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As fat fears grow, Oreo tries new twist

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Chicago Tribune


CHICAGO - The perky emcees had the same question for everyone lining up in Chicago's Lincoln Park this summer for an Oreo jingle-singing contest: How do you like to eat an Oreo cookie?

"Stuff it in my face," chirped Rachel Wax, an 11-year-old happy to get the free package of cookies and an Oreo T-shirt supplied by Kraft Foods Inc.

Marketers spend billions to elicit that kind of enthusiasm for a brand. But such an honest outburst from a child also can evoke an unhealthy image that Kraft is trying to avoid.

The success of the Oreo, the world's best-selling cookie, has created an unexpected burden for Kraft, the nation's largest foodmaker. The more effectively it sells cookies, the more the company's critics can accuse it of stuffing junk food in the faces of Americans.

With childhood obesity rates tripling since the 1970s, foodmakers are recalibrating long-standing marketing tactics that have helped elevate snacking to America's fourth meal.

Kraft earlier this year promised to stop advertising its most fattening products to kids under the age of 12, the first major food company to do so. It also was among the first to yank such products from school vending machines. But the company, which spends more than $5 billion a year to market all its brands, still employs contests and other sales gimmicks that appeal to children.

The evolution of Oreo marketing shows how foodmakers help Americans feel good about eating junk food. Marketers drape the cookie in wholesome images designed to make consumers welcome the snack as a family tradition. The cookie and its logo can be found in many corners of our lives - from the hood of a Dale Earnhardt Jr. race car to ersatz educational toys made from oversize, plastic versions of the treat.

That would seem to be good news for the company; shareholders expect executives to boost sales of star products regardless of how healthy they may be. But if Kraft pushes its junk-food offerings too hard, it can seem out of touch or even manipulative.

"Companies are being forced to consider a business decision: What can you do to react responsibly to health concerns of a nation that's caught in the throes of an obesity epidemic versus what do you do to promote growth of your market share?" asked Dr. James Gavin, former president of the Morehouse School of Medicine and a Kraft adviser.

Kraft says its current marketing and sales campaigns are "nearly universally recognized" for their sensitivity to childhood obesity. The company also points out that there is no single culprit to blame for this national problem.

Foodmakers share responsibility with the individuals who buy their products. After all, peeled carrots and ready-made salads are as easy to buy as a package of cookies, and Americans notoriously eat too much and exercise too little.

But few snacks are as tempting as an Oreo, and its growth into an international star is a story of how great taste met deft marketing. It was the perfect match, until Americans suddenly took note of their expanding waistlines.



Nabisco's vice president of cookies in 1996 set out to make snacking history.

Dave Hardie, a man with a title that his children loved, wanted to make the Oreo soar. Oreo already was winning the cookie category, now Hardie and his marketing team wanted it to be No. 1 among all sweet snacks, which also include candies.

At the time, which was before Kraft controlled Nabisco, M&M's held that title with sales of about $1 billion - double that of the Oreo, Hardie recalled.

It seemed an ideal moment to build a billion-dollar cookie brand. Although Americans were getting fatter, most didn't know that the United States was on the cusp of an obesity crisis. By the time Hardie took over, many consumers had abandoned the low-fat diet craze and were clamoring for indulgent treats.

Though the cookie sold well in supermarkets, Hardie wanted to put Oreo products in every vending machine, restaurant and convenience store. Even children's bedrooms. He wanted the cookie's image printed on kids' pajamas and toys.

"The idea was to be ubiquitous," Hardie said, "like M&M's or Coca-Cola."

To reach its youngest customers, Oreo marketers struck a deal with toymaker Fisher-Price. The Oreo Matchin' Middles game asks preschoolers to match the shapes embedded in plastic cookie wafers and filling.

Thanks to a partnership with Mattel, the Oreo School Time Fun Barbie debuted. "Let's go over to Barbie doll's place for some study time - and snack time!" the box said.

The African-American version of the doll became an unwitting collector's item, a symbol of politically incorrect marketing. ("Oreo" is sometimes used as a disparaging term for African-Americans who are seen as black on the outside and white on the inside.)

For restaurants, Nabisco offered Oreo toys, place mats and goodie bags. "The ABC's of Marketing to Kids," a Nabisco advice booklet for restaurateurs, suggested sprinkling Oreo pieces on applesauce or giving free Oreo desserts to kids who showed report cards.

