (CAGR) of of 35%. The creams and cookies market is worth Rs 8,000 crore in value terms and growing at CAGR of 22%.

“The biscuit market is seeing good growth and if it holds on to this rate for the next seven years or so the market will grow into Rs 40,000 crore-plus in value terms. Even 1% of that market is a huge potential for this category and we expect Oreo to capture a fair share,” said Venkatesan.

While Cadbury chose to start out with key cities that include the metros and tier-1 cities as distribution points for its India launch, the focus will now shift to smaller towns. “We are ramping up distribution with 600 more towns on the radar,” Venkatesan said. “As a part of this strategy we have successfully added 1.5 million stores in the last three months. The ramp-up will significantly help increase volumes.”

Even in cities, the main focus of Cadbury was to establish the brand in modern retail stores. The company is now looking at scaling up operations to cover kirana stores.

In modern retail format stores, Oreo consumption is far ahead in this niche but growing category, according to retailers. “On the back of high consumer engagement Oreo is making strong inroads in the premium cookies and cream category leading to market development and growing consumption,” said Devendra Chawla, president (food & FMCG) at Future group.

While revenue contributions from India are still small for the company, Oreo surpassed $2 billion in annual global revenues in 2011, with the US and China being the major contributors, doubling sales over just five years ago.

The brand grew double digits in developed regions like North America and Europe in 2011 and is looking at developing markets as the next area for growth.