Hydrox: One Smart Cookie

Marketing Plan

Madeline Milano 828 Cookie Drive (687) 555-8888 [email protected] www.hydroxrulesoreodrools.com

Table of Contents ______

Executive Summary 3

Situational Analysis 4 Industry Background & Growth 4 Competition 5 SWOT Analysis 7 Strengths 7 Weaknesses 7 Opportunities 7 Threats 8

Marketing Objectives 9

Target Customers 10 Children aged 5-12 10 Demographics 10 Buying habits 10 Psychographics 10 Media habits 11 Parents of children aged 5-12 11 Demographics and Psychographics 11 Buying habits 12 Media habits 12 Product Description & Unique Selling Proposition 13 Distribution Plan 15 Phase 1: School fundraisers 15 Phase 2: General availability 15 Phase 3: Online retailers and grocery delivery services 15 Pricing & Positioning Strategy 17 Positioning Statement 17 Pricing Strategy 17 Offers 17

Strategy for Increasing Transaction Prices 18

Promotions Strategy 19 Phase 1: Personal selling, word of mouth, and social media 19 Phrase 2: Television, paid social media, and national sweepstakes 19 Television 19 Social Media 19 Sweepstake Competitions 20 Customer Retention 20 Joint Ventures & Partnerships 21 Fundraising.com 21 Netflix and The Magic School Bus Rides Again 21 Camp Kennedy Space Center 21 References 22 Appendix A: Marketing Materials 26

Executive Summary ______

Launched in 1908, Hydrox cookies are the original chocolate sandwich cookie. When Oreo launched their cookie in 1912, however, Hydrox lost market share and gained a reputation as “the knockoff Oreo”—this despite having a richer, more chocolatey taste, a crispier cookie, and more wholesome ingredients than Oreos. The comparison to Oreos, along with the clinical-sounding Hydrox name, has held the brand back.

To escape the “knockoff” reputation, Hydrox must rebrand as a cookie that is completely distinct from Oreos. It must also create a context for the unusual Hydrox name, so that it seems pure and intelligent, rather than chemical and unappetizing.

Hydrox can accomplish both of these goals by rebranding as “the smart cookie”: a wholesome and educational cookie that will entertain kids and please parents.

Today, Hydrox cookies are not only kosher, but also GMO free, artificial color free and made with real sugar. To improve consumer’s perceptions, the brand positioning must stress on the fact that it is a healthy choice. Also, new Hydrox cookies will come packaged with cookie-based science experiments, and each cookie will have a fun science fact printed on the cream inside. Children will want the cookies not just for the taste, but for the experience. Parents will want to buy them not just as a treat, but as a teaching tool.

Hydrox will re-enter the market through school-based fundraisers. After gaining brand awareness, the product will become available in major grocery stores. This expansion will be supported by a television ad campaign, social media, and national sweepstakes.

Within 5 years, we plan to increase the Hydrox market share to 10% of sandwich cookies.

Situational Analysis ______

Industry Background & Growth Studies in the cookie industry show that cookie sales in the US total nearly $8 billion annually, and grew at slightly less than 1% in 2017 (Schroeder 2017). The growth of major brand cookies slowed or, in some cases, declined, but private labels (e.g., store brands) grew 5.6%.

This downward trend among dominant cookie brands is due primarily to demand shifts.

First, the stigma around “generic” private label brands has lifted, increasing the market share of these lower-priced products (Green 2017). 85% of consumers trust private label brands and 53% shop at a store just for its private brand (Shoup 2019).

Second, preferences are shifting towards indulgence foods that are perceived as more wholesome, nutrient-rich, and natural. Importantly, this does not mean that consumers are buying fewer indulgences like cookies and candy—in fact, sales in this category continue to grow globally—but it does mean that the preferred products in the category are shifting. This can be seen in the success of healthier cookies such as Pepperidge Farms’s low-calorie Thin & Crispy cookies, which drove the company’s 3.9% increase in sales, and Mondelez’s belVita cookies, which saw a robust 19% revenue growth this year (Schroeder 2017).

Finally, due to the increased availability of products made by smaller, specialized companies—mainly through online ordering—some consumers are shifting away from larger brands towards organic, local, or niche brands (Terlep and Gasparro 2017).

Competition

In the sandwich cookie market, Oreo is obviously Hydrox’s number one competitor. According to IRI multi-outlet data, Hydrox posted $492k in annual sales in early 2017, significantly less than Oreo’s sales. Despite a sales decline from the previous year, Oreo remained the top player in the industry (Yu 2018).

Oreo’s parent brand Nabisco currently dominates the market, with its Oreo brand earning $710 million in sales in 2017. Table 1 shows sales of the US’s top cookie brands in 2017. However, the Oreo brand saw a 7.6% decline in sales during 2017, while Oreo Double Stuf sales fell 6.7% (Conway 2019). The CEO of Mondelez, which owns Nabisco, attributed the decrease in profits from major cookie brands to price deflation, erosion in promotion effectiveness, and a shift toward health and well-being products.