Marketing to children was less controversial then. Industry conferences held sessions on pitching products in classrooms. Coca-Cola put its logo on school scoreboards. Teachers handed out book covers featuring ads for Gatorade drinks, Reebok shoes, Jolly Rancher candies.

For its part, the company created a sales gimmick so compelling that Wal-Mart Stores Inc. - well on its way to becoming the nation's largest food retailer - made the Oreo a fixture of its store entertainment strategy for years. In June 1997, all 2,300 Wal-Marts held Oreo-stacking contests for kids. To let employees know how important this was, Wal-Mart beamed to its stores a video of its CEO stacking Oreos.

The cookie's revenue grew steadily throughout the 1990s, reaching about $760 million in 2000. The drive to make Oreo a billion-dollar brand endured as one marketing boss after another expanded the treat's reach. That year, cigarette-maker Philip Morris Cos., Kraft's parent company at the time, bought Nabisco and continued promotions that catered to kids' hunger for popularity. Contests offered youngsters a chance to "Be a Pop Star" or have a Nickelodeon TV show filmed at their schools.

"The Oreo Cookie Counting Book," a cookie-shaped board book, debuted the year of the acquisition, joining M&M's, Goldfish crackers and Reese's pieces in the baby and toddler education market. "Children will love to count down as ten little Oreos are dunked, nibbled and stacked one by one ... until there are none!" the back of the book read.

Kraft also jazzed up a Nabisco Web site that attracted kids with brand-emblazoned video games - known as "advergames" - in which Oreos kept players alive longer and held the key to victory.

The games can be especially potent. Though a TV commercial typically lasts no more than 30 seconds, kids on average spend five to seven minutes playing an advergame, one study found.

Junk food looks exciting, even healthful, in some games. In one Indiana Jones-like game, players collected Oreos while fending off attackers and searching for the Temple of the Golden Oreo. "Find the golden cookie jars and your health indicator is reset to 100 percent," the rules said.

The advergames and promotions expanded marketing efforts Nabisco already had under way. But one radical shift came after Kraft took over. The very nature of an Oreo changed.

Nabisco had strict rules. You could shrink the cookie - but only if it remained an exact replica of the original. You could change the color of the filling - but only at holidays. Under Nabisco, Oreo was and always would remain a black-and-white sandwich cookie.

Kraft threw out those rules. The company launched Oreos with vanilla wafers, chocolate filling, even one kind with no filling at all.

At Kraft's annual shareholders' meeting in early 2002, Betsy Holden and Roger Deromedi, the company's co-CEOs at the time, showcased some of these Oreo offspring and promised more. "We expect it to be our next billion-dollar brand," Holden boasted.

By the end of that year worldwide Oreo revenue came very close: $937 million.

But the cookie and the company were in for a fall.



Hundreds of doctors in the Chicago conference hall gasped.

They were viewing a series of maps showing obesity's massive growth in the United States since 1985. States went from blue to yellow to red as the problem worsened, like the deadly dash of a renegade virus.

Obesity fears still were coming into focus on that day in June 2003, even for the audience at the meeting of the American Medical Association. Dr. Julie Gerberding, director of the Centers for Disease Control and Prevention, told the doctors obesity had become "the No. 1 health problem in the United States."

By that time, it was clear the world of the Oreo was changing.

A nutrition-crusading group that year sued to ban the sale of Oreos to kids in California, arguing that children don't understand the dangers of trans fat - a widely used junk-food ingredient that is linked to an increased risk of heart disease. The group,, withdrew the suit, but reaped international publicity.

Nutrition activists, led by Yale University psychologist Kelly Brownell, argued that America needed an extra tax on junk foods. Schools began ejecting fattening snacks from vending machines and taking soft-drink logos off their scoreboards. Plaintiffs' lawyers eyeing bigger stakes began speaking openly of making "Big Food" the next tobacco.

In the midst of such talk, Kraft yanked a teen-oriented ad it was airing. In it, a spaced-out actor wearing headphones is sprawled on the floor of his junk-strewn room, like a teenager in an opium den. As he absent-mindedly reaches for Double Stuf Oreos, his arms and legs fan out, leaving impressions on the rug like a child making a snow angel.

The slothlike scene of mindless snacking wasn't an image the company wanted. "We'd rather show a consumer in a more active lifestyle," recalled Michael Senackerib, Kraft's cookie and cracker chief.