Table 1. Dollar sales of the leading cookie brands of the United States in 2017

Table 2. Hydrox vs. Oreo Product Comparison

Hydrox Oreo

Ingredients real sugar, non-GMO, kosher corn syrup

Flavor stronger chocolate scent and lighter chocolate flavor and cocoa taste sweeter

Dunk test remain crisp after dunk in milk ready to fall apart in milk

Brand awareness few people know the brand, global awareness especially younger generations

Marketing budget low high

Package similar to Oreo famous blue package

History first sold in 1908, known as the first sold in 1912, copycat of Hydrox original chocolate sandwich cookie.

Despite a similar look between their cookies, Hydrox and Oreo have some major differences. Table 2 above shows the product and brand differences between them (Fahey 2017).

SWOT Analysis

Strengths Hydrox does not include high-fructose corn syrup or any GMO ingredients, both of which are becoming increasingly unpopular with American parents. In 2017, the company removed artificial flavors and colors from the new recipe, and got non-GMO certification (Kassoff 2017). The cookie is also vegan and kosher. On its outside packaging and in marketing communications, Hydrox will convey this information to consumers.

Weaknesses The Hydrox name has a chemical connotation that invokes cleaning products rather than cookies. It also has a brand reputation as the “knockoff Oreo,” which has contributed to declining sales.

Hydrox cookies still contain non-organic, processed ingredients, and are a high-calorie and high-fat food. While they may appear healthier than Oreo cookies, they will not appear healthier than organic, non-processed snacks.

Opportunities As customers’ tastes move away from foods with high fructose corn syrup and GMO ingredients (like Oreo), Hydrox is presented with an opportunity to capture market share in this healthier market. This is particularly true since Hydrox is, and will appear, more wholesome and educational than Oreo.

In 2018, Hydrox accused Oreo of deliberately making its cookies difficult to find on store shelves. Hydrox argued that Oreo did so for years by letting its own employees stock the shelves rather than grocery store workers. If Hydrox wins this case, it could change the way big brands play the game in the market, and dramatically improve consumer access to Hydrox products (Gelski 2018).

Threats The growing popularity of private label cookies impacts all brands, including Hydrox. The threat of imitation of Hydrox rebranding, if successful, will be moderate to high. A comparable recipe could be developed, and other brands could use similar science facts.

Marketing Objectives ______

The marketing campaign has three main goals:

1. Increase brand awareness among parents of American children aged 5-12 from 12% to 50% within five years. 2. Increase brand awareness among American children aged 5-12 from 3% to 50% within five years. 3. Increase the Hydrox market share to 10% of sandwich cookies within five years.

Target Customers ______

Our marketing will be focused on two distinct groups: school-aged children and their parents.

Children aged 5-12

Demographics Children in the U.S. have strong purchase power. According to Forbes, by 2020, they will be the largest generation of consumers by 2020, with a purchase power of $143 billion in direct spending (FONA International 2019).

Buying habits Our target market is suburban American school-aged children, aged 5-12. This market’s habits include making impulse purchases, and motivating their parents to purchase items through frequent repeated requests (aka, “pester power” or the “nag factor”) (Johns Hopkins University Bloomberg School of Public Health 2011). Children aged 12 years and under have the power to influence $500 billion in purchases annually (Greninger 2017).

Psychographics Research indicates that there are several stages of effective marketing towards school-aged children (SickKids 2020). Children in general love entertainment and novelty. Marketing messages for children up to age 6 aim to associate brands with feelings of fun and happiness, rather than describing actual product facts. The wisdom of this marketing tactic has been proven by the success of children’s “ket” candies such as Pop Rocks (Hudak 2007). This strategy dovetails well with the “fun” nature of Hydrox’s games and fun facts.

Children aged 8-12 respond best to “aspirational” marketing, which aims to make children feel grown-up, cool, or more intelligent. This fits in well with Hydrox’s new branding as the “smart cookie.”

Subtle or complex tastes are lost on this target market (Kentish 2015); they are more motivated to purchase through games, prizes, quizzes, contests, and sweepstakes than through distinctive flavors.

Media habits At this stage, kids are mostly motivated by TV commercials, online ads, and even magazines. 65% of brand requests by kids are inspired by a commercial. 50% are from online ads, and 46% are from magazine ads. Today’s kids also have more access to technologies. They are tech-savvy and rely on smart devices and social media. Kids between 10 to 13 years old either own a smartphone or know when they would get one (Zahra Media Group 2017).

Kids’ content viewing choices are focused on streaming services. 50% of 5-15 years now watch services like Netflix and Amazon Prime. Social media like YouTube also became a popular choice (Gilchrist and Polizzi 2019). The graph below shows that kids from 8 to 15 years old prefer YouTube over TV, and this trend is growing.

Parents of children aged 5-12

Demographics and Psychographics Our second target market is suburban American parents of school-aged children. These parents are aged 30-45, although their income level varies, all are primarily motivated by their children’s wants and interests. Two studies, one by Viacom (Consoli 2012) and another by the survey site YouGov (Harmeling and Gammon 2015), show that 95% of American parents seek their children’s input when purchasing items for them.

Buying habits These parents are also increasingly focused on offering their children healthier food. Nielsen research suggests that 52% of Americans avoid food that has artificial sweeteners, which Hydrox does not include (though Oreos do). This is even more pronounced in parents (Nielsen 2017). According to a 2014 BabyCenter/IAB study, 63% of new North American parents change their purchasing criteria when they have children, with 45% of new moms saying that natural and wholesome ingredients are an important criteria when making food decisions. While only 12% of mothers reported buying organic products for their children in 2006, that number had tripled to 36% by 2014, and will likely continue to rise (BabyCenter 2015).

Media habits These parents belong to an age group that is active on social media such as YouTube, Facebook, Instagram, Pinterest, and LinkedIn (Perrin and Anderson 2019). Table 3 below shows comparison of media habits across different demographic groups in the US.

Table 3

They are also major subscribers of video streaming services and mobile videos (Westcott et al. 2018).

Product Description & Unique Selling Proposition ______

Hydrox: the smart cookie.

Hydrox cookies are a sweet teaching treat!

Not only are they the smarter choice for parents—no high fructose corn syrup and lots of educational value—but they also come packed with entertainment kids love: fun facts, puzzles, contests, and experiments.

Hydrox cookies differ from Oreos: they are a chocolate sandwich cookie with cream filling, but they are crunchier, slightly less sweet, have a richer chocolate taste, and are made from simpler ingredients—namely, with no formulated high fructose corn syrup (FDA 2019). In March 2017, Hydrox became the first national sandwich cookie brand with non-GMO certification (Kassoff 2017). See the graph below.

The new, rebranded Hydrox cookies will come with a fun science fact printed on the cream of every cookie, similar to the successful Snapple tactic of including a “Real Fact” on the lid of every bottle (Marketing Sherpa 2004). Our patent-pending process allows machines to use quick-dry chocolate deco pens to write facts on a premium, tasteless, organic wafer sheet. The wafer will be bonded to the cream, making each cookie a twist-off, science surprise!

Distribution Plan ______

Phase 1: School fundraisers

In Year 1, Hydrox cookies will be reintroduced to the public through a school fundraiser program, in partnership with Fundraising.com. Students will sell school-branded boxes of Hydrox cookies for $5 per box (25.5 oz), competing to earn prizes and rewards for selling. Hydrox will donate $1.50 to the school for every box sold. Appendix A shows some sample marketing materials for the program.

The main goal of this initial fundraising strategy is to increase awareness of Hydrox cookies, build brand loyalty, and generate demand for the product.

Phase 2: General availability

In Year 2, after increasing brand awareness and market share through the school fundraiser program, Hydrox cookies will become available in the cookie aisle of all major grocery stores (including big box stores like Wal-Mart and Target). Eventually, we will offer Hydrox cookies in gas stations and convenience stores. Hydrox will also negotiate with these grocery stores to gain more visible shelf placement.

This distribution strategy, similar to that of Oreo cookies, will effectively reach our target customers.

Phase 3: Online retailers and grocery delivery services Retail industry is shifting from offline to online and mobile retailing. Given the busy schedules of today’s parents, online grocery shopping and grocery delivery apps can ease their daily stress dramatically. In Year 3, Hydrox will be sold on major online retail platforms such as Amazon, eBay, and Walmart. These stores have broad access to consumers all over the world, and are essential for Hydrox to improve its market share.

For metropolitan and suburban areas where income levels are relatively high, Hydrox will partner with third party grocery delivery services such as Instacart, DoorDash, Deliv, or

Shipt to reach consumers. With several simple clicks on their smartphones, kids and parents can get same day home delivery.

Pricing & Positioning Strategy ______

Positioning Statement For parents who are sick of unhealthy, artificial snacks, Hydrox cookies offer a healthier treat that children are still excited to eat—and they’re educational! Unlike Oreo cookies, Hydrox cookies have no high fructose corn syrup, artificial flavorings, or GMO ingredients. Plus, each cookie comes printed with a fun science fact.

Pricing Strategy Our prices are in line with Oreo cookies at $2.99 for a standard 39-cookie package.