That summer Kraft appointed a panel of respected scholars to advise it on obesity and nutrition issues. Several of the experts urged Kraft to make big changes.

Dr. James Gavin, then president of Morehouse School of Medicine, argued that the company should add dividers inside packages so consumers would know when they were eating more than one serving.

Jeanne Goldberg, director of the Center on Nutrition Communication at Tufts University, prodded the company to stop using toddlers in TV ads for Oreos and other junk foods.

"The notion of using kids to promote these things is very seductive because kids are cute, but I don't think it's a good idea," Goldberg said.

In the summer of 2003, Kraft stopped all marketing programs in classrooms and pulled Oreos from school vending machines. The company also vowed to shrink the portion size of its single-serving packs.

Michael Mudd, then a Kraft spokesman, called the changes "the right thing to do." Nodding to the concern that food companies might face the scrutiny tobacco companies did, Mudd added, "If it also discourages a plaintiff's attorney or unfair legislation, that's fine with us."

Nevertheless, health concerns started weighing down the Oreo. Particularly worrisome for Kraft were once-loyal customers such as Laura Mercado. The North Riverside, Ill., mom cut her family's Oreo purchases in half.

"The trans fat gave it bad publicity," she said. "I slowed down because of that."

Sales of the Oreo fell 5 percent in 2003 and stayed flat last year, according to Information Resources Inc., which tracks purchases at stores except for Wal-Mart. Kraft executives, who once boasted about Oreo's sales, stopped revealing the cookie's revenue in 2003.

Holden, Kraft's co-CEO, that year poured an extra $200 million into marketing to boost sales of Oreo and other brands. But at the end of the year, Kraft demoted Holden, one of the most powerful women in American business. A few weeks later, the company announced a major restructuring that called for closing up to 20 factories and cutting 6,000 jobs.

Critics continued to hold up Oreo marketing as a symbol of America's unhealthy relationship with junk food. In Senate speeches on the obesity epidemic last year, Sen. Tom Harkin, D-Iowa, lambasted "The Oreo Cookie Counting Book" as a gimmick that imprints brand loyalty on unknowing preschoolers.

"That will have little kids associate learning, associate getting better and progressing with eating Oreo cookies," Harkin said of the book.

Kraft has since ended its agreement with the publisher, and the counting book is no longer in print. The company also stopped allowing Fisher-Price to use the Oreo image on the preschool Matchin' Middles toy. But Kraft acknowledged that the book and the toy "may still be available in the marketplace." Still it said marketing campaigns from years ago "have no relevance today."

Last fall, Senackerib, Kraft's cookie chief, downplayed the billion-dollar sales goal in an interview. "It's kind of an artificial number," he said.

The Oreo binge seemed over.



The unprecedented announcement came last January. We hear you, Kraft said, reassuring those suspicious that its ads were contributing to America's obesity epidemic. No longer would Kraft pitch its most fattening foods on SpongeBob SquarePants and other kiddie hits.

"We talked to mothers who were buying products for their kids," Kraft CEO Roger Deromedi said in an interview. "Consumers had told us, `We would like you to restrict your advertising of the products that you sell to kids.'"

Within weeks of the announcement, however, Kraft helped form a Washington lobbying group to prevent Uncle Sam from controlling how food companies market to kids.

The group, which also includes PepsiCo, General Mills and Kellogg, is working to convince Congress that "there is not a correlation between advertising trends and recent childhood obesity," according to the group's mission statement.

The contrast between Kraft's public pledge to reform and the lobbying campaign captures the company's central quandary - how to appear conscientious while protecting the marketing muscle that has made Kraft one of the world's most powerful food companies.

"We believe self-regulation of the marketing of food products can and does work," David S. Johnson, Kraft's chief of North America, said in a written statement. "And we are collaborating with the industry to strengthen efforts in this area."

But critics contend foodmakers' track records prove that companies can't regulate themselves. The Children's Advertising Review Unit, the industry's self-policing organization, frequently comes under fire for being toothless and understaffed.

Kraft recently drew the organization's ire for an ad that focused on a cereal box prize - violating voluntary guidelines that ads should center on food products, not kiddie prizes.

But by the time the group reached an agreement with Kraft earlier this month, the ad already had run its course in Sports Illustrated for Kids and two comic book magazines.

"The industry's efforts so far have been woefully inadequate," Sen. Harkin said. While noting that Kraft has taken "positive steps," he said it and other food companies still are using cartoon tie-ins, advergames and kid-oriented promotions "with the idea of encouraging children to consume unhealthy products."

Even some of Kraft's steps have been reversed. The company, for instance, took back its promise to shrink the size of its single-serve packages after marketers showed some customers smaller prototypes.

Those customers said, "Why would you take away something I currently like to buy from time to time? Why don't you just give me both (choices)?'" recalled Lance Friedmann, Kraft's senior vice president of global health and wellness.

Instead, Kraft vowed to change the package labels so consumers who decide to, say, gulp a whole Mini Oreo Go Pak - those cookie-packed cups that fit neatly into a car's cup holder - will know they have just downed 540 calories. That's the equivalent of 10 regular Oreos.

Kraft's strategy is to offer healthier options to customers worried about their diets, while still selling its more fattening staples to those who prefer the originals.

Last fall Kraft launched a line of snacks that come in individually wrapped portions, each containing 100 calories. These include Oreo Thin Crisps, which have less calories than the traditional Oreo and don't contain any sweet filling.

Victoria Dietrich, 46, is a consumer who likes to have those choices. The psychotherapist said she buys Oreos more often now that Kraft has launched its Thin Crisps, some of which she tossed into her cart at a Chicago Dominick's. But Dietrich also reached for a pack of the regular Oreos, noting that when she and her toddler daughter eat the classic version, she doesn't look at the nutrition label.

"Why ruin a good thing?" she asked.

While Kraft considers its lower-calorie snacks a big success, they made up less than 6 percent of Oreo sales in the first half of this year, according to Information Resources. To keep growing Kraft has to find ways to sell more of the core Oreo products to a nation worried about its waistline.

The foodmaker is one of many companies trying to project a healthier aura. Cereal-makers promoted the fiber-rich whole grains in their sugary products. McDonald's touted Happy Meals with apple slices instead of fries.

Kraft's image builders pumped up a long-standing partnership with the dairy industry, touting the Oreo as "milk's favorite cookie." In supermarkets this summer, gallon containers of milk sported Oreo sales-pitch stickers. A new commercial cobbled many years of Oreo ads featuring young kids - including a famous one starring a 2-year-old boy with his sippy cup - dunking their cookies in milk. The ad revived an Oreos-and-milk jingle that first aired in 1981.

The message to parents: Here's something you can use to coax reluctant tots into drinking their milk.

Kraft's Web site, which had dropped the advergame in which cookies restored a player's "health indicator," added a game in which players had to deliver milk to stores using an Oreo truck.

Nearly 90 percent of visitors to the Web site are over the age of 11, and 62 percent are 18 and older, according to a July ratings report. Kraft says it has revamped the games to appeal to that audience.

As Kraft shapes a healthier image, though, the company continues to use its marketing muscle to push new products.

If last year's Thin Crisps targeted the health-conscious set, this year's spin-offs are downright decadent. A recent addition, a chocolate-covered version, is one of the most fattening Oreos Kraft has ever introduced.

"The new enrobed chocolate Oreo was one of the most successful new launches ever in the cookie and cracker category," Brian Driscoll, Kraft's top sales executive, told Wall Street analysts and investors in May.

In just two weeks the company persuaded stores to install 55,000 displays of the new cookies.

To ensure prime aisle space and high-volume sales, the food giant offers stores cash payments and rebates that can amount to more than half the retail price of a package.

The pricing of new products also is an incentive for the grocery stores. Chains could buy the new chocolate-covered Oreos at $2 per pack, according a Kraft list that details product prices and available discounts. Yet some Jewel-Osco stores, for instance, sold them at $4.29.

Kraft also supplies the labor - 5,000 sales representatives around the country who build the in-store displays and replenish them as often as 10 times a week.

The approach helped boost Oreo sales nearly 11 percent in the first half of this year, according to Information Resources. But the surge did little to offset Kraft's broader problems.

The company's most recent financial results disappointed many investors. Kraft's stock lately has languished around the price at which it debuted when the company went public in June 2001. Some Wall Street analysts doubt the company will reach its 2005 profit goals.

In the face of such pressure, Deromedi earlier this year dusted off an old pledge: to make Oreo a billion-dollar brand.


(c) 2005, Chicago Tribune. Distributed by Knight Ridder/Tribune News Service.

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