While parents are increasingly interested in natural and wholesome ingredients, only 21% of American adults are willing to pay extra to avoid unwanted ingredients like high fructose corn syrup. Because of this, a premium-price strategy is unlikely to succeed, though Hydrox may be able to entice Oreos customers away from that brand if the price is similar, and Hydrox cookies add value through their lack of high fructose corn syrup.

A low-priced penetration strategy would also be counterproductive, as Hydrox is attempting to shed its reputation as the Oreo “knockoff”—a status that would be reinforced by lower pricing, and which might make the product less appealing to children aged 10-12, who are preoccupied with social status and resistant to cheap or “off-brand” items (Barasch 2016).

Offers After the initial wave of distribution through school fundraisers, 20% off coupons will be offered at grocery store locations during the initial grocery store rollout. Coupons will also be available through partnering grocery stores’ weekly ads.

For mobile grocery delivery apps, a 10% off coupon will be offered for people who “subscribe” to Hydrox cookies for regular automatic deliveries.

Strategy for Increasing Transaction Prices Hydrox will offer a “family size” package of 60 cookies for $3.99 and a “snack pack” package of 8 individually packaged servings for $4.99. These prices are also in line with Oreo’s pricing, for reasons stated in the Pricing Strategy.

Promotions Strategy ______

Phase 1: Personal selling, word of mouth, and social media We will reintroduce Hydrox through personal selling (in-school fundraising campaigns). In partnership with Fundraising.com, students will sell Hydrox cookies to friends, families, and neighbors to raise money for their school's science program. The money raised may be used for supplies, after-school science clubs, and more.

These fundraising campaigns will be complemented by web-based science education resources for teachers and schools. All schools will receive access to free, cookie-related science experiments, web resources, and a library of Hydrox-sponsored science videos for kids.

Phrase 2: Television, paid social media, and national sweepstakes

Television After establishing a foothold in the market through school fundraising campaigns, Hydrox will expand to grocery stores. This expansion will be supported by a national television ad campaign, focused on advertising to children aged 5-12 through popular children’s TV shows. This ad campaign will focus on the slogan “One smart cookie”.

Commercials will show cool, “slacker” style kids sneaking a peek inside a Hydrox cookie and using the fact inside to surprise and impress others (then happily eating the cookie to hide the evidence).

Social Media Our campaign will continue to focus on earning social media attention through sharing helpful science materials for teachers and parents, as well as fun, cookie-related science games for kids. Additionally, the company will experiment with sponsored posts and tweets directed at parents looking for healthier alternatives for their children. The targeted social media platforms include Facebook, YouTube, Instagram, Twitter, and Pinterest.

Sweepstake Competitions Hydrox will sponsor seasonal sweepstake competitions to keep kids excited about purchasing cookies. Our flagship sweepstake will be an annual contest to win a free, week-long trip to the Camp Kennedy Space Center for a youth “astronaut training” camp.

Customer Retention To retain our customers, we will keep the cookie exciting and fresh by frequently changing the science facts, experiments, and contests available. We encourage kids and their parents to interact with our product design and invent new ways to eat Hydrox cookies. Consumers are encouraged to post innovative pictures about our cookies, and will be rewarded if their pictures are adopted as official Hydrox marketing material. Repeated purchasers/subscribers of our products will get generous discounts.

Joint Ventures & Partnerships ______

Fundraising.com Fundraising.com has a well-established infrastructure for helping schools run successful fundraisers. It currently provides a variety of fundraising options and products to address different schools’ needs; Hydrox cookies will be added to this list, and Fundraising.com will specifically promote the product for science-related fundraisers.

Netflix and The Magic School Bus Rides Again Netflix is currently rebooting the popular Magic School Bus series, and Hydrox will be a partner. Hydrox will print special edition packaging with a main character (Miss Frizzle) on the front. Hydrox will also include a promo code inside the package for a free month of Netflix.

Netflix will include Hydrox cookie product placement in three episodes of the second season of The Magic School Bus Rides Again.

Camp Kennedy Space Center Each year, Hydrox will run a spring sweepstake offering ten all-expenses-paid trips to a week-long astronaut camp at the Camp Kennedy Space Center. Camp Kennedy will promote this sweepstakes competition on their website and social media accounts. They will also coordinate a Hydrox-sponsored live webcast with astronauts aboard the International Space Station, where students can submit questions to be answered via the Hydrox Twitter feed.

References ______

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Yu, Douglas. 2018. “Hydrox Producer Seeks $800m from Mondelēz for Damaging Its Cookie Sales.” William Reed Business Media Ltd., September 3, 2018. Accessed July 4, 2020. https://www.bakeryandsnacks.com/Article/2018/09/03/Hydrox-producer-seeks-80 0m-from-Mondelez-for-hurting-its-cookie-sales.

Appendix A: Marketing Materials

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Facebook ad for teachers:

Facebook ad for parents: